Episode 711 | Finding Early Customers, Horizontal vs. Vertical, Prosumer SaaS, and More Listener Questions (with Ruben Gamez)

Rob Walling:
Welcome back to another episode of Startups For the Rest of Us, I am your host, Rob Walling, and this is the podcast for bootstrapped and mostly bootstrapped founders to change their lives through entrepreneurship. This week I have fan favorite, Ruben Gamez, back on the show, and we talked through several listener questions, really good listener questions this week. And I’m not just saying that, people sent in video and audio asking questions like, so if I build a SaaS with no audience, how do I find people to talk to? If I build in no code, should I be concerned that I can’t export my code? Thoughts about going horizontal versus vertical, building a prosumer SaaS and more. 

Before we dive into that, you should check out MicroConf Connect at microconfconnect.com. This is our online community and forum. We host it in Slack and we’re approaching 7,000 members. They’re bootstrapped and mostly bootstrapped SaaS founders. Recent conversations in Connect, including a debate about magic sign-in links, how long you should spend diving into a niche before deciding on the product offer, how to safeguard your product from misuse during free trials, at what point in your journey should you invest in a conference booth, and more. It’s a vibrant and highly moderated community. Very high signal-to-noise if you’re looking to find and hang out with other misfits like you and I, head to microconfconnect.com. And with that, let’s dive into listener questions. 

Ruben Gamez, welcome back to Startups For the Rest of Us.  

Ruben Gamez:
Thanks. Great to be here.  

Rob Walling:
Yeah, it’s always good to have you, man. We have some really interesting listener questions today, all audio or video. As always, if you want to submit a question and you want it to go to the top of the stack, make sure to send audio or video, text questions do still get answered now and again, and let’s dive in to our first question from Jay Lee.  

Jay Lee:
Hey Rob, my name is Jay and I’m from LA. Loving the pod, so thanks so much. I had a quick question about how and where to talk to your first users, especially early on in your app’s life. So recently, I saw your post on X about how you don’t need an audience to start a SaaS, and that in fact less than 5% of the companies you invest in have any sort of audience at all, and it makes sense. So my question is then, assuming that you’re a programmer with zero audience, starting from scratch, what does your strategy look like? For example, let’s say you want to build software to help people run in-person conferences. Do you just go to some r slash conferences Subreddit and start posting questions? Do you just join some Facebook group and post, “What problems do you guys have?” Or do you cold DM people on LinkedIn with any conference manager title and ask them questions? So what would be your specific strategy and approach here? Thanks again and love the work you do.  

Rob Walling:
So I like this question because it’s fun. I’m Mr. Don’t Build An Audience If You’re Going To Build A SaaS, or it’s not don’t build an audience, but if you don’t already have an audience and that’s not an amazing gifting of yours and you really want to do it and all this and that, don’t do it. Don’t listen to the advice. And I come back to the less than 5% of all TinySeed funded companies, which is just 170 now, less than 5% had any kind of audience when they started or even have any kind of audience today. And it’s fun to me though when I say that and then Jay Lee writes in and says, okay, so then what? Because that’s kind of cool, right? It’s like, oh, someone’s listening and they buy into it, but it’s like, so then what do I do? Help me with the next step. So with that, I’ll kick it over to you Mr. Guy with an incredibly successful business and no audience. How do you think about the questions he’s thinking about?  

Ruben Gamez:
Yeah, it’s funny because you would think based off of what you see on Twitter and all that stuff that everyone has an audience and that’s how they start their business. But most of the people that I talk to and just like you’ve always said, they don’t start that way. So I’ve done it twice without an audience. I feel like that’s good because that means it’s the default. So the way that he phrased the question was interesting to me. It’s like, okay, he said in person, people who run in person conferences, you reach out to them and all that. How do you start to get those? How do you start to market those? I feel like that might be a little bit of a dangerous way to approach it. I’d start with the research side first, and I say dangerous because you could be in the right community. 

Let’s say you find a community, and I did this with Bidsketch back in the day, found a community of designers, a couple of community of designers for trying to validate the product, trying to see if there was interest there in buying, and then got nothing. And that was a negative signal. I think one of the things that a lot of people don’t talk about enough is that if you can have the right type of person, but the context could be wrong. They could be, the reason why they’re in this community might be a topic that doesn’t align with your product. So you might get, there are always segments of a type. So people that are running conferences, there might be people who are running conferences in a certain way or certain types of conferences that won’t make for good customers. That might be an issue. 

Or if you’re using ads and you have some bait, like a lead magnet or something like that, if that doesn’t align well with the type of product that you’re selling, like if you’re selling something on the money side, software for people who run conferences for monetizing conferences, but the bait that you use has nothing to do with that, that might also be a bad signal that you get there. So I’d start with the research side and I think about it in terms of talking to people who are potential customers. So yes, reaching out through LinkedIn, reaching out to Twitter through these communities, however you could find them, tell them that you’re researching a problem and not talk about the solution. Some of them will talk to you, some of them won’t. Also, I like to talk to founders who have sold into the space, who have the same type of product or had it in the past, failed or succeeded with it. 

I did this with SignWell. Talk to people who were in the electronic signature space as founders and get their perspective. The other side of it, like how hard it is, how they sold, what things are effective. And then sometimes talk to in slightly bigger companies when they have sales and marketing specialists, talk to somebody who’s done that role and try to learn from them. Not going too big because if I’m talking to somebody, in the early days, I did this, I talked to somebody, two people that one did growth and one did marketing for e-signature companies, but the companies, they were successful and they were larger than I’d be starting, but not so large. They weren’t DocuSign or something like that, which wouldn’t really be that relevant to me. And you get, I feel like a really good perspective on price points, on channels that work, on trade-offs, things that are good that are not so good, all that before you start marketing and then just are more informed about how to go approach your marketing.  

Rob Walling:
And it sounds like you would, if you have any kind of network in this space, you’d start with that because that’s easy, right?  

Ruben Gamez:
Definitely.  

Rob Walling:
If I know I happen to know five or six people who run conferences because I run conferences, but if I was going to build a product for in-person events, I would instantly go to them and I would ask them questions and “Hey, who else do you know who I can talk to?” Right?  

Ruben Gamez:
Yes.  

Rob Walling:
That’s the next, it’s the star.  

Ruben Gamez:
That’s a great way of doing it.  

Rob Walling:
Yes. But if you don’t know anyone, so you know zero, you have no network in the space. Well, you do exactly what you said, cold DMs, there’s LinkedIn, there’s Twitter, there’s Facebook, there’s Instagram, there is cold email, whatever way you can do it. And I do think, I mean Jay mentioned, do you go into a Facebook group or a Subreddit and start asking, “What problems do you have?” Or whatever. No, I wouldn’t. I would lurk.  

Ruben Gamez:
Right. See what naturally is brought up.  

Rob Walling:
Yep. I would want to see what’s brought up because look, people want to bitch about things and they bitch about… You know what I mean? So it’s like you don’t need to ask. You’re going to just notice. I have a few hobbies. I collect high-end vintage, Silver Age and Golden Age comic books. I play Dungeons and Dragons, and so I’m in those Subreddits and Facebook groups and this and that, and it’s the same shit every week. Someone complained about this grading company and someone complaining about Wizards of the Coast, the maker of Dungeons and Dragons doing the same thing. Again, you don’t have to ask anyone what the problems are or what their opinions are, they’re sharing them. And I feel like in-person event operators are going to have a similar thing. 

Now maybe they won’t complain as much as consumers whining about a tabletop game they should take way less seriously than they do. But if people who run events, we have similar problems and they’re just going to be talked about on a regular basis, maybe not every week, but you know that once a month, the same topic that’s bugging everybody and hopefully it’s like, “Ooh, does anyone use…” I’m going to bring up makeup example. “Anyone use Eventbrite? Oh my gosh, their fees are so awful and their software is terrible and it doesn’t do dynamic coupon codes.” And then I’m like, “Wait, what?” So now I’ve been part of this thing, checking in on it every day for a week or a month, and I get the tone. You start to understand just the gestalt and how people talk and how they interact. 

And then you chime in, “Oh hey, here’s a…” Either you can DM them on Reddit, I believe like private message or you can chime in thoughtfully. Not, “I’m selling something.” But you can say, “I’m a software entrepreneur. I’m researching something. I’m actually in the press of potentially building something that could blah, blah, blah.” You got to watch the tone of some Subreddits are so anti-marketing yourself that you may just need to PM, private message or DM people that you literally can’t. Like, you post a URL to your thing and you’re kicked out of the Subreddit. I’ve heard of that. So it depends, but you just have to be sensible about it and tactful.  

Ruben Gamez:
Yeah. The last thing that I forgot to mention related to all that was competitor research and looking at reviews and seeing the negative reviews and what people are complaining about there.  

Rob Walling:
Whether it’s like Capterra, whether it’s going to Google, ask ChatGPT, anywhere, any of the review and rating sites, just take them all with a grain of salt. But I agree, you start to get a picture of what people are upset about and what they don’t like. And here’s the thing with in-person events, I know that Eventbrite’s huge, it’s the 900 pound gorilla and therefore there’s a bunch of stuff they do poorly because that’s what big companies do over time, it just happens. So that’s actually an interesting space. 

Now there are, how many ticketing platforms do you think exists that ARG’s taking advantage of that? I mean, there’s got to be a hundred, literally a hundred. So then you start to think, okay, so am I looking for a unique position? Am I looking for an angle no one else is covering? Or am I looking for an angle? Think something that people are complaining about that they can’t find a solution to. So again, am I trying to be unique that no one else is doing? Or am I willing to compete with a couple of the others in this space if I think I can execute better and market better? How do you think about that?  

Ruben Gamez:
If you are trying to be unique and do something that nobody’s doing in this space, then just I think that’s a valid approach. But I also think it’s higher risk because no one’s proven that people will pay for that thing. So it’s just to understand where the risk is and then approach that first. I’d prove that out as true or false first before trying to approach distribution or marketing or anything like that. Because that’s the highest risk that no one will pay for this thing and it doesn’t… Like you reaching the right type of people won’t matter in that context. So I tend to prefer having competition. If it’s too competitive, then the risk becomes like, can you get distribution? And that’s the thing that I really focus on.  

Rob Walling:
Can you out market them?  

Ruben Gamez:
Yeah.  

Rob Walling:
Right. Then you look at what your skill set, what you think you can do. I want to say just two other things about how I might do this, find people. One is you have no audience, that’s fine, but still, if you have a Twitter account, you have a Facebook account, you have an Instagram account, whatever you have, post on there and say, if you’re following me, I’m an entrepreneur and I’m looking to talk to anyone who runs an in-person event, big or small, if you are or you know them, it’d be amazing if you… You know what I mean? It may do nothing, but it does, it takes three minutes. And so it’s like just promoting it. You say you have no audience, you probably have at least a hundred people that follow you somewhere. So that’s another way to do it. It’s not a silver bullet, but it might get you something. 

And then I’m curious for you, you started with SignWell, which is the best electronic signature app on the market. You started doing SEO way before you had a product, you were generating traffic. But my question for you is, had you already done all this research before that point when you started the SEO?  

Ruben Gamez:
The very first thing that I did was research on the distribution side, research different channels, SEO, and then, I’m trying to think of the timing. I felt like I started all that almost at the same sort of time. Once I felt good about distribution, then it was like, okay, let me better understand this. And it was not a case. So if I did something on the SEO side, it’s maybe I started with a couple of things that I felt were easier and I could start to get the right type of traffic, the right type of leads. But at the same time or very close soon after that, it was literally talking to all these people and understanding what I was getting myself into from as many perspectives as I could. So even though I felt like, okay, people are paying for this type of product and all this stuff, and the risk was on the distribution side, I still wanted to better understand why people buy and what distribution looked like. So I don’t know if that’s how I approached it.  

Rob Walling:
Yeah, that makes sense. Well, the reason I was asking is because 10 years ago, SEO was, I think it’s inarguable that it was easier. It was simpler than it is today. There were times when I was trying to validate some ideas that I never built. I was going to build some software for coaches, not more like sports coaches at universities, this whole thing. I never did because the validation didn’t come through. But I actually just, there were terms that had so little competition that I threw up a landing page and I built some links to it, which again, easier to do, but maybe it was like 12 years ago, you could do one of the private blog networks. Remember the PBNs? Is that what those were called?  

Ruben Gamez:
Oh. Yeah. That was fun.  

Rob Walling:
So I could literally get a page to rank in a week or two for terms, you know what I mean? And so would do that with a landing page that captured email, and then I would reach out and say, what are you looking for? Blah, blah, blah. So that was my way of doing it. Now, it’s not that easy today, but I still think if I were to launch a SaaS today, I would get a landing page up very early for me because of course, I’m always talking about it on podcasts. With Drip, I was spending a non-inconsequential amount of money, maybe a thousand a month, maybe more on Facebook ads when-  

Ruben Gamez:
Yeah, I remember you were doing Facebook ads.  

Rob Walling:
It was just a landing page. There was no SEO to it, and you could do AdWords. So here’s the thing, if people are searching for it, you do AdWords. If not, and you know the type of role then you run ads on, it’s either Facebook or LinkedIn is tougher to make it work. It’s just the way their tech isn’t as good, their AI isn’t as good, so you have to do a lot more manual stuff. But there you can target job titles and that’s the key. If you know the job title, you go there. If you know the demographics, psychographics, you go to Facebook. And if you want intent and there is actual volume, then you go to Google if you have any money to spend. 

So zero audience, but you can still drive people and look, could you drive them a landing page and say, opt in to learn more? Yes. Could you drive them to a landing page and say, I’m thinking about building this thing. It’s me in a little video. “Hey, my name’s Rob. Click the button below and just book a time with me. Here’s my Savicat link. And just book a time on my calendar because I want to talk to you.” You’re just trying to do stuff to get into conversations.  

Ruben Gamez:
Yeah, I did that with Twitter ads for SignWell, Twitter ads to a, I don’t remember the exact hook that I used. It was something related to costs for e-signature or something like that I think. And it was going to a survey and then I was pre-qualifying them on the survey just trying to find out if I wanted to talk to them. And if I did, then I’d offer them an incentive because this was cold, to talk to people it’s harder, super cold, especially off an ad like that. And if not, then I just added them to a list. So back then, especially when I did it, it was expensive, it was too expensive, I wouldn’t recommend it. But there are so many different ways of doing it.  

Rob Walling:
And to be clear, you’re not going for any type of ROI on these ads. This is a research cost.  

Ruben Gamez:
Exactly.  

Rob Walling:
Yeah. You’re not trying to make sales at all. You’re just paying for the privilege of speaking to folks.  

Ruben Gamez:
Yeah, you’re paying for the data.  

Rob Walling:
All right, so that may go down in history as the longest Startups For the Rest of Us question, but it’s good and thorough, dude, honestly. So probably the next book that I’m going to publish is called the SaaS Launchpad and it’s like a precursor to SaaS Playbook, what we just said needs to go in there. I literally made, the manuscript is quote, unquote done, but it’s not locked down. So I think I’m going to go back through what we just said and try to pull out a section. Because this is very, that’s the most in-depth, I think I’ve ever talked about this topic. So thanks for doing that with me.  

Ruben Gamez:
Yeah, it’s cool. And it was cool seeing you do it for Drip because I do remember that. I thought that was a really interesting approach that you had.  

Rob Walling:
Just scraping and clawing, trying to get people to pay attention. 

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Next question is about no code, code export.  

Ashish :
Hey, Rob, Ashish here. I’m calling you from Dubai. Relatively new listener to your podcast, maybe a little over a year, really enjoying the topics and the conversations. Thank you for what you do. I’m a non-technical person. I’m a marketing guy, but I want to build something and I don’t have a technical person. So I came across these no-code tools like Bubble, and I’m trying to see if I can build something out on Bubble, but I also, I came across this video on YouTube that talked about how Bubble does not allow you to export its code when you need to scale or when you need to move servers. 

My question to you is how much of that is an issue? Should I be paying attention to that right now? I don’t even have an MVP to show for. So is this an important discussion right now? Should I just try using Bubble, build a product, see how the market interacts with it, and then tomorrow if I need to scale, worry about that then? Or should I be worried about this right now from the starting process and look for tools that will allow me to export code? I kind of like Bubble because it’s comprehensive. The learning curve is there, but I think I’ve kind of got a hang of what is there. The other tools don’t seem difficult to learn, but yeah, I just wanted to know what your opinion on this is. Thanks.  

Rob Walling:
I like this one. No one’s ever asked it. We’ve talked about platform risk and no-code platform risk specifically about relying on a single platform and your entire business is built on it and how they can raise prices or they could go out of business or whatever. But the idea of, hey, if I can’t export the code from Bubble, should I consider building on it? What’s your take?  

Ruben Gamez:
The one thing I wasn’t clear about was exporting the code from Bubble, does that mean it gets to a certain scale, people are paying for it, then export it because now we’re going to have developers work on that or something like that?  

Rob Walling:
I was thinking two reasons. One, what if Bubble were to 10x their pricing tomorrow or go out of business and just disappear off the internet or which you said, which is a year down the line, six months down the line, I need to move to code. Is there a migration path or do I just have to build it from scratch? So I think either of those would be factors that you would consider.  

Ruben Gamez:
I feel like I would not worry about the scaling part of it, and this is even if you’re writing the code, I wouldn’t worry about it too much unless you have experience and you kind of know both the market and the product and all that. I think of it more as almost like an MVP or first version and I’d expect it to be rewritten or maybe rewritten from scratch from code. The harder part really is like, will people pay for this? Can I get distribution for it? And those are the things that I’d be focusing on. And it’s funny, about a year ago I talked to somebody that had a no-code app that was in the e-signature space. It didn’t do the whole thing, but it was pretty aligned. I was like, “Oh, this is interesting.” It was focused on some forms and they’d gotten some paying customers, but they were stuck and they wanted to sell it. 

So I looked at buying it and I did not buy it because it was no-code and the no-code stuff was super complex. It was like the app itself wasn’t that hard, so it wasn’t that complicated. The UI wasn’t doing all this sort of tricky stuff. It was just like there were so many, if then else, so many different conditions, so much stuff in the no-codes for away and it was super verbose, and it was hard to understand. It wasn’t like I could go in there and be like, oh yeah, I can get somebody that can quickly understand this. So I just didn’t, feel like it would be more like I would buy and have to rewrite from scratch, and that’s kind of like even if I’m starting it from no-code, I’d think about it almost in that sort of same way when scaling.  

Rob Walling:
Well, I agree with you on the answer that when I heard this question, I thought if I’m going to build no-code, there is no-code export. There’s no platform that lets you do that. So you either do it and accept that risk or you don’t and you hire someone to write code or write the code yourself if you know how. I feel like it’s pretty straightforward decision and you just had a cautionary tale around building a no-code, but I don’t think you’re saying don’t build something in no-code.  

Ruben Gamez:
No, no.  

Rob Walling:
Yeah, because I’m not either. I mean folks have heard my take. My take tends to be a balance, like no-code is a tool, know what you’re getting into, much like venture capital and funding, bootstrapper funding is a tool. Know what you’re getting into. There are pros and cons to it and I have entire episodes of both of this show dedicated to that as well as on the YouTube channel because an extreme view of never no-code or always no-code, I’ve talked to people with both and I’m always just like every example you’re bringing up for the never is actually not, or the always is this, the one that drives me nuts of anything SaaS, everything can be built with no-code and you should. 

And I’m just like, “No, that’s a factually inaccurate statement.” So like anything, there’s a nuance, but thanks for that question. So the end result is don’t consider this an endorsement, but in my shoes and in Ruben shoes, if we’re going to do no-code, that’s one of the factors you have to take into account when you’re going to do it. And so I would not be bothered by the fact that you couldn’t export the code. Our next question is about going horizontal or vertical as this OP spins out an existing app that he’s built for consulting clients.  

Dean:
Hi Rob. I’m Dean, I’m a freelance software developer. I’m Dutch, but I live in Madrid. I was recommended your podcast by two friends who both have successful SaaS businesses and also have been to MicroConfs. So before I raise my question, I would like to give you a bit of context. For the last four years, I’ve been building this SaaS product for a client. It’s a tool for historic and geographical research that allows researchers to create and navigate relational and geographical data in one map center tool. And I built and designed this SaaS product from scratch with my client and we started an MVP, then we got some important clients on board and after four years it became quite a feature rich application and a good few high-touch customers with five-digit subscription fees are on board now. So think of governments and utility companies. So it will probably give me a steady stream of income from consultancy work. 

But now I’ve seen this was a success, I would like to have a bootstrap size of my own. And I would like it to be a spin-off of this SaaS, I learned a lot of tricks of the trade. I cannot copy the product, but I can use concepts and technology. My clients are happy with that to build something similar. So knowing that the original is a high-touch vertical SaaS in a very niche market, a lot of its success depended on the context and knowledge that my client already had. My question is, should I try to find another vertical in another niche possibly with a partner that has context in that niche, repeat a trick or should I extract some of the features, simplify them, go for a horizontal low touch approach? I have to say, I prefer the latter. I think it’s more bootstrapable, but I’m curious to know what you think. Thank you.  

Rob Walling:
So this is a super interesting question. What do you think about it, Ruben?  

Ruben Gamez:
Yeah, it is. I’m curious what your answer will be.  

Rob Walling:
I can go first if you want.  

Ruben Gamez:
Yeah, why don’t you go first. I’m very curious.  

Rob Walling:
So my answer, what he’s really asking, he’s saying should I go into another vertical where it is, he’s implying that will be higher touch sales, higher ticket price and be more of an enterprise mid-market sell or go horizontal and only pull a couple pieces out and make it this self-serve. I presume 10, 20, $40 a month, whatever self-serve is, make it this low cost, he said more bootstrapable thing. And I don’t necessarily agree with the premise of that framing even. That acts like there’s only two ways to go and I don’t think there are. You could go with horizontal and just make it expensive. You could go horizontal and still do sales calls and do demos and close. The horizontal and the vertical is separate from the other factors. I think they’re less reliant on each other. In my head, if I were to do it, it does depend on exactly what… I’m struggling a bit because I don’t know exactly what the software does, so I almost want to know more detail. 

To me, if it worked in one vertical and you can stay in a vertical, a different vertical, that’s where you can charge the most. And although it will be enterprise sales and onboarding and this and that, to me I would go for high ticket price if you want to grow this to a million or multi-million dollar SaaS company. Those are the patterns that I’m seeing in the companies that I’m invested in. Now with that said, I am a marketer. Me personally, everything I’ve ever built, the starting ticket prices, like Drip was $50 and that was the most expensive SaaS I ever sold. That’s the starting price and obviously the average revenue for account was much higher than that. But I’m not a salesperson and I wouldn’t love starting an enterprise company where you get five new clients a year or 20 new clients a year and it’s 2000 AC, no 2000 per month each. It’s like what a… That’s just not my gifting. 

And so in his shoes, I would either not do it or I would figure out how can I make this horizontal and how can I make it more of something that I can market? But that’s not self-serve either because self-serve implies that it’s low annual contract value or low average revenue per account. So I’d be wondering, is this generalizable? Is the big question. Is anyone looking for it? That’s probably the first thing I do. We just talked about doing research. Everything we said for the very first question I would do for either a vertical or a horizontal play. Horizontal is a lot harder to do it because now who are you contacting? You reaching out to the world? Are you going on Hacker News and Reddit? You know what I mean? That’s the hard part. It’s like does anyone need it? 

Because if I’m just going to go, if I have code and I have ideas and learnings and I’m going to say, cool, I’m going to launch this new novel thing that really no one else is doing right now. It’s this cool thing that can do geographic with historical stuff and I’m going to try to sell it. I think of ancestry.com because there’s history, right? Well, that’s basically a B2C play, isn’t it? Or B to prosumer at best. I’m not going to be in that game. There’s no way. So if that’s the model where this works, then no, I’m not doing that. I’m going to go for the high ticket vertical enterprise play. That’s my thinking. I realized I’m thinking out loud, but what do you think about all this?  

Ruben Gamez:
So my thinking is pretty similar to that except that on the vertical versus horizontal… So it’s tricky. The way that he’s framing or saying, going horizontal is I agree, is implying a lower touch, lower price type product because he said simplify, sort of strip out the stuff. And when you do that, that’s basically what you’re aiming for. So in my space with SignWell, we sell to the low end of the market. We sell also to mid-market going towards enterprise and for our core product we have an API and then we have the core product. So for the core product, for us to be able to be horizontal and sell more towards mid-market and going towards enterprise, we needed to build more. We didn’t need to have a, we couldn’t do it with a simple product because larger companies and enterprises, the ones that are going to pay more for the product, even across verticals just have all sorts of different needs and the sophistication levels just higher. 

So the product needs to be more sophisticated, needs to do more. We had to also do more on the compliance and security side and I feel like it’s a harder thing to do. I feel like it’s probably one of the hardest things to do to be horizontal and go for the enterprise. I think it’s easier. It’s all kind of hard, right? Different types of hard. I think it’s a little easier though to stick with enterprise and a higher price or mid-market or whatever and go after a specific vertical, especially if… So in his case, he’s already done it. He has that experience. This is another thing, it sounds super easy to just be like, oh yeah, we’re just going to go with, and I hear this from time to time, with this more simple product, go self-serve and all that stuff and that, there’s a lot that seems great about that, but the reality is it’s a different game. 

It’s like different company and team DNA, it’s different founder, DNA. It’s a different skill set. And you need much bigger numbers. The way you approach things is just different. And if he already has the experience and the skill set to do it for one vertical, I’d kind of leverage that and take a similar approach for another vertical.  

Rob Walling:
That’s how I think about it too. The higher price, typically the lower the churn, the faster the growth. We see this in the state of independent SaaS when we ask about churn and lifetime value and ticket price and then we compare it to growth, it’s obvious that the higher [inaudible 00:32:26] value, lower the churn and higher ticket price, the math just makes that make sense, but we see it in TinySeed too. We see that, like I have a list of all the companies that are doing seven figures in ARR that are in TinySeed, and it’s a good list. One commonality you’ll notice is almost all of them, some of them have lower priced plans like SignWell where you can sign up, is it like $12 per person? But they also have a thousand dollars a month plan, a $2,000 a month plan, a $5,000 a month. There’s one of them that literally has a couple of contracts, ACV, quarter million dollars, and those are harder to sell. 

They take longer. You know this. You’re doing sales calls right now selling this stuff, but those are the ones that grow you quickest. Even with Drip, I talked about it being $50 starting price point. Most of our growth, especially as we got later, were folks paying us between $500 and $2,000 a month. It was the big lists that made them moved the needle for us. And that’s the pattern we see over and over. So the indie hacker dream or the bootstrapper dream of course is to have a $20 a month product, self-serve, everybody just handles it. You got a KB, there’s no support ever. Everything just [inaudible 00:33:33] on a beach in Bali or whatever. And that does exist, but that also plateaus pretty quickly. If you want to build a three, four, 5 million dollar business like that, it’s few and far between.  

Ruben Gamez:
Yeah. The numbers that you need are just so big. I think people underestimate the scale that they need to get to that when you’re talking about a $10 a month type of business.  

Rob Walling:
So thanks for that question. Hope it was helpful. Our next question is from Francesco, how to approach a prosumer product.  

Francesco :
Hey Rob, it’s Francesco from Berlin. You are always advise against business to consumer product as they’re difficult to monetize and recommend in start building B2B SaaS. I totally agree with this, but I think there is also sort of a third category in between. There is the business to consumer or business to professional that we rarely discuss about. I want to get your thoughts about this space and I want to understand how would you approach such a business to clarify, I mean this kind of product like Notion or Linear or GitHub that they offer both a team or an enterprise plan but also the targeted for the individual use and they might be paid or free for the individual. 

I wanted to understand whether you see meaningful changes compared to a classical B2B SaaS and eventually which ones? And specifically if you were to build such business, if you first optimize for an individual to sign up and start using it and then potentially selling them to a team plan or the opposite, if you would go first after the company, the team’s plan and then eventually allowing the user to sign up and use it for a personal use. Thank you very much.  

Rob Walling:
So I feel like Francesco is talking about two different things. He talks about B to prosumer, B2P as we can say, and I do think we can talk about that, but he also gets a little bit into product-led growth and dual funnels. So I think we can talk a bit about both of those because those are not necessarily, those don’t have to be the same thing. You can make most of your money from enterprise and have a dual funnel so you’re serving prosumers or VSMBs or consumers for that matter. And then also have product-led growth and it can all be present or it doesn’t have to be. So I guess to start with, he asks about B to prosumer and he agrees he doesn’t want to do B2C, but I think he’s asking what is the difference? Is B to prosumer more similar to B2C, or is it more similar to B to SMB? 

And I’m actually going to, before I kick it to you, I want to go through a few things. I know I often say B2C and B2B, that implies there’s two, right? It’s a dichotomy. That’s not at all what it’s like. There’s B2C, there’s B2P, prosumer, which is, I will say it’s people who are making money from something but usually not doing it full-time. That’s how I define it. Like, photographers, lot of wedding photographers are like this, doing things on the weekend. A lot of fitness coaches are like this, B to prosumer. I think most indie hackers are this, where they make full-time living from other stuff and they’re building stuff on the side. I know a lot of interior decorators are interior designers who do it as a part-time thing. I think folks selling stuff on Etsy, most of those are prosumers where they’re making money, but it’s not their full-time income. 

There are a handful, but it’s like anything, it’s a power law. There’s a small number who are doing it. Then there’s, B to very small business. VSMB, B2SMB, B to mid-market, B to enterprise, B to government, B to schools. Each customer type is different. And in fact, at TinySeed I believe we’ve invested in companies who do every one of those, except I do not think we have anyone who sells to consumers. I mean we are B2B SaaS, so it makes sense we didn’t do that. I can’t offhand think of anyone selling to prosumers, but I do know folks in the MicroConf Community like Nate Grahek who’s been on the podcast and attended MicroConf, he has StickyAlbums which goes after photographers. And I’ve talked to him quite a bit about the challenges, the ups and downs of selling into that space. So with that preamble, Ruben, what are your thoughts on this question?  

Ruben Gamez:
Yeah, the whole categorization of what’s prosumer and business and all this stuff is interesting. To me, I think of it a little bit differently than you do. So B2B, like business to business, to me, anyone in a business context, if they’re making money off is a business. So that would include freelancers and photographers and all that stuff. A prosumer to me is somebody like, and Craig from Castos I feel like sells to multiple, right? Somebody with a hobby that spends on software. So podcasting software is a really good example or podcasting hosting because there are a lot of people with podcasts that do it as a hobby, like founders or I listen to video game podcasts, all sorts of different MMA podcasts sometimes to where it’s like they’re not really making money off of these things in a business context, but it’s something that they’re spending and photographers sometimes fall under that category. 

Some of them are like they have clients and some of them are like, no, I’m spending money on this equipment and the stuff for me and for my own hobby and uses. So I don’t know that it matters too much, but I think the part that matters is that these are all different segments and how you approach them really makes a difference. What type of product that you build and how you get distribution. So if you’re, and let’s use Castos is a good example. So if you’re bottom of the funnel type content, buyer intent content will bring in a mix across all of these groups. So something like ranking for best podcast hosting will bring in everyone from somebody who’s doing it as a hobby but needs podcast hosting, somebody who’s doing it part-time, somebody who’s doing it full-time, a company that needs a podcast, a publication. 

And then once you start to move away from that, you kind of often need to understand the different segments and where they live, where they hang out and how to approach each of the different ones and how to do the messaging for them. So I feel like it’s sort of relevant from a distribution standpoint and from a building a product standpoint, they’re two, a couple ways of, I prefer, my preference is to start with bottom of the funnel and get a mix of the different types of segments so that I could talk to them and see them as customers and understand what I like better, what’s my preference as far as, not just who’s paying more, but who’s excited about the thing that I’m building in the way that it’s positioned maybe or if I see an opportunity to serve a certain segment. And I just like that variety early on and that’s kind of how I would approach it. 

It’s hard to approach it from a general marketing sense of just getting a bunch of tension and people and going really broad across all these segments. If you’re not going bottom of the funnel or by your intent, by your aligned sort of way of getting leads and traffic and customers, then I’d be very deliberate about picking a segment and starting with that. I think a lot of it has to do with personal strengths. Going back to the original question of how does this work, how do people sell, how do these different segments buy the software? And then what’s the opportunity I see and what do I like?  

Rob Walling:
Yeah, I think that makes a lot of sense. The way I think about prosumers is they are very similar to consumers. They are price sensitive. They churn at higher rates because usually it’s either, as you’re pointing out, you were putting hobbyists into prosumers, right? And whereas I was saying you have to make money. So we have a slightly different definition of it, which is fine. They’re going to churn way higher than businesses. They’ll churn similar to consumers. I don’t know if it’s exactly, I mean I’m sure it depends on the space, but know you’re going to have a high churn, low price point, high price sensitivity, therefore you are going to need a very wide funnel. Lot of incoming traffic as you said, SEO content, whatever it is. You’re not going to be able to buy Google AdWords and market to prosumers. I say not. 

I never want to say you can’t. I just am very, very skeptical that you’ll be able to attract folks in the prosumer space at any type of volume that will make it make sense with Google AdWords. So prosumer businesses, I know multiple founders who have built, definitely mid-six figure ARR SaaS companies for prosumers. I actually know multiple who’ve done seven figures and everything I’ve just said checks out. They’re like, man, quite a bit of support. Man, the churn is really high. I tried to raise my prices and usually they’re unable to raise prices the same way we were with enterprises. But what they do is they wind up adding a bunch of, you have this thing and now you have a thousand or 2000 prosumers, and then you have your email list of another 20,000 or whatever. So then you just build a second product alongside it and a third product or a module that you can charge. That’s how you get more average revenue per account. You can’t just do the typical B2B playbook of raising prices, charging annually, all that stuff.  

Ruben Gamez:
This just reminded me of who was it, Buffer, I think it was Buffer that ran into this problem. So they were able to build a very successful business with big numbers. They got there and they were still got to a point of where they were struggling with, okay, how do we grow this more and trying to increase the average revenue per customer and never really did, never really got there, really smart people working on it. It is a hard thing to do.  

Rob Walling:
Yeah. And they came out, who’s the founder that’s still there? Is Joel?  

Ruben Gamez:
Joel. Yeah.  

Rob Walling:
Joel’s the one that’s still there. Yeah. He tweeted within the last month where he was like, we kept trying to, and they’ve been declining for three years in revenue, but I mean it’s still like 17 million ARR or something. It’s a boots start company. But he was saying they kept trying to fight the churn and they were trying to go up market and do this and that, and they eventually decided we are for makers and creators, which are solidly prosumers usually because most of them not doing it full-time want to do it. And so he said, we just embraced it. We know our churn is going to be this and we either will widen our funnel or we’ll just ride this out because they will plateau in a good way. They’re going down now. So you want to plateau in that point because you want to level out and he’s saying, we think we’ll level out this year in 2024, and I’m sure the number’s going to be 15, 16 million ARR. 

And look, that’s not a bad business. It’s not a business… I personally would get bored with that. I need something to be going up into the right, otherwise I lose motivation and I’m sure, and it’s hard to hire really good ambitious people because they don’t want to work on a declining product or a flat product, but I’m not going to throw shade at Buffer or anything they’ve built because it’s a hell of a business.  

Ruben Gamez:
Yeah, it’s still a nice business. That brings up another interesting point too is that sometimes, so it’s super easy to just be like, well go after businesses because the retention is better and they pay more and you just need less customers and all this stuff. But the reality is that sometimes the opportunity is just kind of maybe on the lower end or maybe in a business like Buffer where it’s like a lot of prosumer, a lot of freelancers, and that’s the easier path. But then just kind of know what you’re getting into, what kind of issues you might hit.  

Rob Walling:
I had Christopher Gimmer on the podcast. He’s spoken at MicroConf a couple of times. Snappa.com. Yep. It is exactly this. It’s a high churn, relatively priced sensitive audience, but he and a co-founder bootstrapped it to, he’s pretty public about their numbers. I think they’re doing a million and a half or something like that and in that range, totally bootstrapped. And they just eventually realized, “Hey, we can’t grow this business anymore.” But they’re basically split. I mean, they’re super profitable and now they’re launching a second product and they just accept that there was a great opportunity that they took advantage of and they can’t outrun that churn, but they don’t need to because now they have this cash flowing business that can help them do the next thing and the next thing and the next.  

Ruben Gamez:
Yeah, great example.  

Rob Walling:
And I think the part of the question he asked about Notion and GitHub having these free or super cheap plans, I think I pay $4 a month for GitHub and I have for years. I just don’t even know if I cancel it if I’m going to lose anything. So I just don’t ever, I’m just like, yep, every month I get billed four. I literally have no idea if there’s a repo that I need, but it’s like I can’t be bothered to go check the account for four bucks. And I’m a little bit like, I bristle a little bit when entrepreneurs ask about this because when people use Steve Jobs as an example, or Basecamp or these outlier folks, I feel like GitHub and Notion have how many hundreds of millions of dollars in the bank. And I don’t want to say we can’t learn things from them because we can. 

Like, HubSpot’s amazing. And I know we learned a lot about marketing, inbound marketing SEO from them, but I think it can be dangerous to look at a company like Notion and GitHub and say, well, if they’re doing it, then I also am going to have a free plan or a $4 a month plan because you don’t know how their economics are actually working. And if you don’t have the dual funnel, but at the same time, I’m not saying don’t do it, but I’m saying SignWell and Castos both have plans that are, well, yours I think starts at $12 a month and Castos lowest I think is $19 a month. So it’s somewhere around 20.  

Ruben Gamez:
We’re 10 and eight.  

Rob Walling:
10 and eight. All right. So low and that’s per seat. So feasibly if one person’s there. But yeah, this is very much low. You need a lot of customers to make it. But both of you have dual funnels and Castos has higher end hosting, but they also have the Castos Productions, the editing service that I think in production service it’s 500 to a thousand or 2000 a month. And SignWell, you have your API. We’ve talked about it on the show.  

Ruben Gamez:
Yeah, even on the core side, we have just companies with a lot of users that we sell into.  

Rob Walling:
And so, I don’t want to speak for you, but my guess is if we looked at the amount of MRR that comes from $10 plans for you and the amount of MRR that comes from people paying you a hundred and up or 500 and up, that it’s probably significantly more that are in that latter bucket. Is that right?  

Ruben Gamez:
Funny enough, it is actually weirdly, and I say weirdly because it’s usually not the case, equally distributed.  

Rob Walling:
Is it continuing to be that or is one catching up and out running the other, or do you think it’ll stay 50-50? Because you’re right, that is very-  

Ruben Gamez:
We are really strong on the lower end. So they’re growing kind of equally, the now, especially on the API side, that’s starting to increase. But yeah, it is a bit of a weird distribution because that’s typically not how it plays out.  

Rob Walling:
So listeners and Francesco, if I were thinking about this, just to be clear, most of, I have insight into a hundred ninety-something companies and most of the companies with this type of dual funnel, we have either free on the bottom end or super cheap, and then you have people paying you 500, a thousand, 2000 and up, they make the bulk of their revenue. Oftentimes it’s 70, 80% of their MRR comes from the higher end, sometimes more than that, to be honest. So if Francesco’s talking about that, about a GitHub, Notion type thing, and oh, my guess is too, I don’t know, is GitHub public? Because we could look at their S one and figure out where their revenue actually comes from.  

Ruben Gamez:
I feel like they are, but I’m not sure yet.  

Rob Walling:
And Dropbox is the same way where it’s like, oh, they’re like a B2C player, aren’t they? No. Have you ever looked at how much all their revenue is business? Not all, but you get the idea. So if I were to put that in context then, as Francesco’s thinking about prosumers, can you have these $4 plans, $10 plans, $20 plans? Yes. But if I were going to do it and I wanted to actually build a great business, I would make sure that this product that serves Prosumers also has an enterprise customer base, an enterprise use case and enterprise and by enterprise look, mid-market, whatever, 500 and up, 300 and up, like some number. 

I don’t literally mean enterprise because that’s actually massive contracts, but that’s where it can be dangerous to assume that since GitHub and Notion are doing something that I can do that too without knowing that the second part, which is, but you also need the high end. Because if there’s no use case for them, if you’re building something for individual fitness trainers for five bucks or 10 bucks, I don’t know. Are there places that are large enough that will pay you $2,000 a month for the same software if there’s team functionality? That’s the question. That’s the kind of thinking that I’d be looking at if I were thinking about this kind of business.  

Ruben Gamez:
Yeah, I agree. The Notion and GitHub, somebody, I think it was like, was a podcast from Brian Balfour, I forget its name. They were talking about like a lot of these businesses that seem like they’re B2C or seem like they’re lean consumer, they’re actually enterprise or enterprisey businesses. That’s where most of the money comes from.  

Rob Walling:
That’s what we see too. Well, sir, it’s been amazing having you on the show today. If folks want to keep up with what you’re up to, they can see your spicy hot trolley takes on Twitter at Earthlingworks, and of course, signwell.com for the best electronic signature app on the market. Thanks so much for joining me.  

Ruben Gamez:
Great being here. Thanks.  

Rob Walling:
Thank again to Ruben for joining me on the show again this week. Hope that was insightful and helpful. There were actually, I really did like the listener questions this week, especially that first one. There’s a reason I let it go 15, 16 minutes because there was a lot to talk about there. 

Thanks for listening this week and every week. This is Rob Walling signing off from episode 711.