Episode 509 | Revisiting the Six Stages of SaaS Growth with DNSimple

Rob: It’s this week’s episode of Startups For The Rest Of Us. I am your host, Rob Walling. Today I revisit the Six Stages of SaaS Growth. These are the stages that I talked through with Jordan Gal about 10 episodes ago with 499 and 499.5 where I compared the stages of Drip with his stages of CartHook. And today, I bring a third founder on. His name is Anthony Eden. He runs DNSimple. DNSimple is a self-funded startup for 10 years, and he has a team size of 19 people. They’re fully remote. It’s domain management, and they are a DNS provider as well. They compete with GoDaddy, Namecheap, et cetera.
I’ve spoken with Anthony before. He’s been to at least a couple of MicroConf Europe. He was on MicroConf On Air just a couple of weeks ago, if you want to hear more from him, and he told a really good founder origin story on ZenFounder. You can Google that. We’ll actually link it up in the show notes, but a couple of hundred episodes ago. A few years back, he had a really bad co-founder breakup with his brother. And that’s a pretty heart-wrenching story that he goes through.
But before we dive into our conversation, I want to let you know about MicroConf Remote. This is something that we planned more than a year ago before all the COVID stuff happened. We were going to do seven in-person events and one virtual event called MicroConf Remote. We announced this, I believe it was November, December 2019. And here it is, it’s time to get that going.

For now, mark your calendar for August 26, and it’s 11:00 AM Eastern to 4:00 PM Eastern. Obviously, if you can’t make the entire time, you can drop in and drop out. But you can head to microconfremote.com to reserve your stop, get a ticket, and find out a little more about some of the cookie, wild, and frankly pretty novel innovative stuff that we’re working on for this.

This is not going to be your typical virtual summit. We’ve all been to too many of them in the past six months, and we’ve been working really hard. Let me put it this way, Producer Xander has been working really hard to make this a unique event. There are going to be some in-person elements here in Minneapolis that are creative, different, and visually appealing—just visually interesting. There’s going to be some aspects of it that are remote, but it really is going to be essentially a five-hour live broadcast, and we are going to bring the MicroConf thunder.

We’re not sitting on our laurels and having a bunch of people record some things on some webcams and stitching them together. We want to make it a MicroConf event. We want to put the MicroConf fingerprint on it, which is a unique thing. We build the events that we want to attend, and that’s one of the reasons that MicroConf has resonated with so many people. The community is so strong and such successful entrepreneurs and aspiring entrepreneurs are really people that want to help one another come to these events because there’s something special about it. And MicroConf Remote will be that as well. We will have a hallway track.
Again, we’re innovating. I don’t want to give away all the stuff. But just trust me on this—microconfremote.com to get your ticket. And with that, let’s dive in to my conversation with Anthony Eden where I revisit the Six Stages of SaaS Growth and how they applied or didn’t apply to his SaaS company, DNSimple. Anthony Eden, thank you so much for joining me on the show today.

Anthony: Thanks for having me. Appreciate it.

Rob: Calling in all the way from France. How are things out there?

Anthony: We’re doing well so far. Happy to be just relaxing a little bit here down in the South of France.

Rob: Excellent. Today, you and I have talked about offline, I wanted to bring you on the show to talk through the Six Stages of SaaS Growth similar to what Jordan Gal and I did in 499 and 499.5, about 10 episodes ago. Where I sat down and I looked at my experience with Drip going from stage one, prelaunch to pre-product market fit, to stage three product-market fit, to escape velocity, to scale, and to company building. Those are the six stages. And then compared the revenue milestones that we hit with Drip and where we were at with each stage to Jordan’s journey with CartHook.
You and I had a chat maybe two weeks ago on MicroConf On Air and it occurred to me, your 10 years into building DNSimple, you have a team size of 19, and it became pretty apparent, your take on this could be interesting as well. To find out where has your journey varied or lined up really well with what Jordan and I have encountered in our journeys. I know that you went back and listened to those two episodes. I’m curious right off the cuff, were there any big shocks as you were listening? Like, oh yeah, that’s totally different from DNSimple? Or did you feel like quite a few of the things lined up?

Anthony: I felt—when I listened to it—a lot of the stuff lined up. I was actually surprised that Jordan’s path—considering that he actually took some funding along the way—was still similar in terms of timing and revenue growth. That was actually the only surprise that I got out of it. Everything else was pretty spot on with the growth of DNSimple with their side differences and how long it took to get from one stage to the next. Generally, I feel that it tracts pretty well with that.

Rob: That’s awesome. That’s what I’m trying to do. Now there’s going to be three of us having weighed on this. I think it’ll be an interesting experiment moving forward, to have a fourth and fifth person weigh-in and just to see the varying degrees of experience. Jordan raising money—he didn’t raise so much that it changed their trajectory in a meaningful way. He didn’t take a huge venture round. And he runs it like bootstrapper, like a self-funded startup even though he had a couple of hundred grand in the bank as they were getting up.
I’m excited to dive in with you today. And I’m curious, if we start with stage one, this is pre-launch. Let’s talk through how long that was, what that looked like for you, was it just you working on it, did you have a co-founder at the time? And just talk us through, set the stage for the pre-launch before we get to stage two.

Anthony: Sure. When we started in 2010, I started this with my brother. My brother is more involved in the network engineering side, and he was the one that was setting up the initial infrastructure for resolving DNS entries and things like that. I spent my time working completely on the Rails application—which is going to be the front end. We went from April until July basically just cranking away on getting everything ready.
My goal was to launch at RailsConf that year and I just, just missed it, but surely thereafter, I was able to start announcing it and getting people on board. It took about three months during that pre-launch phase to go from nothing to a working product. That’s working including taking money from people with credit card payments, subscription, and all that. We relied heavily on using outside SaaS services, what was available at the time to minimize what we have to build internally.
It worked out pretty well. We just got to that first launch. I didn’t come in with any audience. I guess I have my developer audience—the people that I would go to and speak with at conferences and things like that. But generally speaking, I didn’t have a mailing list, I didn’t have anything. I put it together and then I started going to some friends. I went on Twitter and I said, hey, I’m doing this. Is anybody interested in trying it out? Three months from nothing to initial launch.

Rob: Wow. That’s super fast, man. What gave you the crazy idea to think that you could compete with GoDaddy, Namecheap, and all these massive companies. It feels to me, in 2010, domain management and DNS was a solved problem, but obviously it wasn’t because you’ve built this great company. What were you thinking at that point?

Anthony: I was mostly focused on the terrible experience that was the majority of domain and DNS providers at that time. There was just an opportunity in the market because the tooling was so bad. A lot of the companies that you’re talking about—the big ones—they grew up at the end of the last century, in the late ‘90s and then the early ‘00s. It just seems like their websites were stuck back in that time period.
I saw this is an opportunity to do two things. One is to greatly simplify how these interactions work. Removing a lot of the excess steps those sites have in them, and really just focus on making a good system for registering domains and then managing the DNS around them. And then I also knew that we wanted to have an API for a lot of this stuff.
I focused heavily, after the initial launch, into getting a workable API that I could have people develop other things on top of. I think those were really the key things that I was focusing on to differentiate from those big providers at the time.

Rob: I love big markets with hated competitors, or hated incumbents where people despise them. Back in the day it was PayPal or QuickBooks. Certainly, a lot of people don’t like GoDaddy. And then when I was onto Drip, it was Infusionsoft, Marketo, and Pardot—these big clunky competitors. Those are spaces where if you are able to get to some feature parity, there’s a huge amount of work. Although when you did it 90 days, it sounds like.
But oftentimes, there’s a lot of work to get there. But if you can do that and build a better experience and then just not be a […] company that charges people too much, it makes it really easy to compete when your competitors are just widely despised.

Anthony: Definitely. There’s a marketing angle where you essentially pick a fight. You pick a fight with the biggest guy out there. You turn that fight into a David versus Goliath showdown (if you will). In my case, what I focused on was doing what was right for the people that were using DNSimple. Focusing on taking their feedback, applying in a timely fashion, and adding functionality as they needed. That really took us into the post-launch phase.
The initial launch was really minimal. But then as soon as people started using, they say, hey, this would be great to have. In fact, there was no domain registration in the first version. People said, this is really cool, but I really love it if I didn’t have to go somewhere else to register my domains. That functionality didn’t come until about four or five months later, just to put things into perspective.

Rob: Yeah, very good. That kind of gives us a good idea, three months, two of you working on it, that was your pre-launch phase. Stage two, I have called a pre-product market fit where you’ve launched and you’re just trying to sort out, have I built something people want? And you’re getting to that point of really locking that in. For Jordan, if I recall, it was 0 to about 5000 of MRR. And for Drip it was about 0–10,000 or 11,000 MRR.
It took us about eight months. It might have been nine months from that launch day until I felt like we really started having product-market fit. Jordan said his was 12 or 18 months. It was a really long time. Talk to us about DNSimple. At what revenue number did you feel like you did have some modicum of product-market fit, and how long did it take you to get there? What was the process like?

Anthony: By the end of the first year, we were already doing about 10,000 in MRR a month. We hit it pretty quickly. After the launch, I was out there. I was doing the conferences, adding functionality, trying to pull people in, and seeing what we could do. I wrote down that I think it went all the way into 2011 because we were still adding a lot of functionality. As I mentioned, the registration functionality, the API, that all came within the next 6–9 months after that initial launch and slowly trying to grow it.
Sometime in 2011, we really started to hit our stride and had found a good market fit. But even through 2011, the MRR was still right around that relatively low number. I capped the year an average between 10,000 and 12,000 in MRR.

Rob: What were the signs to you when you thought, boy I really have built something people want? What did product-market fit look like for DNSimple?

Anthony: For us, there were a couple of triggers that made me think, wow we’ve actually accomplished something. The first was we started getting people in who I didn’t know. I didn’t know where they came from even. The first customers were either friends of mine, friends of friends, friends of my brothers, or whoever, and they started coming in. But once we got some point where we had legitimate businesses using us that I had no idea where they were coming from, I said, okay, this is really interesting.
And then the second bit was when people just started sharing about wow, this is really great. This is so much better than anything that I’ve used out there before. I’m really happy with it. We think that positive sharing in the community—that really is largely on Twitter—was another indicator that showed that we were doing well, and we have a product that was going to be successful. And it has been successful.

Rob: Yeah, cool. At the time, was it still just you and your brother?

Anthony: Yes. We stayed with two people all the way through 2011. In fact, only added on who was really the first employee of DNSimple in 2012. That came through an acquisition, and that person was Simone Carletti. He’s the CTO of DNSimple, still with us today, and I acquired his RoboDomains business to bring him on board. And that was what brought the third person in.

Rob: Very interesting. In terms of revenue here, I’d love to cover that when we get there. Which stage did you acquire him in?

Anthony: He was early revenue. He had the product out for a little while. He was getting minimal revenue. At that point, we probably gone up to 20,000 MRR at that point.

Rob: Got it. Let’s dive in right there then. Stage three is product-market fit. For Drip, it was on that around that 10,000 mark until right around 25,000 where we entered stage four, which I’m calling escape velocity, which is where we really had figured out one or two marketing channels where growth started picking up even faster.
These product-market fit stages have built something people want and are willing to pay for, but maybe I don’t have a repeatable sustainable marketing channel yet. Growth is good and retention is good, but it’s not blowing me away yet. Was there a time period like that with DNSimple? I’m curious, similar questions, what was the revenue range (if you recall), and how long did it take?

Anthony: I actually went back and looked. In the first couple of years, by the year-end, we were around 150,000 for the entire year. And then in 2012, we went up by the end of the year 200%+ in growth. That was really when things started to take off. If I recall correctly, that was right around the time that there was a whole bunch of fiascos around GoDaddy. People were just like, I am done with this. It was the elephant shooting, and it was sexist ads on TV for the Super Bowl.
In fact, I distinctly remember I was watching the Super Bowl and the ad came out. I was like, I cannot believe this ad is just so gross. I went on Twitter and I said, if you’ve seen the ad and you dislike it, then take your wallet and walk. The idea is to take your money to somebody that will not put up ads like this. That really kicked off that faster growth at that point. In a lot of ways, it was a lot of luck in terms of the timing and a misstep by some of the biggest players in the market.

Rob: Yeah. If you’ve listened to the podcast recently, I certainly have talked about the three things that I think contribute to success is hard work, luck, and skill. It is luck, but you were at the right place at the right time. You had already built a register on DNS provider, you have this app, you happen to see the commercial, and you went on Twitter. There’s all this stuff that comes through, but you also had the skill to then handle the incoming traffic. You had this skill to take advantage of it when it came. It’s a bunch of factors.
In so many entrepreneurial stories, there almost always is some element of fortuitous timing. But if you weren’t at the right place at the right time with the right app and you didn’t take that leap or you didn’t take the risk of hey, I’m going to go on Twitter and maybe talk a little smack about a competitor—which some people wouldn’t do or some people would be scared of doing—it probably wouldn’t have happened the same way.

Anthony: Absolutely, absolutely. I agree 100%. You don’t just get struck by luck. Put yourself in situations where you can take advantage of some opportunity. I’m a huge believer in setting up as many of these opportunities around you as you can. Not all of them are going pan out. The vast majority of them are never going to show up. But for the ones that do, if you’re there and ready, that’s because you prepared. It just doesn’t drop out of the sky.

Rob: You found product-market fit, and do you remember how long it was before that growth really started ticking up for you before you hit escape velocity?

Anthony: Throughout 2011, 2012 era, we pretty much stayed. And in fact, going into 2013, we stayed with three people. I would say that by the end of 2012, we were hitting that escape velocity phase and then all the way through 2013. Because at that point, our growths were triple-digit year over year growth. But it very quickly starts slowing down because when you’re small, those big leaps look huge. By the end of 2013, we were still growing fast, but we weren’t rocket to the moon type of growth anymore. Things started to just be stable and become a nice steady growth trajectory.

Rob: Yeah. That’s cool. That’s what I call stage four, escape velocity. With Drip and CartHook, they lined up quite well. It was from about 25,000 MRR up to about 80,000 MRR, which is obviously right around the $1 million mark. With escape velocity, before we get to scale, where you have to start scaling the team and doing all that, you can ride the escape velocity for a while without ballooning the team.
In your experience with DNSimple, was it similar revenue ranges there—25,000–80,000 before you felt like you had to start scaling? I’m also curious how long you felt like you were in escape velocity before you transitioned to scaling?

Anthony: I intended on sticking to the escape velocity part for as long as I could. I think actually, one of the more interesting things, I recall listening to Jordan’s interview with you, is the triggers that move you from one phase to the next. And for DNSimple, there was a very, very specific trigger that switched us from escape velocity to scale. It actually wasn’t revenue. I don’t think directly it was revenue.
We could’ve continued operating fairly well in escape velocity with a very small number of people for longer than we did. But in our case, in 2014, that was the year from hell for me. That was a really tough year. Early in the year, my co-founder, my brother, decided he was done, and it was not a clean break. That was the start of a really bad year.
When he decided he had to go, he basically took a lot of his operations knowledge with him and I had nobody else to lean on. Both Simone and I were more on the application development side. It left a big gaping hole, and to me, that really quickly made me understand, oh my goodness, I need to do a better job to prepare and not have this gap here. Because we’re an operational company, we really need to have a good network operator who’s on the team.
That was the next time that we wanted and started looking to hire. I hired two people immediately and I had a contractor as well during that time right at the beginning of 2014, to fill that gap. In 2014, things started to slow down. But then by the end of the year, we were doing well, and then we got DDoS. It capped the end of a pretty horrible year.
By the end of the year though, we had continued growing a little bit more, added on a couple more people, and got to the point where we were eight people by the end of 2014. The trigger really, to get us from escape velocity into scaling was an event for us, was the loss of a key person that triggered a better understanding that I needed to make some adjustments to the team and grow the team a bit.

Rob: Yeah. Have that redundancy. I remember that break up because you talked about it on ZenFounder years ago. We did a founder origin story where Sherry interviewed you. We’ll link that up in the show notes. It’s a pretty devastating story. We don’t necessarily have time to dig into it here. You already told the full one over there.
What’s interesting is in 2014, perhaps by coincidence, was a really […] year for me too with Drip. There is just a bunch of stuff that went sideways. And I remember it being really hard, and I made a cash flow mistake where I had a big tax bill come because I had made a bunch of money the year before. I remember that just being a tough year. I feel your pain, perhaps not in the same ways.
At the end of escape velocity then, is that when you were at eight people? Do you feel like you are in escape velocity during 2014? And that’s where you had to make the transition from essentially three people up to eight?

Anthony: Yeah. I would say we started 2014 at the tail end of escape velocity. And then the triggering event with the loss of Darren from the team forced us into that next phase, which was the scale phase. We had done really well in terms of revenue per person, obviously. Because the fewer people you have, you’re growing your revenue. It’s amazing.
At the time I didn’t really think how important that number was. But I should’ve, in retrospect, understood there is probably a limit that most companies can go to where the revenue per person starts to become actually painful for the team, because there is just so much happening, and I missed that. Now, I understand a little bit better at what we can do.
Ironically, I still made the same mistake again. Later on, we’ll go over that. In terms of not seeing that that number hits a threshold where it’s really hard to operate a business at these types of numbers. But it’s actually a really interesting number to watch. By the end of 2014, we had added on numerous people and reduced that revenue per person. It became more comfortable again. Even though we did get DDoS, that was a really hard time. But coming out the other end of that, we had an epiphany going into 2015 that if we’re going to do this, we need to do this business so that there are enough team members to continue operating even if one person goes away.

Rob: Yeah. You need that. Like I said earlier, you have to have that redundancy at a certain point. You start to scale up to a million a year, you pass that, and you just have to think about it. You’ve mentioned this revenue per employee number, which I have heard several people talk about. And obviously, Basecamp is known for having 50 employees. What we think they’re doing is 100 million ARR or north of that. They have this outrageously high number. Probably one of the highest of any SaaS.
But I’m curious, where you feel like a healthy number is. Because as you said, when you go too high, there’s too much pain on your team. And when you go too low, the business isn’t profitable. But in your experience, where’s a healthy range?

Anthony: It depends largely on the business. In a SaaS business, your healthy range is probably 250,000–300,000 per employee is what I would be aiming for. I wrote down each of the years and looked at what our revenue per team member would be because I would count contractors as well. Looked at that and said, okay, at what point did things really start to hurt?
We were pretty comfortable in the 250,000–250,000–300,000 range. When it gets over the 300,000, when you get to the300,000,whenyougettothe350,000, $400,000 range, it starts to get hard, which makes me appreciate it. If you have a company like Basecamp that can do so much with such a small team, it really is an impressive feat. I can’t even imagine scaling that up to say Apple-sized company where they’re doing huge amounts of revenue per employee. It’s mind-boggling.

Rob: I bet Mailchimp is similar. Because I believe they have to be approaching (if they haven’t passed) a billion revenue. I think that it’s 700 million, maybe it was last year. Given their growth rate, I’m sure they’re up there. Their headcount is not as big as you would think for a company doing that much bootstrap company (in essence) doing that much revenue.
I want to give more thought to it. Again, it does depend on the business how support intensive is it. You can have a super simple tool that maybe you only need one or two support people for the support 1000 customers versus you have a really complicated marketing automation suite or whatever and you need a lot of customer success people just to get people onboarded. I think the number varies. But I do like that range.
I’ve always thought of it between 250,000 and 500,000 is the number in my head, but I know that there are people doing north of that. Really, the slower you grow, the less support you need, the less customer success, the less sales, the less a lot of things. You can have higher profit margins, or at least higher revenue per employee—if you’re on this really slow growth. Although the Basecamp is doing an enormous amount of revenue, they’re 15, 16 years in. I think they had a bit of a luxury. If they are at 100 million and they are 55 employees, that’s almost 2 million per employee. That’s just astronomical.
But that wouldn’t be something I would personally strive for in my company. It’s perhaps unrealistic. Much like a lot of the stuff Basecamp does is just unrealistic for most of us. They hit a lot of retakes, they did a great job and built an incredible business. But it can be hard to model our own companies after the outliers, like the Mailchimps and the Basecamps.

Anthony: Sure. Other factors you mentioned is the sales and the number of people you have. Are you doing enterprise type sales, or you’re doing hands-off style service? There are so many factors involved. It’s impressive, but I’m with you. I don’t think I would be in the position where I would want to operate a company at that type of size. If it happened, then so be it.
I never designed this to work this way. This is all looking back at the numbers and applying the feelings that I felt that each point along the way, when those numbers hit a certain point and how the team interacted with each other. It’s more looking back rather than saying, oh, I would plan to try to do 500,000 to 1 million revenue per employee.

Rob: Speaking of milestones, do you remember celebrating any of these? When you hit 1 million ARR, 100,000 MRR, whatever—did you go out to dinner with the wife or pop champagne with the employees? How were you at doing that?

Anthony: I feel like I’m more on your side. I didn’t celebrate very well. But at the same time, the team would get together, we would do meetups three times a year. We would always make those meetups an enjoyable time to be together. We would open some bottles of wine or of champagne—depends on where we were in the world. But we would spend part of the time just being together and celebrating the fact that we have this business that we can operate, and at the same time, live our lives.
We didn’t celebrate necessarily the milestones per se, but we still celebrate it regularly just for the existence of this. The sheer fact that we have such a wonderful opportunity to continue working on something that’s both mostly enjoyable and profitable.

Rob: I call those pinch myself moments. Do you ever pinch yourself and just say, we did this. This is incredible. This was a goal, a dream that I had, 5, 10, 15 years ago to own a company. I really never thought I would be able to do it. And then you look around and you run a company of 19 people doing millions of dollars, presumably, in revenue a year, 10 years in. It’s just incredible.

Anthony: Yup. Definitely have my moments like that. And then the next day something goes south and I say, why do I do this to myself?

Rob: Right, exactly. Why don’t I just go get a job? We’ve covered escape velocity—stage four. Stage five is scale. You kind of talked about where your brother left and you were forced to scale up to 8 people, 80,000 to about 200,000 MRR. Does that ring true with you? How long do you feel you were in the scale phase?

Anthony: This is interesting. When I went back and looked, we got to about 12 people, and we stayed in the scale phase for four years. The revenue numbers kept going up, but we had some turnover in the team. But we would get other people in. We had a pretty good dynamic in the team, and we were able to pretty much stabilize at a good point where we were comfortable. Revenues would grow, but our headcount wouldn’t. We stayed there pretty much all the way up through 2018.
Again, I look at the revenue per employee, and I would see this number just keep going up, up, and up. We were doing well, but at the same time, at the end of 2018 and 2019, we said, okay, there are certain things that are getting challenging. What are the things that we do at DNSimple is everybody does support, every team member, including myself. We all keep trying to support the queue, we all answer support. But we started to get the feeling we can do this, but we’re actually doing our customers a disservice because not all of them need the technical support. They need somebody there who’s maybe an advocate for them.
We started thinking about customer success as an independent thing inside of DNSimple. That was the start of us looking to move from the scale phase into the building a company phase. In an engineering organization, you could just keep adding engineers, and you can scale pretty well if you can do a lot of automation. You can automate, you can have a knowledge basis, you can outsource first-tier support that is backed up by your engineers.
You could do all kinds of things to grow, but at the same time, you start to sacrifice the quality of specific areas. Whether it’s the quality of bringing on a contract that is not your typical self-service contract, more of an enterprise contract. If you don’t have somebody there to handle that, then they get […] of a weak experience. If you don’t have somebody to take care of customer success—that’s support and also account management and things like that—well then, they have a bad experience. The people that fit into that bucket.
In 2018, we started looking at this at the tail end and said maybe it’s time to start looking for some people and putting them in roles outside of engineering. I think that was the next trigger that moved us into the company building phase where we started actually saying, you know, we should probably write down what we do here. We should probably start to look at who does what and what roles are being under-serviced because we don’t have an expert in that role.

Rob: Yeah. That to me is a mark of starting to think about a company building it. There’s mission, vision, values type of stuff where hey, you need to communicate the culture to new people. We are getting past that phrase, two pizza teams. When your team gets larger, then can eat two pizzas. You’re going to need three or four pizzas just a way to measure team size. When you start getting past that, you have to have some structure in place or else stuff goes haywire. And it sounds like you were pretty deliberate about recognizing that.
A lot of founders—especially first time founders—get to the 15 or the 20 employee mark before they realize that they’ve created a big hairball, a big mass, no titles, and people have overlapping responsibilities and all that. I’m curious how you detected that and why you were ahead of the game there as you switched into this phase six of company building.

Anthony: I would credit it a lot to the team and the ability to openly discuss these items. When we get together to do our meetups, it’s a very open forum. It’s not me telling the team what we’re going to do. It’s active discussions about the strategy and direction of the company. The things that work, and the things that don’t. What we do well, and what we can do better.
It’s a credit to the team. It came from different people and different fashion, but they brought it to my attention that hey, we could probably do better here if we put somebody in this role. And then it’s just me listening to them and accepting that, oh yeah, okay, I can’t continue running this as an engineering only company, but I can continue with the set of values that built DNSimple from the ground up. Which is focusing on automation, focusing on customers, and focusing on the team working well together.

Rob: Yeah. That’s nice. You’ve hired well to have people who are in tune with the org. That they’re able to give you candid feedback.

Anthony: I hope that my attitude towards them has helped encourage that as well by not shutting them down. Even though there are some ideas that maybe don’t fit right away, I try to hear it out. I couldn’t do this. If you asked Anthony from 20 years ago to do this, there’s no way he would have been able to do this. He was way too thick in his head, way too stubborn, and would’ve immediately cut off anybody who tried to give a suggestion.
That is the one thing I’ve had the luxury of developing over the 10 years is pushing that down and listening to the people around me. Whether that’s the team, the customers, or advisers as well.

Rob: Perhaps the spoiler question is, stage six company building. I think that’s maybe the stage you’re in now. Do you think there’s a stage seven? There must be. But I just wonder what that transition looks like.

Anthony: One of the things that I’m seeing here, and what I’ve seen with other companies is that you hit that seven-figure mark. There’s a big difference between 1 million in revenue in a year and1millioninrevenueinayearand10 million. The steps to get from the 1 million a year to the1millionayeartothe10 million are actually very significant, and they require a change in mindset. I think that’s the company building phase.
Building a company at that point, is when you’re really thinking about the company. My guess is—and I still am testing the waters here and seeing if I understand this—but it’s when you start to look beyond being a single product or a single service and you start to think of the company as an umbrella for accomplishing things that work well together but maybe are in the original line of the product.
You start to think—not a second product that’s completely different—can I do something that is another line of revenue that works well with what I have, but is still able to be independent and use independently. Because to date, all the revenue in DNSimple, all comes from services built in to the DNSimple application. Whether that’s email forwarding, domain registration, or SSL certificates. These are all built into the application.
Now I’m starting to think if we want to go to that next step, what is another source of revenue that maybe is able to integrate well with DNSimple but operate independently.

Rob: Yeah. I like that. Stage seven, empire building. I’m just going to throw it out there.

Anthony: There you go. Exactly. I like it.

Rob: It’s interesting because you look at Intercom and how they expanded. You look at Basecamp, they’ve launched a bunch of different products. But then I see others that haven’t gone down that road. Like Zappier, I really think of them still as a single product and segment. It’s certainly a possibility of one possible avenue to start adding on and expanding outside that core competency. Have you started thinking about that then for DNSimple?

Anthony: Yes. It’s one of the things that we’ve been talking about recently is we still want to have innovation in the world of domain in DNS. We still want to continue working hard on growing our place in the market and in delivering really high-quality service to our customers. We continue to invest in infrastructure and continue to invest in people. For the foreseeable future, that’s where our growth will come from. But at the same time, we’re starting to look and say what types of things we like to give to our customers where there are gaps in the marketplace right now.
Similar to what we experienced in the very early days of DNSimple where you had some big key players and they were well-established, but they had lost some of their traction or lost some of their mojo because they got too comfortable. That to me is the next thing that I can look at and say, okay, where else is close to DNSimple but can be an area of revenue growth because we can innovate there.
There are a lot of companies doing a lot of different ways. Some do it through acquisitions. One path into empire building (if you will) is through acquiring smaller businesses that have something innovative, but where you can actually work better with them. That’s a path.
Another path is independent product development where you set a tiger team off to the side and say, okay, put together several things and let’s test the waters with them and see what works and what doesn’t. The other option is that a lot of companies start to hit this size and say, I don’t want to do this alone. I’m okay with being part of somebody else’s empire. That’s the other direction that we see where the founders say, okay, we can keep doing this, and we want to keep doing this, but we want to do it with another partner who has already achieved the larger scale and already has a foothold in areas that we want to go into. There are lots of angles.

Rob: Yeah. Speaking of acquisitions, you have to imagine that you had people approach you about acquiring DNSimple over the years. A) is that true, and B) has that ever been you’ve considered?

Anthony: Yes. It’s been true over the years different companies have come in and said, hey, you’re interesting. What you’re doing is really interesting, would you like to talk? I usually will talk to them, nothing has ever gone any further than just initial conversations. Part of that is just because I really love what I do and I love the ethos inside of DNSimple. I love the way the team works together, I love the product and how it works. I feel like there’s more to do within this space, so I’m not quite ready to get out of it yet. I feel like I have more energy to put back into it. I have a longer-term vision that we still haven’t achieved.
For me, I have a lot of energy still to just keep going. I’m happy to stick with making this thing keep growing and keep on making the product better for our customers. That satisfies me for the moment. But yeah, we’ve had people come in over the years at different levels. Nothing to the point where it was, hey, let’s go into due diligence. No letter of intent or anything like that. The right thing hasn’t shown up for that yet.

Rob: Yeah. That’s the norm. When you build a business in the seven figures or eight figures, you will absolutely get a bunch of funding offers and a bunch of acquisition conversations start, and most of them go nowhere. Taking the first call is a good rule of thumb to do. If you feel like they might have the cash to actually do it, and they’re not wasting time, but to not get distracted by it. That’s the worst part is somebody comes in and wants to do an acquihire and you waste a bunch of time on phone calls with them in the early days when it’s just a distraction. And it’s pulling you away from doing product-market fit, escape velocity, and all that stuff.

Anthony: Yeah. Generally, what I do is I try to stay as honest as I can in those conversations—brutally honest at some point where I say, this is the situation, I love what I do, we make good money. If you’re going to come in, you’re going to have an offer that’s too good for me to turn down. That usually ends the conversation. Because most buyers are going to be private equity, they’re going to be independently funded, or yes, I’ve had like you, I also have a lot of venture capitalist interest over the years. It’s never felt right for this business.
This business is a steady growth business. It’s not one where I’ve ever felt we’ve had something that is oh let’s shoot for the moon type situation and try to become a $100 million or more company quickly. That’s what a venture capitalist is looking to fund. They’re looking to fund somebody who really wants to put fuel into the rocket and try to take off. That hasn’t interested me. We’ll have the conversations, but it usually ends pretty quickly when I’m brutally honest about my situation.

Rob: Sir, thank you so much for joining me on the show today. Folks want to connect with you, you are @aeden on Twitter. You are really active in MicroConf Connect, and I appreciate that because you’re a more experienced founder and then a lot of folks and I feel like you lend a lot of knowledge and insights. If folks want to be around and glean from your knowledgeable aura, they can hit microconfconnect.com and connect with you there. And of course, dnsimple.com if folks want to check out what you’ve been working on for the past decade.

Anthony: Yup. Absolutely. Thanks for having me on. And definitely love the MicroConf Connect community. Love being able to get in there and talk with other people both that are in earlier phases and also people that are in a similar situation that I’m in. It’s been really helpful just to follow along with what other people do. It’s a great community, so I’m very, very happy about that.

Rob: Thanks, sir. Appreciate it. Have a good one.

Anthony: All right. You too.

Rob: Thank you again to Anthony for coming on the show, and thank you for listening to Startups For The Rest Of Us every week. If you’re not already subscribed—I’m not sure how you’re listening to this episode, but please head into a podcatcher, click the subscribe button, share this with a friend, and would love a tweet. We are @startupspod on Twitter. You can follow us, you can @ mention us. I’ll take any help you can lend in terms of helping us spread the word about this message that you can build a startup. You can build a SaaS company without venture funding, and you can be ambitious without having to put your relationships and your family life and potentially your health on the line in order to build a company.
That’s really what MicroConf, Startups For The Rest Of Us, Tiny Seed, and my blog. All of my writing, just everything that we’ve done is aimed towards telling more people that this path is out there because so many people just don’t know it exists, they don’t know it’s viable, and we want to be the people to show them that it is. Anything you can do to help us get the message out, I’d appreciate it. I will be in your earbuds next Tuesday morning.