Episode 625 | TinySeed Tales s3e4: Doubling MRR

Rob Walling:
Welcome back to this week’s episode of TinySeed Tales, season three, episode four, in which CloudForecast doubles their MRR and Tony uses the phrase, “It feels like we cheated.” It’s a really good episode. You’re going to want to stick around for it. Quick reminder that applications for our next TinySeed batches are currently open until September 25th, just a few days after this podcast airs. Head to tinyseed.com/apply if you’re interested, and let’s dive into this episode of TinySeed Tales.

Tony Chan:
It felt like we cheated to be honest. I’m trying to change my thinking a bit that Hey, everything and all the effort that we put in has led up to this and it’s not cheating. We did get lucky, but the work that we’ve done the last three years has culminated to be able to close that deal.

Rob Walling:
Welcome back to TinySeed Tales, a series where I follow a founder through their struggles, victories, and failures as they build their startup. I’m your host, Rob Walling. I’m a serial entrepreneur and co-founder of TinySeed, the first startup accelerator designed for bootstrapers. We’re back with Tony Chan of CloudForecast, the cost management tool for Amazon Web Services. It’s been about a month since our last conversation, and there are big changes afoot.
So Tony, listeners may not realize the way we do these episodes. Sometimes it’s a month, sometimes it’s three months between them. And I record voiceovers, we send it off to a producer, and then we get it back a few weeks later. And usually, what’s happened with the past three seasons is, I listen to it, the founders listen to it, give me the thumbs up, because you have final cut. But what was interesting with the last episode, because I sent you episode three just a few days ago, five days ago, and you listened through it and you sent me an email and you say, “Wow, how much has changed since then. Great episode. I hope people can relate to the highs and lows, the struggles, and it feels like pushing a boulder up a hill sometimes. That was just a few weeks. LOL.” And then in all caps, “GET ME OFF THIS ROLLER COASTER.”
So what has changed that made you say that? Because the last one was you were down, things were not growing. They were just going along in a way that you were not super happy with. So what caused you to send that email to me?

Tony Chan:
Yeah, absolutely. Last time we chatted, I had mentioned things were a bit slow and felt like we were floundering a bit. We weren’t getting new opportunities. It seemed like it was just string of bad luck. But since the last time we chatted, we closed a really big enterprise opportunity that essentially doubled our MRR to 35K. So that represents 50% of revenue. It did take us a bit of effort to close that out, but that was a huge change, and it’s a huge inflection point in our growth and our company.

Rob Walling:
Absolutely. That almost never happens. It’s so rare.

Tony Chan:
It literally looks like a hockey stick when I map it out. I’ve never seen that before, but that is a huge change, and I think that was the reason why I wrote that email. Because it’s two months where personally I felt like crap. I was by myself a little bit. Things were not going away. And then all of a sudden, we had a string of good luck and be able to close this deal and have that conversation and just put all our efforts into that opportunity and closed it.

Rob Walling:
And in the last episode, we talked about celebrating how you had crossed 200K ARR back in August. And I was thinking to myself, yeah, so now you’re looking forward to 250, and then you have a little celebration at three, a little celebration at four, and you just blew by all those, because you guys are over 400.

Tony Chan:
It felt like we cheated to be honest. I’m trying to changed my thinking a bit that hey, everything and all the effort that we put in has led up to this and it’s not cheating. We did get lucky, but the work that we’ve done the last three years has culminated to be able to close that deal. So yeah, it’s definitely a huge inflection point for us and we’re just so happy to be able to see that growth, and the hard work that we put in has led to that.

Rob Walling:
There’s an old saying that luck is when preparation meets opportunity. The only reason this deal went through is that Tony and his team built a product that people actually want and developed the skills to market it. I love that Tony has the perspective to give himself a well deserved pat on the back. But I also understand his initial instinct to be humble and even cautious. When it comes to B2B sales, closing a deal can take three or four months or longer. This one came together at whirlwind speed and carries new implications for the business.

Tony Chan:
With more money comes more problems. How can we use that money wisely? How can we spend that and generate the most ROI? It’s just crazy to think that at 420K, we have really high gross margins at close to 90%. I’m almost making what I did working at my previous job if I decided not to reinvest back in company. So I think that is also a huge relief. Obviously, we’re not going to do that. We want to reinvest in the company. So it comes with whole set of problems that accelerates a lot of things, whereas I feel like a lot of companies can step growth into that. Whereas for us, it’s a one shot deal where it’s just a huge step versus where we’re at before.

Rob Walling:
And now your thinking has to shift to, okay, we have all this money, so now we have this big margin in essence, how do we spend this to grow the company? Is that something that’s on your mind right now?

Tony Chan:
So it’s funny that you ask that because there’s also a sense of fear that I have on that side. When you first start out building your company, you have a sense of fear of, okay, maybe this won’t work out. I think we’re past that, but it becomes a different sense of fear. It’s like, all right, we are planning and we’re trying to be very strategic about it and ask people questions, but there’s still that uncertainty. It’s kind of ironic, but we’re close to a half a million dollar business, but what happens if we spend a whole year investing that money and the ROI that we had hoped for doesn’t materialize?
So there is definitely that burden that I’m carrying and thinking through. But yeah, we are strategically trying to plan through 2022 and how to budget things, not something that we’ve been really good at and how to plan for things on the growth and marketing side, but also on the product side as well. So there’s definitely a lot of moving parts and literally any typical bootstrap company, they get maybe two or three years to plan all that because it’s a lot of incremental step growth. Whereas for us, we’re condensing that in 60 days. So it’s not a lot of time to think through this and just making sure we spend the money the right way.

Rob Walling:
Can you give us any insights into what you’re thinking in terms of hires or marketing or how you can invest it?

Tony Chan:
So on the product engineering side, it does make sense for us to maybe hire an engineer more on the senior side to help Francois a little bit, to help us move faster on product. That’s something that we’ve always been really good at. So that is a very easy input output type of scenario.
I think the tricky part at the moment is the growth and marketing side, and it feels very overwhelming. And there are just so many moving parts and just so many different ways we can execute and how we’ve always executed previously, it’s like, oh, we come up with a thought and idea and we just do it. But with this type of money that we’re getting, we need to be strategic about it and we need to plan for it. And I feel like that’s something not a lot of bootstrap founders are really good at sometimes. We just fly by the edge of our seat and just execute and do it.
But when talking to a bunch of advisors and mentors, a lot of them say, “It sounds like you need to plan. You need to be really strategic about it.” That’s the main thing that the advice converged on is, “Hey, you need to be strategic and plan out the year and be able to hire contractors, the agencies in this area as well.” It is a lot of money, but it’s not enough to say, “Hey, let’s hire a full marketing team and build out growth person, a head of marketing, a content strategist.” So that’s where we’re at at the moment is just figure out who to plug in and where to plug people in for next year and what our budget looks like.

Rob Walling:
I think a mistake that a lot of folks make is thinking that, okay, we have this money and we do need to invest in marketing, and so I’m going to try to find that unicorn marketer that can do everything, that can do strategy and then do several tactics and is an expert at all these. And there is Corey Haynes and there is Asia Aragio, and there’s a handful of other folks we know, but realistically, that’s just not likely to happen. And so I think that’s what you’re finding yourself with is in a perfect world, it’s like, cool, I’m going to hire a developer and then I’m going to hire a marketer. But it’s like, well, are you hiring a strategist who’s going to try new things and have high level knowledge of a bunch of stuff, and then they’re going to essentially delegate the tasks to freelancers or to someone else? Because finding someone to do all of that is obviously pretty hard.

Tony Chan:
Yeah. I think that was the main conclusion we came up with while chatting with people is that unicorn does not exist. So we are working with Asia at the Man Maven. She’ll be a really good resource for us to help us think through what this marketing is and helping us set up a foundational piece. Essentially, she’s coming in, doing customer interviews and helping us set a really good foundation for us for the year and how to plan out the year. She’s acting essentially like a CMO or a VP of marketing for us on the initial setup chat and a project that she’s working on. So we’re very excited for that, because in the past, it’s always been Francois and I just making things up as we go or just taking tidbits from what our customers tell us. Whereas it feels great to have someone who can help us plan for that and have probably seen millions of similar scenarios and be able to just set a really strong foundation for us.
The other area too that makes sense for us based on just our data point is just doubling down on content and SEO. I think you mentioned it’s easy to get overwhelmed by all the channels and where to focus on, but chatting with Ruben, Corey, you and the convergence of advice was it seems like content SEO is an area that should be the primary driver in the area that you should double down on. So helps us keeps our focus on what channels. We talked about outbound, but when we look back in 2021, we blew 25 grand and it didn’t materialize and doesn’t mean we are going to ignore that channel, but it seems like we just need to amp up where we a hundred percent know where things are working and figure out that process as well and where to hire contractors and agencies in that area.

Rob Walling:
The last time we spoke, Tony had already been thinking about hiring a couple extra people to deploy the extra capital they were sitting on. Now with all this additional MRR, they have even more dry powder to take some bigger risks.

Tony Chan:
I think there is a level of somewhat confidence. We plugged in our new growth numbers and we’re like, “Oh, we’re completely fine.”

Rob Walling:
Default to live plus plus, right?

Tony Chan:
Right. The previous mentality is we were counting everything that we were spending. We’re very mindful of where we’re spending our services and the apps we buy or doing business meals and so on. But now that’s almost a rounding error. We don’t have that burden or stress to think about that. Now we can set our focus on what really drives our expenses, which are who we hire. When we looking at the numbers and the balance sheet income statement, that is the primary driver of where our money’s coming in and out.
So I think there’s a weight that’s been lifted from us. We don’t have to worry about paying ourselves next month or we have the money. We were always relatively fine. I think as a bootstrap founder, you’re definitely more hyper aware of that. But with the newfound MRR, it’s definitely less about that, but more of okay, how can we execute? How can we plan? How can we amp this up a little bit more and just continue to grow and build upon the money that we’ve gotten as well?
So I think we’re trying to shift to that mentality a bit. It’s still a bit hard, but that’s something that I’m just trying to remind myself. It’s okay to spend 10 bucks to make your life easier with this one software. It’s more so who do we hire? And that’s the big driving point of growth for us.

Rob Walling:
I’m glad you called that out because it’s an adjustment a lot of founders have to make if they have gone from being really cash strapped, really bootstrapped and either raise funding or grow a business to the point where they’re in your position. Whether it’s 400K ARR, four million or 40 million, at a certain point you hit it and you realize, oh, okay, I have to change my thinking and I can’t be so frugal all the time. It will actually be detrimental to the business.

Tony Chan:
It comes back to what areas is the best spent for Francois and I? Time right now is the most important part. So that area might not be code up on, but my time is probably going to be spent on making sure the engine of what we do and produce with content and SEO and driving more opportunities there, that is where my time is best spent at the next six months. So that is probably the mindset shift that we have on our side.

Rob Walling:
So switching gears a bit, this conversation took place right after Tony and I got back from a TinySeed retreat in Scottsdale, Arizona. We have founders around the world so bringing them together physically is an opportunity to elevate the mentorship that makes this program special. Plus, our founders can actually get in some R and R between focused conversations on hiring, onboarding, marketing, churn, and everything else a SAS founder worries about. I wanted to ask Tony about his experience at the retreat.
I’m curious, my impression is that you are an extrovert and you get a lot out of being around other motivated, ambitious people, but I’m curious to hear in your words, what did you come away, whether it’s tactical things or whether it’s just a broader sense of inspiration or whatever, what did you come away with from that retreat?

Tony Chan:
Yeah, that retreat was great. So that retreat was with the spring and fall batch in Scottsdale, and I think just being around fellow ambitious bootstrap founders, a lot of them are going through the same struggles as you are, have dealt with the same problems, can understand the context and the issues that you’re going through and be able to have empathy and relate to that. And just be able to chat about work and life and just be able to connect with people that are similar to you, there’s just no better feeling than that.
And I, honestly, and Francois as well, we felt energized leaving that retreat, because not only we got to chat about our business, but we got to meet a lot of really cool people, and it really motivates you to just keep pressing forward. And there was a good amount of diverse activities where we chat about things on a tactical level, like where should we focus? That advice we also got was to focus on SEO content. But we also had a lot of time where we went go-karting, we did the hot tub thing and be able to talk about non-work items and talk about life things as well with other founders. And I thought that was really cool. And I really enjoyed that.
And I’m bummed that we only have one retreat left in Minneapolis, but that was a great retreat. And I really enjoyed it. And I’m glad Francois was able to go, because I haven’t seen him in a while actually. And he just came back from his wife having a baby. So it was good to connect with him, and he felt energized as well because he hasn’t been to one of these retreats. So that was his first one. So he had no idea what to expect.

Rob Walling:
It was one of the best retreats we’ve hosted, partly due to a lot of factors. It’s like the founders who showed up like yourself really came to focus and hang out. And yeah, I like that you called out being energized because that’s how I felt leaving it as well. I think the feeling of other founders understanding you and having a shorthand, I summarize that as belonging. You feel like people really understand… When I say MRL TV and ARPU and KAK in any other room, no one has any idea what I’m talking about. People don’t really understand what we do and that’s okay.
But when you get in a room, whether it’s 35 founders at a TinySeed retreat, whether it’s 275 founders at a Microcom Growth event, when you get in a room with that many people who you know you can just have an interesting conversation with about something that you really care about, it is inspiring. And it’s very rare that we’re able to do that.

Tony Chan:
I think what helped too, and it might have been just the luck of the draw is I felt like a lot of the founders were in relatively same growth stages. There might have been that have hit a million and plus, but I think the fact that all the batches were in 2021 and are relatively in the same growth stage, definitely helped facilitate a lot of the conversations, because the memory of whatever you’re going through or the advice where it’s fresh. We know the tactical things of how to approach whatever the problem you’re dealing with or have seen those items, because you are relatively in the same growth stage.
So I think that was very, very helpful and kudos to TinySeed, be able to pick founders, I wouldn’t say similar, but it was a good diverse group of people, and no one had egos. Everyone had a lot of humility. Everyone was willing to share. No one was like, “Hey, look at me. Look what I’m doing, blah, blah, blah.” Everyone was very, very helpful and willing to give back. I think that was the big thing, willing to share their experiences. So I think that was a very refreshing part of it.

Rob Walling:
So we’ve talked about good things, exciting wins and such. Do you have any low points since we last spoke? Any big losses you want to bring up?

Tony Chan:
Nothing in particular. It is a little slow. We’re a few days away from the holidays and the New Year’s. So we do have a lot of warm and code opportunities that we have in the pipeline, but they’re just on hold, and it just sucks not being able to do something about it because a lot of our customers are out of office. So yeah, I think that’s the biggest setback is not being able to make continual progression on just closing more of those opportunities that we’re getting. And honestly, we probably have to wait until mid-January and February.
So yeah, we grew and we doubled our MRR, but not being able to progress that further, that’s also a weakness that I have. Just wanted to keep pushing forward and such, but I can’t do much about it at the moment since a lot of people are out of the office.

Rob Walling:
I wouldn’t call that a weakness either. That’s just founder drive. That’s an adaptive quality that we all get as entrepreneurs.

Tony Chan:
Yeah. It sucks. Yeah, we should celebrate and all that stuff, but there’s that part where I just don’t want to settle. And it just sucks waiting two weeks till people come back. If I could, I’d knock on people’s doors, but they’ll probably freak out a bit. But things are just at a holding pattern at the moment and things will be slow the next two or three weeks.

Rob Walling:
So assuming we chat again in six or eight weeks, what are you most looking forward to?

Tony Chan:
I am looking forward to seeing everything that we’ve planned for 2022 at the moment, and starting putting those things in motion and spending money. In four to six weeks, we should have Asia up and running. We should be starting interviews and such. So I’m really looking forward to seeing how all that works out. And we should start the process of hiring another engineer. So that will bring us to four full-time hires and a bunch of contractors.
So I think just getting started and just being out of this holding pattern is something I’m really looking forward to because I’m already itching to get back to work and be able to do things and be able to connect with customers and trying to progress the business more.

Rob Walling:
I see why Tony is so eager to get back to work after the holidays. The team has new talent incoming and it feels like the only direction from here is up. Stick with us to find out how CloudForecast fares in the new year. We’ll also be formally introduced to Tony’s co-founder, Francois. That’s next time on TinySeed Tales.