Episode 517 | Married Co-founders Who Turned a Free Tool Into a Fast-Growing SaaS Product

Rob: Welcome to this week’s episode of Startups For the Rest of Us. I’m your host, Rob Walling. This week, I sat down with the founding team of ScatterSpoke, John and Colleen. I like their story of how it started almost as a lark—something to learn some new technology, and it’s a hobby that turned into a business. Now, a pretty successful business.

By the time this goes live, they should be at or above $12,000 a month in MRR—to give you some type of scope of where they’re at—and they’re growing pretty quickly, in the 10% per month range. From my observation, they’ve hit product-market fit, and they are getting towards that point of escape velocity working diligently towards it.

I hope you enjoy my conversation today with John Samuelson and Colleen Johnson, the co-founders of ScatterSpoke. John and Colleen, thank you so much for joining me on the show.

Colleen: Thanks for having us, Rob.

Rob: Yeah. It’s great to chat with you again. I know we did a MicroConf On Air a few weeks back, but for folks who didn’t see that, they certainly heard about ScatterSpoke in the intro of this episode. Or they may have also heard that you are in TinySeed batch two. ScatterSpoke, your h1 on your website is, it’s time to have a smarter retrospective. We are improving the way teams improve, and you’re focused on helping people have better retros.

This is an Agile software development methodology. You guys have been working on this for several years now. It’s 3 or 3 ½ years ago, by now.

Colleen: Yeah. It’s definitely ebbed and flowed for us. I think we actually bought the domain name in 2015, and then really threw some stuff together and didn’t do anything with it for probably two years. It’s been around for a while, but not in the shape and form that it is today. That was a big relaunch effort that we did in 2018 to really build it into the tool than it is today. Where you register, invite your team members, and can buy an upgraded plan with more features. None of that was there for the first three years of us just squatting on the domain name basically.

Rob: Right. I have a few notes from your TinySeed application, and also for memory was that the first year, year and a half, it was a tool that was up there for free. There were no accounts. It was just a really super basic thing, but then you added the analytics to it and noticed that, hey, people are actually using this thing. Maybe we could launch a business around it.

John: Yeah, that’s exactly right. I built it to learn new technologies. I’ve always been a Java developer, and I wanted to learn this new thing called Node.js. That’s what started it all. We just put it online. You could go to it and basically press a button, share a link, and a million people could use it. That would probably crash our server, but that’s exactly how it started.

Rob: You built this tool because Colleen is well-known in the space, right? She has this personal brand in Agile space, and you’ve done a lot of speaking, writing, and are considered an influencer.

Colleen: Yeah. I’ve been in the software industry for about 20 years and in the Agile space for about half of that. It really helped me fill an immediate need I had in consulting when teams would either cancel a retro because somebody was out or not be able to have the retro because not everybody was in the same location.

We combined John’s interest in learning some new technology with an immediate need I had. It was great because I was able to really take it with me. Not just to clients, but also in the training sessions, large conferences. We were able to run retros after conferences or public speaking events. We were starting to get a lot of traction really organically without ever spending any money on marketing, and then also getting lots of feedback organically.

Rob: Was that essentially how you got early customers and did early customer development was just by going to these events speaking and having people use it, try it out, and give you feedback?

Colleen: Definitely. It was probably—for the first two years—how we were getting customers and users, and it was how we were getting feedback. And then when we added the ability to register an account, once John dug into our Google Analytics and was like, holy […]. There’s a lot of people using this.

We set up the ability to have a user account and then added Drift to the site. That was another chained point for us where we started to get real-time feedback on where people were getting stuck, where they had questions about the tool or were requesting features that we didn’t have yet.

Rob: Yeah, that’s cool. It’s always fun to hear. It truly is like a maker story where John wants to learn new technology. Colleen has experienced in this space or in this niche and is a bit of an influencer there. You sound like you maybe build it on a whim a little bit or like, hey, this is going to be a fun lark, a fun little project. You put it up for a year, year and a half, and really don’t even have the ability to register for an account. But then there’s just so much usage.

It’s that free tool. Some people go open source to the business route, but you just went literally like the free tool to the business path.

Colleen: I think, in some ways, being a maker project hurt us early on. John was excited to try out the new technology, and I was so close to the teams using it that every time we heard feedback about the simplest thing, we tried to go implement that or change something pretty dramatic in the tool.

We were almost being, in some ways, maybe too reactive or too close to what we were building. I think it took us a while to start to take a step back and say, how do these things help drive business and help us look at this more as a business instead of just a hobby or a pet project?

Rob: Yeah. There’s something I wrote about in my first book and I called it project/product confusion where developers do this especially. I did this in the early days where I would have this great idea for this project. It’s a web app that organizes my audible library, or it keeps me in touch with any author who I enter into the system, I suddenly get an update when they publish a new book, or just whatever.

It’s an interesting idea for a project, but turning that into a product that actually makes money and enough money that it’s worth spending time on is a huge, huge difference, and the maker in me always wanted to make cool stuff. In fact, I made a bunch of cool stuff, but I always thought they would become revenue-generating products, and that was a big mistake.

I was a little bit delusional, I think, in thinking those could be that. I could totally see how building this, it sounds like you almost erred on the other side where you built this free tool to learn new technology and because you happen to be in the space, and then didn’t necessarily think of it as much of a business as perhaps you could have.

Judging by your progress to date, it’s obvious that this can be a successful revenue-generating profitable business. If you’re going into that with that maker creator mindset, it’s not that you can’t do that. Have I seen many 6-figure SaaS businesses built with that? absolutely.

Have I seen many 7-figure SaaS businesses built with that mindset? A lot fewer, and probably 0 8-figure businesses that I think about. If you truly want to make stuff, awesome. That’s how when I started out, it was just like, I want to build cool […], I want people to use it, and I want to be able to live off the revenue. If that’s all you need, that’s great. I got up to about $120,000, $150,000 a year in revenue, and that was amazing.

But when I wanted to shift gears and get up to take that next step and be like, hey, I want to build a 7-figure or multiple 7-figure business, I do think you have to start maybe shifting the mindset a little bit.

You told me before we hit record that you were focused on the small Agile teams. But then enterprises would come and they would ask for features that you weren’t necessarily thinking about or that interested in building. But you did make the shift and decide to build those things for those larger teams.

You want to talk me a little bit through how that process went and why you decided to go down that road instead of just keeping it as a true, hey, I’m a maker and this is my vision and I’m going to build the product that I want, even if it does hurt our growth (in essence).

John: After that first year of launch, when we decided to make it a business, and we weren’t certainly focused on smaller teams, it was a brutal year. People had never given us that much authentic feedback about what sucks or what wasn’t working. It was hard. There were a lot of bugs to get through, and that was one thing. But people can be ruthless, and it cuts you deep.

Actually, we were getting to the point where we were like, you know what? Let’s go back to the maker mindset because this is just not fun or have it be more of a passive business. Out of nowhere, a giant enterprise deal showed up, and they were very interested in some contingencies of we want these 10 features. If you build these 10 features, we’ll sign a deal.

We looked at them, and we’re like, we’ll make these our own, and these wouldn’t be our first choice of what to do, but we did it. That’s when the light bulb went off. I think big enterprises are where all the money is at for us, and most of these come with some custom features. We got to get good with wanting to build those, and it’s been a game-changer ever since.

Rob: Yeah. This was about a year and a half ago in early-2019. You mentioned that you had been grinding it out for so long on the side and that you were considering, should we even do this? It’s not making enough money to make it worth it. And then this enterprise comes along and it’s that realization.

I think so many entrepreneurs—especially developers—see the model of the Basecamps and the Mailchimps where it’s like, hey, I can build the product for $10 a month or $30 a month. I can do the SMB—the Small Business thing, the self-service, and that’s the business that I want to build because I’ve seen that model. It sounds like fun. I don’t have to do high touch sales and deal with these big enterprises with the six months sales cycles, the security reviews, and all of that.

While that is totally possible., it is not actually the optimal way—in my experience—to build a big business quickly. Really, if you look at more of the SaaSter model, which is going after the big-ticket Fortune 1000 or the Fortune 5000, it’s the high touch sales, and it’s big contract values. That tends to get you there faster.

Even I would propose—as good as or better than that—is this model that I think several folks in the TinySeed batches have, and you guys have it as well. This dual funnel is what I’ve been calling it where you do have that high-end enterprise funnel. You do have folks coming in paying (let’s say) tens of thousands a year is how I think about an enterprise sale.

But you also have this nice influx of folks on the lower end, small teams. Maybe it’s a free plan. Maybe it’s the $10, $50, or $100 a month plan that you get a lot of volumes through and that tends to be a lot lower touch, but you get a lot of users and therefore you get that brand momentum. Because the more users you have there, oftentimes, there’s more word of mouth that then can lead to the enterprise funnel.

Have you guys ever thought about this in terms of that like, hey, we have two really different funnels? Do you handle those differently in terms of how much touch, how much onboarding, and perhaps how much support do you offer the two types of customers?

Colleen: Yeah. I think the concept, in general, has been pretty new for us in the last year, but definitely eye-opening in the sense that there’s value in both. Like you said, the overhead to get those small teams in the system and onboard is really low. It’s self sign up. they pick their subscription, invite their team, and there’s usually not a whole lot of overhead for us. Versus, like you said, those big enterprises can take up to six months to go through a security review, legal back and forth on contracts, and then add-in.

John said those custom feature requests and our time to get them in is quite a bit longer. But usually, once we have them, their contracts are anywhere from a year to three years, or maybe longer. There’s value in both of those channels for us because the one that requires more time obviously pulls us away from doing a lot of other stuff.

I think the other thing is, in some ways, that the middle tier like you described is a little bit of a gateway drug for some of these other organizations where they want to test it out, maybe in a pocket of an organization that’s a huge company. They might use the team subscription plan or a business subscription plan to try some of the features out before going to the enterprise.

That’s also been a nice funnel for us of people coming in and trying some of the stuff out before jumping all the way to enterprise. I think we found a couple of different channels or combinations of good paths through those different offerings.

John: I’ll just add to that too. Something that surprised me a bit, like I mentioned, we built a bunch of custom features for that big enterprise client. Those features now work for all of our small teams just as well. We built these enterprise-grade features for these guys and a lot of them, and it’s actually helped the smaller end funnel a lot.

Rob: How has it helped them?

John: A good example, in our tool, we have something called facilitators control. In the beginning, we were just like, this should be a democracy. Everybody should just be able to do whatever. Everybody can have controls to take over the retro. This big enterprise said, no, no. We want somebody to be in charge.

They run the meeting, and we don’t force that to happen. You can do either or, but it turns out these smaller teams also like that to have a facilitator to take charge of a meeting. We were of the opinion that it should be a democracy, not have a hierarchical role set. It’s actually a blessing that we made that because it’s definitely helped us out on both ends of the funnel.

Colleen: Yeah. I think we figured out a way to do it to still support that model. Like John said, to make it optional so that the functionality is there if you want to use it, but it’s not a requirement. That’s a path we did with a lot of what we offer in the tool. The functionality is there if you want it, but also, if you don’t want to use it, you don’t have to.

None of it is forced, and I think that’s something we learned throughout this process too that the more we could make self-service inside the tool, the more we’d be able to serve both of those different client paths.

Rob: That’s an elegant balance to strike because, oftentimes, enterprises want large, clunky things. They want a ton of settings. They want checkboxes everywhere. If you want an easy to use self-service tool, you don’t want 50 checkboxes in your settings. You tend to want to be a little more opinionated in your software.

If you’ve been able to strike a balance with that and be able to have the enterprise features help the smaller teams and potentially vice versa, that’s a really nice way to go. Because the fear is always that you’re almost like building two products in one and it becomes Frankenstein. It’s like our enterprise customers want all this crap, and our small teams want all this stuff. We have to build them into the same product, but it should maybe be two different products really. If you’re able to strike that balance, that’s a really nice way to go.

Colleen: I think the only thing we’ve ever really said no to, from a large enterprise request, is our tool is completely anonymous. We did that by design to create safety in your answers and being able to be really honest with your feedback that you’re providing to your team. If you want to put your name on it, great, but we’ve had requests from small businesses and large businesses to go back and either toggle that on and off.

We even had one request one time where somebody was like, I need you to tell me who wrote this exact card. We were like, no. I’d say that’s the only thing that we’ve really pushed back on from a feature perspective just because it was so core to how we wanted the tool to function that we weren’t willing to bake that in for any contract.

Rob: Yeah. That makes a lot of sense. I’m thinking back to your timeline, you think early-2019, you’re questioning, was this the right thing to do to double down on this business? You get this enterprise customer or prospect who says, hey, build these 10 things and we’ll pay you a lot of money (in essence).

You said yes to it, you built it, and you got them onboarded. But at that point, you’re still not making enough to quit the day job. I’m curious, John, during that year, because you applied to TinySeed in November 2019. Somewhere between early 2019 and getting funded from TinySeed, which I guess was just about a year.

I think we funded in February or March of this year. So it’s been about a year that you’re toiling away. You guys are married. You have small kids. You were basically working all nights and weekends, right? How did that take its toll on you, your mental health, and your marriage? However, you want to describe it. I’m just going to make the assumption that this was not an easy time for you, and I’m curious. There’s got to be folks in the audience who that resonates with.

John: The biggest thing for me is I can work long hours. I can work hard. That’s just part of who I am, but it’s more of a guilt problem to me. What I mean by that is if I’m not at my W-2 job, I’m at home, it’s a Saturday, and I take four hours to go to the park with the kids. I mean, that’s four hours that I should or could be working, and then it’s the opposite is true too.

If I spent those four hours on a Saturday working instead of being with my family, I feel guilty the other way. I feel like the deck stacked against you. You feel guilty no matter what you do. It’s like I have to make this business happen, and I also need to be a good father and husband. That’s by far, in my opinion, the worst part of it. It’s not working long hours. We can get through that. It’s guilt.

Rob: Yeah. Colleen, do you have any additional thoughts on that?

Colleen: Yeah. I mean, I would totally agree. I think the hard part is finding that balance. We’re always trying to teach our kids to work hard, play hard mentality too, but it’s that making space for the play hard. It’s easy when you have the day job or the W-2 job, and this becomes a night and weekend project to feel like there’s never time to enjoy it or never time to play.

I think taking the TinySeed investment and being able to go full-time on this really changed the course of that for us. Although, COVID definitely threw a little bump in the road.

Rob: For real. I was going to ask about that later, but let’s talk about it now. You mentioned offline to me, one of the most painful parts of the recent couple of years is you finally get to the point you’re having enough success, you applied to TinySeed, you get the funding, you’re able to quit the day job, and then really focus on ScatterSpoke, and then COVID hits.

All this happened. Now all your kids are at home, so you don’t actually have all the time, or perhaps all the mental bandwidth. Maybe like me, because I have three kids that are here at home, I’m working at home during the day and I’m feeling a little guilty that I’m not with my kids, which isn’t okay. I should have some time to work and feel okay about it.

I just love to hear more of your thoughts on that whole experience and on how that felt and how you guys have dealt with that.

John: I quit my day job in early-February 2019. I love the company I was at, so it was a hard departure in general. But the day I quit, the next few weeks—I think I said something like this to you before. I felt like the king. I was getting all this time to do all of this work every day, and it was awesome. It felt like the needle moved very quickly from where we had been. And then all of a sudden COVID hit, and all of the kids are at home. I don’t want to equate this to having a job, but it’s a job. Well, all the kids are at home, you’re making lunches, and chasing a two-year-old everywhere.

It was very quickly like that flame, that spark that I had from finally getting there, which in a lot of ways was like the first big goal to quit your day job. It’s like I made it. A month goes by and then it just gets ripped away by COVID. I’m not mad. In a lot of ways, this is the best time of our lives where we spend so much time with our kids, but it sucked. It’s like going back to having a job again. It was very rough.

Rob: Yeah, it sounds like. Just to clarify, you said you quit your job in February of 2019 but it was 2020? Within a month the lockdown started.

John: Exactly.

Rob: Something that we had also talked about. I know that at a certain point—this is before quitting your job—you had tried to hire out some of the development because you just couldn’t keep up with feature requests as often happens. You guys started with a free tool, and then even once you started charging—had a free plan. So you have a lot of users in there asking for features.

I think you made a mistake that I made as well. I think a lot of us do is hiring friends. Instead of going to Upwork or going whatever we’re going to do outsourcing to maybe it’s offshore, maybe it’s not, but it’s finding people where you can have a single relationship with them. Hey, I’m the employer, in essence, and you’re the contractor. When you hire friends, you have a dual-relationship, and that makes things complicated. You want to talk to people through your experience with that.

John: Yeah. I think as engineers, over the years, not even our project, but I’ve been in other people’s projects where it’s like, hey, we should totally build a thing. You do that, and they usually don’t go anywhere. When I had ScatterSpoke going on—this happened a few times. I tried paying my friends. I tried just like let’s do a trial period and if this works out, maybe we can talk about equity.

Really what happens is that you get all excited, you sit down, and you have like one great meeting where you’re like, all right, you’re going to do this. I’m going to do that. And then the week starts piling up and they slowly are not doing anything. There’s just not a lot of accountability because they’re your friends. Often friends in professional settings, like at your day job.

It’s hard to really come down on them because of that. At the end of it, I usually would just cut ties with them and say, look, this just isn’t working out. It’s not a big deal. Let’s just move on. I’ve changed that to hiring people I don’t know, and specifically hiring people, not in the US. I have a whole rant about that, but I’ve found developers in Europe especially just seemed to not be so whiny just to put it bluntly. I’m a US developer. I can say these things.

Rob: I was whining when I was a US developer too. I’ll admit it.

John: We all are. We all get so used to these tech startups. Everybody in the company treats you differently because you’re the tech guy, you know how to do all this. It’s a whole other thing, but anyway, our business changed. This was actually one of the good things about COVID.

When I started slowing down, not having more time, that’s when I found an offshore developer that really worked. You could give them your requirements, and they just were pretty self-sufficient, get the stuff done. You tell him when you want it done, and it was done by then.

Rob: That’s cool. It doesn’t always work out that way, of course, but it’s nice that you either got lucky, interviewed well, or whatever, and were able to turn that corner. Because I think, as a developer, outsourcing development can be a real challenge because I’m going to put this in quotes, “No one can ever write code as good as I can.”

This is the internal monologue of every developer ever. It is nice that you’re able to essentially get parts of that off your plate. Do you still write much code in the product, or are you just doing more technical direction at this point?

John: I do both, but I do the stuff that’s hard or tricky. We’re working on some more pricing stuff right now. I do all that stuff. I just don’t trust yet somebody else to do that. But in general, like, hey, go build these screens to do this other thing. It’s fine. They can go do that, and honestly, you got to let go at some point.

You cannot hold everybody to your standards. At the end of the day and after being an engineer for many years, it doesn’t matter. If the buttons work, there are so many big systems built with duct tape, and they work. You got to get over that as a technical founder.

Rob: Yeah, I agree. That was when I started becoming much more effective as a business owner when I learned that too, and it took me many years. It took me too long. It took me five, six years of running software projects and products. And I was still mingling in the code, still making tweaks, and eventually, I became more valuable to the companies once I outsourced my own development.

As we move towards wrapping up, I wanted to get into your free plan and raising prices once you got into TinySeed. I’m curious, Colleen, do you remember when the two of you—for folks, TinySeed, obviously, a startup accelerator for SaaS companies. You apply and then you do Zoom calls with myself, Einar, Tracy, and sometimes other folks to find out more about you and your company. We ask questions and all this stuff.

I remember, I think Einar may have talked to John, and one of the things Einar said is ScatterSpoke is awesome. They have a free plan. I’m not sure that’s a good idea. I think the pricing is messed up in essence—isn’t accurate, which is very, very common. I think most of us, probably, 70% of founders who haven’t given a lot of thought to the pricing, have screwed it up in some way or another in their product.

But then, when I was on a call with the two of you and I started digging into the numbers of like, whether the free plan converts? What’s your pricing? Do you remember one of the early things I said about the free plan? Do you remember what my general sentiment was?

Colleen: I don’t remember.

John: No.

Rob: Okay. Which is fine, it was like nine months ago. I don’t expect you to. My first thought was you need to kill the free plan. It just didn’t make sense. The numbers didn’t make sense to me. That’s not a blanket statement of free plans don’t work because that’s not true. We see free plans work, and it wasn’t a blanket statement of this will never work, but it was a first instinct of like, wow, you have that many people using it. So few are converting, and maybe it’s too permissive, which I think you guys actually knew that as we were talking.

That was something that you have since done. At this point, you have a free trial, but you can’t sign up for a free plan anymore.

Colleen: Yeah. We’re in the process right now of killing that, actually. We redid our pricing tiers first and gave everybody some grandfathered users and options with those new pricing tiers. We’re about to roll out what will essentially kill the free tier, and it was hard. I mean, it’s still a little hard for me to let go of it, and I think it’s back to being, in some ways, too close to our user base.

I feel like we built this off of people getting to try it, people who knew me, and attended my classes, workshops, or whatever being that user base. I feel like I lured them in and then now I’m like, no, you can’t use it anymore. But I think we have reached maturity as a business that it isn’t a hobby and it isn’t a free tool. We know the value is there, and that people are willing to pay for it. It’s time to grow up.

Rob: Yeah. I like that you said that it’s hard because it is. I think there is a common conversation in the MicroConf community of, hey, charge more, raise prices, and everybody’s undercharging. Most of the time, that’s honestly true, especially if you’ve never really raised prices or never looked at your pricing. That discounts the emotional side of things, both the relationship you have with your users and also the fear.

Raising prices is really scary. Killing free plans is really scary. Adding or removing a credit card before a free trial is really scary. I’ve done all of those things. Every time I’m like, I don’t know if this is going to work. If it doesn’t, maybe I’m going to make a bunch of people mad, and am I going to kill my business with this?

That is something we’ve done pretty intentionally in the first month or two of TinySeed of the batch is to say, hey, who here thinks they have a pricing issue? Again, it’s typically 70% of batch two raised their hand in the Zoom call, but then it’s to help folks think through, not only how they can actually change it mechanically and logistically, but how to deal with the emotion of that. How to convince people, hey, if this doesn’t work, it’s pretty easy to roll back. This is not an undoable decision.

Given how large of a lever—I keep saying pricing is the number one lever in any business. Especially in SaaS, where it’s recurring, pricing is your number one lever. It’s the easiest thing to change and to double growth overnight. Everything else requires more customers, requires more features, or requires something else. But just to change a number on a page and in your Stripe account and have it suddenly change it is a big deal. It deserves a lot more thought I think than most founders think.

All of that is to say how did you deal with, get through, or push through that emotional resistance? Whether it’s the fear or whether it’s just a nagging doubt of like, maybe we shouldn’t be doing this. I’m curious how you pushed through that in order to make such a drastic change.

Colleen: Honestly, once you see that Stripe account number go up and up and you see those trails convert, it’s pretty easy to support it. I think that was proof for me. I think you’re still offering. To me, we built this tool to help teams and to make this easier. I felt like I was taking that away from them by removing the free tier, but I think what you see, as you go down this path, is the value is still there. You’re just asking them to pay to get that value.

Once we start to see all the conversions, and honestly, like new enterprise contracts coming in now, I think it really just supports that the value is something worth paying for.

Rob: Awesome. We’re out of time. Thank you so much, John and Colleen, for joining me today. If folks want to keep up with you on Twitter, you’re @ScatterSpoke, and Colleen, you are @scrumhive. I like that. That’s a cool Agile Twitter handle. And then, of course, scatterspoke.com. If folks want to check out what you’ve been working on and potentially check out for doing their retrospectives. Thank you guys so much for joining me on Startups For the Rest of Us.

John: Thanks, Rob.

Rob: Thanks again to John and Colleen for joining me on the show today. If you’re interested in potentially joining TinySeed batch three, head over to tinyseed.com and get your name on our email list. I believe we’ll be opening applications again here in the next four or five months.

In addition, if you are an accredited investor and you’re interested in investing in early-stage B2B SaaS companies like ScatterSpoke and other TinySeed companies that you’ve heard on this podcast, head to tinyseed.com/thesis. You can see our unique investment thesis that we have at TinySeed, why we believe that B2B SaaS is an amazing investment, and to be able to basically index across hundreds of these SaaS companies and diversify investment is a solid way to go. You can learn more about that, tinyseed.com/thesis. Thank you so much for joining me this week. I’ll see you again next Tuesday morning.