Episode 499 | The (First) Six Stages of SaaS Growth – Part 1

Rob: Welcome to this week’s episode of Startups for the Rest of Us. I’m your host, Rob Walling. Every week on this show I cover topics related to building and growing startups using an ambitious approach that’s also sane, and that allows us to be human beings, have relationships, and hopefully not burn ourselves out.

This week’s episode feels like it’s going to be one of my favorite episodes in a long time. It’s a conversation with myself and Jordan Gal, the founder of CartHook. He and I dig into the six stages of SaaS growth. What we do is we compare our journeys one-to-one between growing Drip and growing CartHook.

What’s interesting is that we took different paths to get there. He raised money, we didn’t, and yet there are so many parallels between the two journeys and the stages line up shockingly well in terms of MRR ranges, of pre-launch, to product-market fit, and to escape velocity. I was struck by (a) some of the parallels, and (b) some of the deviations.

When we started, I figured it would be a normal-length episode. We wound up chatting for almost 1 hour and 15 minutes, so I’ve broken this up into a part one and a part two. Part one is what you’re listening to today, and in part two, we’ll go live on Thursday. I would kick it next week, but of course, episode 500 is next week, and I’ve been planning for that for several weeks. We’re just going to do a twofer this week. I didn’t want to drop a 70-minute episode in your feed today.

We cover the first few stages of SaaS growth in this episode. What’s interesting is I was going to call it the six stages of SaaS growth, but you’ll hear me, towards the end, realizing these aren’t the only six stages. There are stages after this. I have the parenthetical, the first six stages of SaaS growth as defined and discussed in the conversation you’re about to hear.

A little background on Jordan, in case you haven’t heard of him before, he started CartHook, which was cart abandonment software and became a checkout replacement solution for Shopify. It’s doing several million dollars a year in ARR. Jordan has been on Startups for the Rest of Us four or five times answering listener questions, walking through his journey. He’s just a founder in the space. He’s come to several MicroConfs, he’s spoken at multiple MicroConfs, and he’s executing well and doing what a lot of us are trying to achieve. He’s done a really good job executing over the last six-plus years as he’s grown CartHook. The time flies quickly. He’s also the co-host of the Bootstrapped Web podcast, so you may have heard him on there. With that, let’s dive into our conversation.

Jordan Gal, thanks for coming back on the show, man.

Jordan: Absolutely. Great to be here.

Rob: It’s always a pleasure. I’m really stoked to be talking through our journeys, our entrepreneurial journeys, and looking at these six stages of building and growing a SaaS. What’s a trip, what I like about this is I floated this idea to you, like would you be interested in coming on to talk about your journey because you’ve just made it so far so quickly. I know it probably doesn’t feel that way, but I was thinking back to growing Drip, there were some pretty distinct stages. There was the pre-launch, the post-launch, trying to find product-market fit and all these things. I was wondering if ours would at all match up.

When I typed mine out in an email, I shot it over, and how do these match up with what you have, it’s pretty close. The revenue numbers are not exact but the general headspace and what you’re trying to do at these stages, at least at this end of two is shockingly overlapping.

Jordan: Yes. I think because we both started at zero. We were forced into going through these individual stages. It is really different from stage to stage. I’m excited to go back into it. I’m a little worried about all the memories and emotions that it’ll bring up because it’s been a hell of a ride. A lot of it is good and plenty of challenges.

Rob: I’m wondering how much PTSD this is going to bring up for either of us. It’s as you said, of course, there are some great memories. I can reminisce and say oh, man. Remember the good old days? Remember when it was just two of us doing this thing? But you know what, it was super stressful when it was just two of us because we didn’t know if we were building anything people wanted. It was six months of just grinding it out with no market validation and all that. It’s easy to romanticize any of these stages.

Jordan: Yeah. It’s also easy to forget how far you’ve come. Rok and I had a moment the other day. Rob’s my CTO and really my co-founder at this point. We’re really partners. He runs the tech team, I run the rest. We had a moment because we hit 100X from the time he joined. We were like you know what? Let’s take a little time out, get on Zoom, have a drink, and have some laughs because we just keep going through these milestones. There’s so much to worry about and think about, it’s tough to even look back at what we’ve done.

Rob: I’m glad you guys took that time. That was something I was not good at with celebrating the wins and celebrating the transition, and oftentimes, even realizing we were making the transition from one stage to the next. It was Sherry, my wife, who encouraged me to slow down and be like you realize you just built a million-dollar business the day that we crossed $83,333. I was like wow, that really is something that I’d been wanting to do for a while.

Jordan: Yeah, and they change. Recently, this week I had a new milestone. We closed our biggest deal ever, and I never talked to the prospect at all.

Rob: Wow.

Jordan: The team did everything. We’ll get into these stages and the stage that we’re in now. Let’s get there. Let’s start at the beginning.

Rob: Six stages. I’ve named each of these stages because what I’ve noticed is I’ve already (and a lot of folks already) used terminology around this, like pre-launch, post-launch, pre-product market fit, and post-product market fit, but I’m tapping into your and my later experience. Have a couple of stages that I think are cool to define and think about because I think if you do get into the multiple millions of dollars, that you will enter those. We’ll get to those in a bit, but pre-launch, we’re going to start there.

Obviously, I could tell a bunch of stories of pre-launching different stuff, but I’ll stick to Drip for my examples here. Obviously, you’ll stick to CartHook. Pre-launch, for me, was a bunch of customer development, and it was a bunch of validation. That was even pre-building. It was going out. I had 17 email threads going with founders saying if we build this would you pay this much for it? I got about 10 or 11 people said yes, I would at least try it out.

For me, it was a lot of marketing as I had a contract developer who was building into the background first half-time, and then he switched over to full-time. That contractor is a guy that a lot of folks may know. His name is Derrick Reimer. At the time, he was just a 1099. He was a friend of mine who wrote Ruby, and he was a good developer. This was going to be really the first app that I had built that I wasn’t going to write any code on. It was partially an intentional decision to pick a language I didn’t know.

My memory of that was me and this contractor both working remotely. We would chat on the phone once or twice a week, and we had met once to basically spec out what the original version of Drip was going to be. I was thinking about that, I was building the marketing list, I was going on podcasts, and I was running some Facebook Ads to landing pages to test value propositions, I mean all the smoke test stuff. I was also doing some MicroConf stuff, speaking, and the podcast. I was staying busy, but it was very much one of many irons in the fire that I had going on. I’m curious to hear how your experience with pre-launch compares to that.

Jordan: Similar in that your real pre-launch started years prior. What allowed you to really hit the ground running was years of work prior, and yes, the same for me. I ran an ecommerce company with my brothers several years prior to starting CartHook. My customer development was my own experience. My pre-launch was consumed with figuring out how to get a product built if I am not technical myself. Going through all these different options, talking to agencies, looking for freelancers, looking for employees, and looking for co-founders. I just went through all these different options.

I knew the product that I wanted to build. It was a cart abandonment app. It was something similar to what I used as a merchant. I knew it made me money and didn’t cost too much. The ROI was great. I knew I wanted to build something that specifically generated new revenue for merchants so I could price based on a percentage of revenue. I had all that, and my pre-launch challenge was how do I get someone to build this? As often happens, it was preparation plus luck. The luck for me came in the form of bumping into an old family friend of my wife’s.

We were doing our 18-month excursion where we lived in a different city for a month or two to figure out where we wanted to move. While we were in San Francisco, I bumped into the younger brother of one of my wife’s friends from back in Connecticut at the laundromat. I had just known him through the years as the computer whiz kid. It was just a coincidence. We ran into each other, then we started having coffee, and then it turned out that he had been doing a bunch of freelance work. He really wanted to basically learn more on the business side.

We just had this match between I want something to build, he wanted to build something, and that’s what happened. I gave him a piece of the company, basically took three months off from freelancing, built the first version of the product, and then handed the baton over to me to start selling. That was my version of pre-launch.

Rob: Wow. The younger brother of a friend of a sister in a laundromat? Sounds like you’re making it up. It sounds ridiculous.

Jordan: Look, his line item on the cap table will speak the truth. That it’s very real, it’s there, and I hope it really works out for him.

Rob: Quite a trip. A lot of questions for you actually because I haven’t heard you talk much about this stage of your business. As an investor, I guess I should have said that upfront. I’ve invested a couple of times in a couple of rounds in CartHook. I’ve been along on the journey with you, but I wasn’t involved yet at this point. I’m wondering, did you validate this idea? I’m imagining this already existed at the time. Why did you decide to build something that already existed, if that was the case?

Jordan: I liked the low-risk approach of that. I used to use a product just like this, and it was a terrible product. It made me money. When I looked at software ideas after selling the ecommerce business, what I did was I looked through our credit card statements. In the ecommerce business, where were we spending our money? I just identified that app as really high value and really low quality. What I said was okay, what if I build a better version of that?

At this point in time, I don’t really have the intention to build a company. My intention is how do I make $10,000 a month so I can do whatever I want. I don’t know where the software thing is going to go, but I like the idea of recurring revenue.

Rob: Life’s now business.

Jordan. Exactly. I wasn’t full-time on it, I was just exploring. I had worked in a previous business where I was a partner that had this quirk. It generated revenue about a year after doing the work. I had about a year of income without doing any work. That’s when I just said okay, I need to register to replace this income, so I can maintain this freedom to explore. I wanted specifically low risk. I didn’t want to come up with something new and not know if it was going to be wanted by the market.

I had my own validation. What I did, really, as part of being able to convince Charlie, the developer that joined me as the original co-founder, I did the legwork to show him that he wasn’t going to waste three months of his time.

Rob: That’s what I was going to ask you.

Jordan: That was the big thing to convince him. I said look, I’m the business person. I’m not just talking. I used to be a merchant, and I’ve been emailing. I did the cold email thing—30 different people a day—I had an inbox full of people saying, yeah, that’s interesting. I would be interested in looking at that. I would pay for that.

Rob: We get emails in the podcast and I get just emails to me personally about how do I find a developer, a technical co-founder if I’m not technical? I always say you prove your worth as that non-developer side. You prove that you can market, you can make sales, that you will hustle, and you will do work alongside that developer so that they’re not working for three months, like you’re saying, while you’re sitting around doing your thing, and then suddenly you’re going to magically market this thing. Most people aren’t able to do that. I didn’t know that.

My next question was going to be how did you convince him to do it? I love that you basically lived that. You showed him that it was worth it and that you could potentially build it. It’s interesting. You thought that you could build something similar but just better because the UX, the user experience of the other one wasn’t good?

Jordan: Yeah. The design was horrible, the UX was horrible, and the onboarding was terrible. It was a bad piece of software but it made me 3000 or3000or4000 every single month, and I paid them $79 a month. I would never cancel it because it kept making me money. I basically said I want to be that guy. That was where I landed. I had a few other ideas. That’s my pre-lunch.

Rob: What’s cool is the parallel of when I launched Drip. I say ‘I’ because at that time, I viewed it as another one of my apps. As we get later on, it’s we because it was Derrick and I as co-founders, and then it was a team of people. When I launched Drip, I absolutely viewed it as a lifestyle business. Similar to you, I was thinking I had already grown HitTail to about 25,000 or25,000or30,000 a month. That wasn’t super interesting to me anymore, I wanted it to be bigger, but I didn’t expect it to grow as quickly as it did from a start.

Once we got into it a little bit I did, but I was really mostly thinking about it like you were just like hey, I want to freaking build a business that throws off a bunch of cash. It’s funny that we wind up going down similar about different paths.

Let’s talk about post-launch. For us with Drip, as we were working on this, it was from about obviously zero in MRR. We built for about six months and then started a slow launch where I would launch to 300 people on the list. I think the total list was 3400. It’s about 300 people every couple of weeks. Getting them and we were trying to get onboarding set. We were trying to not churn everybody out. By the end of that launch, we were between 7000 and7000and8000 a month in MRR.

Over the next six months, we were flailing trying to find product-market fit because I was driving traffic, I was marketing it, and I was doing all the things that I had done in the past that had worked and they weren’t working. Churn was too high, trial-to-paid was not great, and it just wasn’t working. From about 0 to around0toaround10,000 or $12,000, I view this as a pre-product market fit stage, post-launch/pre-product market fit.

For those you’ve heard product-market fit on the podcast a bunch of times, I have a text expander in my head of product-market fit equals you’ve built something people want and are willing to pay for. That’s how I think about it. And are able to reach them at scale and have a bunch of leads because to me, that’s escape velocity, which is two steps from now. That’s the stage I’m […] to. But at this point, it was me and I believe Derrick at that point I’d say hey, I’m thinking of buying a house, I need a couple of pay stubs, W-2 in order to buy a house. We switched him over from 1099 to W-2, and I think he was making about the same amount of money, but it was more of an accounting thing.

At the time, I believe, Derrick and I were the two W-2 employees, in essence, working on it. It was still super scrappy, we had no office. Derrick would come over to my house. There was a […] on my property and we would sit there, chat, map this stuff out, and talk about what we were building next. It was totally freewheeling. It’s just week-to-week, day-to-day. I was doing the email support for the first few months until we brought someone in. That’s my post-lunch, pre-product market fit story. I will add, this was perhaps the hardest part because it was the mental game of not knowing if we were going to find product-market fit.

It took us from November 2013 until about it started changing in May, but it really peaked in terms of churn just plummeted, trial-to-paid doubled, and just every sign of product-market fit you can imagine happened in a 90-day span from May to August of 2014. Depending on how you measure it, it was somewhere between six and nine months from launch to where, oh my gosh, the unit economics on this business all of a sudden are amazing. The ROI of dumping more leads into the top of this funnel is going to scale this thing. That was the moment that I feel like that was product-market fit. That’s that stage three, so I won’t go into there yet, but I’m curious to hear similarities and differences of your post-launch, pre-product market fit stage.

Jordan: Look, good for you because mine was an extended torture session of 12 months, I guess. It was not pretty. This stage, like really good off the ground, launching, and generating some revenue was really no fun. What happened was Charlie passed the baton over to me. He built the product to a point where it’s good enough and now let’s start to sell it. I started with cold email and it worked. I got it to 500 MRR, then500MRR,then1000, then 1500. And then, Charlie got the offer of a lifetime for just his dream job at1500.Andthen,Charliegottheofferofalifetimeforjusthisdreamjobat1500 a month. I had to just tell him you have to take this job. I’m not going to let you stay with me. I’m not even doing it full-time. It’s making $1500 a month. This is your dream job. You have to do it.

He agreed and he took the job and committed to continuing to help nights and weekends. Then I was alone again. I was doing it half the time, I didn’t really know if it was going to go anywhere, and I was just filled with doubt on it. I just kept going. I figured out a cold email system that allowed me to grow faster. I had information built with, got sent over to a VA, then they qualified, and then they sent those records over to another VA that loaded them up into the cold emailing software. What got spit out of the process was scheduled demos for me. Then I would just do a few demos a day and then we started to grow. That got to about $3000 a month and then a little bit more luck came my way.

For me, this first phase really ended when Adii Pienaar, God bless him. We know Adii from the MicroConf community and just from the startup scene overall. He’s a great guy. He built a company called Conversio that just recently got acquired by Campaign Monitor. He’s obviously from WooThemes and WooCommerce prior to that. When Adii was starting his new company, Conversio, he emailed me and effectively offered an acquisition/partnership. He said look, I think what you’re doing with CartHook is interesting. I have this thing going on. At the time, it was called Receiptful. He said would you think about joining me?

I knew that it was too early to have any financial impact, but the conversation got me thinking. It made me perk up and take the opportunity more seriously with what I was doing. By coincidence, I was in New York at the time and started telling some of my friends about this potential partnership/acquisition interest. That’s when my friends, who all went into finance and made far more money than all of us, said why would you do that? It’s so early. Why don’t you just take a few bucks from a few of us and really give it a go?

That’s what started the next chapter for me because when I entertained really taking money, I knew I needed a full-time technical co-founder. That’s when I found Ben Fisher and that’s when we teamed up and the business changed trajectory. That first phase was just 12 months of doubt, pain, taking every credit card over the phone, and just doing it that way until it got a little bit of interest. Then I used that interest to parlay up into investor interest and then raise money. That’s when the next stage started for me.

Rob: That is crazy. That is also another case of serendipity in essence, right? Just a weird conflux of ATP and are asking you all that stuff and not getting you talking to some friends who decide to convince you guys around. What’s a trip is that’s when, at least the way I have it in my Google spreadsheet that I track my angel investments, I have September 2015 of writing the first check. My memory is you were around $5000 MRR at that time. Did you raise me on this?

I probably told you this in the past, this was a pre-Drip exit for me, so I had some money, but I was not in a place to be crazy with cash. I was still trying to grow Drip, and I was honestly trying to conserve cash. I had done a couple of angel investments prior to that. One of the things that I liked about what you were doing because we knew each other, you’ve definitely done Attendee Talks. I don’t know if you’d spoken at a MicroConf yet or not, but we had definitely hung out at MicroConfs.

The way that you executed, you just hustled. The whole cold email system that you explained to me at the time (and I was super impressed by that), the fact that you had scrapped as a non-developer founder to $5000 MRR in SaaS, which I knew is hard enough to do if you’re the one writing the code and doing everything. The other thing is the Bootstrapped Web podcast. I listen to you talk every week or most weeks, I guess. Three weeks out of the month. I was like this guy’s sharp. He just thinks about things in a way that I think makes sense. It felt to me like you were going to be successful. It was literally a bet on you more than even an abandoned cart.

I was like, an abandoned cart? Cool. I don’t know the abandoned cart space, I don’t know if there are 10 apps, I don’t know ecommerce. But if you’re telling me you think there’s an opportunity there—I’ve seen you execute on this—I want to be involved in this. That was a big piece of it for me.

Jordan: Thank you for saying that, by the way. All of us have these serendipitous moments come through. What I got good at over the years was just identifying how to take one small little thing and just keep parlaying that up into bigger things. That is a theme throughout the company. The way I found Ben Fisher, the co-founder, is he signed up for my product. He just had a cool email address, then I looked him up, and he sounded legit. I got on the phone with him and then impressed him enough to join me as co-founder. It was, again, a tiny little breadcrumb. I think all of us are surrounded by these things.

Building up the radar on knowing I should pursue this little tiny thing because there might be something bigger. I don’t know if it’s talent, skill, luck, or some combination of them.

Rob: I had said that post-launch/pre-product market fit for me was the most painful, agonizing part of the journey, do you share that sentiment, or were there times later that have been worse?

Jordan: Two stages from now was the worst for me. I’ll explain that. For me, stage two—post-launch—just felt like an extended torture session that I had to go through on the way to the next thing. I didn’t like it. It wasn’t for me. I would love to skip it on any other company in the future. It’s just something that I had to just deal with until we got somewhere better.

Rob: If you look at the State of Independent SaaS Report that we did or just look general on the internet and see revenue reports, most people don’t make it to the next stage. Stage one was pre-launch, stage two is post-launch/pre-product market fit, and stage three is product-market fit. Again, build something people want and are willing to pay for. For me, with Drip, keep in mind I also had an advantage that I had an audience at this time. That’s a big part of what got me to 10,000–10,000–12,000 without having to do the hustle and send the cold emails. I was able to lean on that audience for that initial kick-start.

Stage three I have as product-market fit. The numbers that I wrote down—this is starting to be from memories, so you got to give it a little fuzzy around the edges—is from about 12,000 MRR is up to about12,000MRRisuptoabout25,000 MRR. That was me and two W-2 employees. It was me and Derrick. As we were going through this phase, this is when Derrick and I started talking like you’re indispensable here. Derrick was starting about going off and doing his own thing because he’s entrepreneurial. That’s when we had to have that conversation about let’s figure out a way to make this work for everyone and make it worth your while, basically, to stick around so you don’t feel like you’re working a day job.

During that time, we hired a second developer. We were just building the product out. We were playing catch-up. We were first at launch to try to compete. We were just going to be like an email capture thing and autoresponders, then it’s like we’re going to compete with MailChimp and AWeber, and then we realized that the real market with the real money in it was—not that MailChimp’s not a real market with real money—that we could go up-market and compete against the Infusionsoft. At the time, it was Office Autopilot that later rebranded to Ontraport. It’s really not on most people’s radar anymore. Then ActiveCampaign was just coming about. They had been I believe white-labeled software, downloadable software. They were not really SaaS for that long before then.

We realized, wow, there’s so much more money the higher price points there. This product-market fit stage was from 12,000–12,000–25,000. We were building out the product and I was just trying to find repeatable marketing channels that extended beyond my audience because I really had exhausted just the usual my things. I call it a concentric circle marketing where it’s like first I’m going to talk to everyone who listens to me—my email list, Twitter, and podcast list. The next one out is my friends’ audiences, so I go on podcasts, I do that. The further out you get it’s like can I make content and SEO work? Can I drive cold traffic from pay-per-click ads? Can I do webinars?

This was a very scrappy phase of just trying to find repeatable channels that drove repeatable traffic. Again, at about 25,000, that’s when I felt like we had started hitting our stride, which is stage four. I won’t go into that yet, but I’m curious to hear how your product-market fit, essentially25,000,that′swhenIfeltlikewehadstartedhittingourstride,whichisstagefour.Iwon′tgointothatyet,butI′mcurioustohearhowyourproduct−marketfit,essentially5000–$20,000, how that went, and how you think about it in retrospect.

Jordan: I remember when Drip launched. The power of getting off the ground. I remember because I was in the struggle at that time. I don’t know about the timing but I’m pretty sure we were under 10,000 in MRR. Once you get to10,000inMRR.Onceyougetto10,000 MRR in 60 days really shows the power of an audience. We still see that these days. We see my podcast co-host and friend Brian Casel launching something with an audience. We see Adam Wathan and Steve and how much value they give. Whenever they launch a product it’s so much easier. I will remember that for the future.

For us, this stage, that 5000–5000–20,000, was bookended with success at first and then failure toward the end of the stage. Right around 5000 is when we raised some money. We raised friends and family’s money. It was like5000iswhenweraisedsomemoney.Weraisedfriendsandfamily′smoney.Itwaslike275,000, and that allowed us to go full-time, focus on it, and hire two engineers. It was myself, Ben as co-founder, and two engineers. Those two engineers are still with the company, by the way. One of them is Rok who’s the CTO. The other one is Jan who is now on infrastructure.

We built something actually worth paying for. We improved the cart abandonment product and then I went on a search for a flywheel. Just something better than the cold email because as soon as we left the Volusion market, which is where I built my ecommerce business and it was really easy to email the owner of the company, cold email stopped working. Then we had to figure out a better way. What we ended up figuring out were partnerships. What we would do is we would do the integration with a platform, then we would try to do some co-marketing, and we hit onto this perfect situation with a platform called Cratejoy.

Cratjoy was a brand-new ecommerce company run by Amir. He used to work at Zynga, who’s super smart, and they were growing like crazy. Full-on hyper-growth was just crazy. Every one of their merchants kept asking them for cart abandonment email. They didn’t want to build it themselves, and I just stuck my head out at just the right time and said we will build it for you, and then you could just tell her customers that they could use us so you don’t have to worry about it. He was like that’s exactly what we need to do.

We did the integration and then what they did is they took us and just built us directly into their admin. Everybody that created a new account saw CartHook right in front of them and then a lot of people signed up. That ended up being so critical to the whole life of the company because as we started growing in this way, the failure bookend of this phase was really coming to terms with the fact that cart abandonment was just not going to do it for us. The market started to get crowded, everyone started to go cheaper, our differentiator started to get worn away.

Our thing was that we captured the email as soon as it was typed into the field, and only the larger, much more expensive solutions were doing it, and then everyone else started doing it. I just did not like the future of the company in cart abandonment, and that’s when we made the decision to build the second product. But we couldn’t have done it without the flywheel, specifically from Cratejoy because what it allows us to do is spend six months building a new product while the revenue just kept growing anyway.

Rob: You self-funded yourself out of revenues in essence. I remember the conversation where we talked on the phone and you said I see this opportunity that’s not cart abandonment, and I want to build a second product. I was like, shiny object syndrome. I was like you need to convince me. Every founder ever wants to build a new product, why? You convinced me. My memories were like look, this is super risky, it’s another product. You now have to go find product-market fit again, but you’re mired in this every day and you’re thinking about this 100 hours a week. This is where you want to go with it, then you got to trust your gut. This is that founder gut-check moment.

Jordan: Yeah. It was very risky but I pretend to be more risk-loving than I really am. I always want to protect the downside. In many ways, I’m risk-averse, but I want the cake and to eat it too. I want to take additional risk while also protecting the downside. That’s the situation I found myself in when we said at the very worst, this thing’s just going to keep growing but slowly, because of the flywheel we’ve built. Even if we take this risk, at worst, I pare everything down. It ends up as two people doing 20,000, and we can survive. It was definitely a huge risk to take to build a second product with a team of four people and20,000,andwecansurvive.Itwasdefinitelyahugerisktotaketobuildasecondproductwithateamoffourpeopleand100,000 in the bank.

Rob: You had this cart abandonment app that was thrown off, let’s say, $20,000 a month and you used it to build the second product. You want to tell folks what that was and why you saw an opportunity there? Why was it unique? There was timing involved in this.

Jordan: Yes, there was. That’s right. Here’s what was happening. Everyone knows Shopify now and the incredible success story rocket ship like ridiculous performance that they’ve had, especially since going public. When we were in the ecommerce market, this was four years ago, Shopify was becoming successful and being talked about, but it was not the clear, straightforward, obvious winner in the market.

What was happening was as Shopify got better at making it easy to launch a physical product business and the ecosystem around it of fulfillment and importing from China, all these things started coming together in such a way that made selling physical products almost as straightforward and hands-off as selling digital products.

What that did is it started to attract all the marketers that were traditionally in the digital marketing space selling courses and e-books, it started to attract them into the physical product world. It is much easier to sell a physical product than it is a digital one in many ways. You put a picture of it on the site, you write some copy around the benefits, you put a price, and then there’s a buy button. It is much more straightforward than a digital book that explains how to do X, Y, or Z. That started attracting people, and at the same time, ClickFunnels was exploding.

The reason ClickFunnels was exploding was because it was building products in the market of those traditional digital marketers, but it was showing them how to very easily build things that sell physical products. The problem with ClickFunnels was that it didn’t have the infrastructure on the backend like inventory, fulfillment, and shipping. It just had a great system to just put up a landing page and be able to sell, most importantly to sell with post-purchase upsells. What people were doing is they started selling physical products on ClickFunnels. They would find success, but then they would run into the issue of not having enough infrastructure to do fulfillment, shipping, and so on.

They were dealing with CSV exports and losing their minds. Then they went over to Shopify, which had a much better system for selling physical products. But when they did that, they lost a lot of the marketing strategy functionality around the checkout and post-purchase upsells. There was just this huge pool of marketers that wanted to sell on Shopify with the post-purchase upsell functionality. That’s what we saw as the opportunity. If we build post-purchase upsells and a customizable checkout for Shopify, all of these people that are currently on ClickFunnels and want to come over to Shopify will come over along with our ability to provide them what they want. That was the moment right there in the market.

Rob: That was the right bet based on your growth since then. It’s a trip, and you no longer have the cart abandonment functionality at all, right?

Jordan: That’s right. We sunset it from the public eye, maybe 6 or 12 months ago, and we just left some of the merchants that wanted to stay on. It is amazing how long people will keep software around if you keep making them money. We haven’t touched the thing in three years, but we still have people paying us $100 a month because it keeps making them money.

Rob: It’s back to your initial premise of I paid 3000 or3000or4000 a month, or I made 3000 or3000or4000 a month from this software, and I was never going to cancel it as a merchant. That’s the thing.

Sorry to break in here but that is the end of part one. To recap, Jordan and I talked through the pre-launch stage, the post-launch/pre-product market fit stage, and the product-market fit stage. Part two that comes out in about 48 hours, we will cover the remaining stages of SaaS growth. Thanks for listening. I’ll talk to you then.