Startups For the Rest of Us

Rob Walling:
It’s a bird, it’s a plane. It’s another episode of Startups For The Rest Of Us. I’m your host, Rob Walling. Today is another episode of Hot Take Tuesday.
This is our news round-up format where we take the most important news stories of the day that affect bootstrapped and mostly bootstrapped SaaS founders. And we bat them around and we give our hot takes on topics today ranging from whether we are actually experiencing a recession, how to think about that as a startup founder. We dig into ChatGPT, which is the open AI project that is all the buzz right now, and we talk about Elon Musk acquiring Twitter and the drama or lack of drama, depending on your perspective, around this entire endeavor. But as always, we relate it back to bootstrapped and mostly bootstrapped startup founders who are trying to figure out how these events impact us and our companies, if at all. And all the while I tried to keep my guests from derailing the podcast episode.
Our first panelist for Hot Take Tuesday is Tracy Makes on Twitter. Tracy Osborn, welcome back to the show.

Tracy Osborn:
Happy to be here.

Rob Walling:
We got some good topics today. Our other panelist, many of you know him well. This dower gentleman to my left, Mr. Einar Vollset whose Twitter feed is filled with things that only make sense if you are actively watching the World Cup or a Giants game. Einar Vollset, welcome to the show.

Einar Vollset:
Thank you very much. I was upset this morning because it turns out that Aaron Judge is going to stay with the New York Yankees, which is a disaster. See what I mean?

Rob Walling:
I have no idea what you’re talking about. Is that a sports ball team?

Tracy Osborn:
I was going to say my brain just went reeeee.

Rob Walling:
I don’t know who or what. I caught a baseball team in there, I think. The man who is not going to derail today’s episode, Mr. Einar Vollset.

Einar Vollset:
Thank you for having me.

Tracy Osborn:
It’s not going to happen.

Rob Walling:
All right, we’re going to kick it off with the topic that everyone’s talking about this week. Chat.openAI, which by the way, if you forget the name of this and you try to find it via a Google search, I couldn’t because I couldn’t remember it was called Chat.openAI, so I went in for like “AI chat” and “artificial intelligence chat” and a “chat thing” and there’s just all this crap out there. So they need to work on their SEO. I had to actually go to Twitter. Chat.AI hit the scene in the last week. Everyone seems to be searching for things, getting answers. Some are funny, a lot are accurate, some are inaccurate. Are we already tired of seeing people post these conversations on Twitter? Tracy you want to weigh in first?

Tracy Osborn:
I was wondering if you’re going to leave the Twitter part in, because I know that one of our potential topics for today was talking about Twitter in general. And I have not been on Twitter in the last couple weeks, but the sci-fi nerd in me feels like this is the first step to having a computer do-do-do and then it calculates and does things for you. You need to have some sort of crappy AI that’s, I don’t know, being an AI. And so I think that’s on its own, really neat to see this last few months of really picking up on this idea of like, “Okay, this is the first step to something that could be like AI, I don’t know, maybe Skynet apocalypse somehow in the future.

Rob Walling:
Hopefully not. But Einar, do you for one, welcome our future robot overlords?

Einar Vollset:
I do.

Rob Walling:
That’s a deep cut. Anyone, just me?

Einar Vollset:
I do. I totally welcome our new overlords. I’ve been an AI fan for forever. It was one of the topics that I considered doing my PhD in. So I think it’s amazing what they’ve done. It fits the… It’s got the perfect profile for what amazing technology because A, everyone sort of, kind of, treats it as a toy at the moment and the mainstream news hasn’t really picked up on what’s going on. That’s one of the most shocking things to me about this. My Twitter feed is just nonstop ChatGPT. Nonstop. Nonstop. And I read the Wall Street Journal, the FT or The Times or whatever, and it’s like nothing. It’s like it didn’t exist. I’m like, “What is happening here? This is a giant step forward. And it’s like they weren’t even paying attention.” This is the most shocking thing to me. But yeah, I mean I really like it.
I think you’ll gain feed like the sort of mill of people who are like, “Oh no, AI’s going to take over everything and blah, blah, blah. All the jobs are going to end.” And it does do some amazing things with co-generation and accessing APIs or that sort of thing. But I don’t think it’ll be… I don’t think Google will fire all its engineers and just switch to open GPT, to put it that way. I don’t think that’s on the cards. It was one of my portfolio company founders, actually Pierre with Scraping Bee, he was like… This morning he tweeted something. Did you see this tweet? It was like, “Hey, I figured out how Google can have a 90% profit margin. They should just have all their queries ask ChatGPT and they’ll have a 90% profit margin, assuming 10 trillion searches,” which I thought was pretty funny.
But it is interesting because I mean, one of the most interesting takes I’ve seen… So there’s a bunch of stuff we can dive into because I’ve spent a lot of time with it, but one of the most interesting things is like, “What does this do to Google? What does it do to search?” Because people are like, “Whoa, this is actually better than my Google search interface now.” Which is quite something because the way, and it sort of makes sense, because if you think about Google, at least the way it used to be, it’s like it generates value or information from the sort of link graph in the world versus with open GPT it basically builds its intelligence based on the things that are on the internet but it’s not the links. It’s the text and the implications of the text. It’s a very interesting model.
It’s genuinely one of the first things I’ve seen. I’ve been like, “Truly, this could hurt Google. Not immediately, but something like that really could.” And people complain and they say, “Oh, it’s just going to hallucinate facts.” That’s fair, but I’ve also seen it reference its sources. I have a… There’s a tooling that goes in, so instead of just calling, playing in the playground or whatever, you chain all these things together and you give it access to basically searching the web and fetching data from the web and summarizing data in the web and then referencing that data in the response. And that sort of gets rid of that concern because then you know the references’ sources. So yeah, I’m super excited. I really like the space. It’s probably over hyped at the moment. It usually tends to be. There’ll be a trough of sorrow in 18 months when everything is in the crapper. But I think two, three years from now we’ll look back and we’ll be like, “Oh yeah, this underlying technology really enabled a couple of amazing new companies at least.” I’m sure about that.

Tracy Osborn:
Yeah, I have memories. My job, 10 years ago, it was a lead generation for online education and they wanted to get the SEO pages for every, I don’t know, artistic degrees in New York, artistic degrees in Pennsylvania, artistic degrees in blah, blah, blah, blah blah. And so this company I worked with hired a whole huge amount of writers. I don’t know, it was like 50 writers, just churning out all of these little snippets so they can have them on the pages and therefore the pages would rank in Google. Again, this is 10 years ago. And so that whole industry, I guess, of just hiring groups of writers like that is gone and I’m happy for it. It seemed like a pretty lame job anyways for those folks. And I remember, no, they were pretty unhappy too.

Einar Vollset:
Tracy The Content Farm Producer.

Tracy Osborn:
Yeah. Yeah. Exactly. Yeah. Content farms. Yeah, that’s the word for it. So that was my former job of watching that happen and I’m very happy that doesn’t exist. I didn’t really think about the replacing of Google, which is lovely to hear. That makes me even more excited because me and everyone else in the world searched for things on Google now and it’s just like, you aren’t as good as I remember you used to be. Stop ignoring the words I’m using. Stop switching out the… Oh, it’s like Google saying like, “Oh I know what you really want to search for.” And I’m like, “I know what I’m doing. I’m searching for the thing I want.”
And it just drives me… I’ve been just driven up the wall with Google, so that’s exciting. I like this idea that we can have something that will be… Take us back to getting good information from my… If you have a query and you want to ask it. Can we call it Ask Jeeves? I feel like this is a dream of Ask Jeeves.

Rob Walling:
Ask Jeeves.

Tracy Osborn:
Yeah.

Rob Walling:
You’ve just invented-

Einar Vollset:
That’s right.

Tracy Osborn:
It’s what Jeeves promised.

Rob Walling:
Registers.com.

Tracy Osborn:
You put in a query and then you get the answer and we are finally there.

Rob Walling:
Yeah, remember that.

Tracy Osborn:
It just took a while.

Rob Walling:
It’s a trip. 25 years later.

Einar Vollset:
Yeah, I think one of the most interesting things too is, if you think about it, it allows you to give context and expand, in a way that doesn’t really work all that well with Google. So it’s hard for me to do the following, do a broad search on Google and then have a subset of those results and then search within those results, but only those results and do that two or three times.

Tracy Osborn:
Yeah.

Einar Vollset:
But a language type model that remembers state is a much more natural way to interact with a data set in that way. So there’s a bunch of things there that are very interesting.

Rob Walling:
The state is a big deal.

Einar Vollset:
Yeah, I think so.

Rob Walling:
The state is a huge deal. Can you imagine when this is built into our Amazon Echoes and the Google Homes or whatever and you can literally just ask the question and actually get an answer because today it’s garbage. You ask Alexis something and she’s like, “According to blah” and cites something and half the time it’s garbage. It doesn’t answer your-

Tracy Osborn:
And then you get an ad afterwards.

Rob Walling:
And then… I don’t. I must be paying for a premium or something but-

Tracy Osborn:
Oh, some people are talking about getting ads or it’s like, “Also did you know blah blah blah blah” or something. I don’t have an Alexa. I’m just hearing people talking about how they’re trying to throw ads in. Anyways continue.

Rob Walling:
But in order for this to work and replace Google searches or whatever, if I’m in a browser, because I think in terms of voice interaction, this is just head and shoulders above anything we see in the space, once they adapted to that. In terms of actual Google searches, at first when someone started suggesting Google’s in trouble, I see it on Twitter where they type in, “What’s the average rainfall on the Amazon basin” and then it gives a response or whatever. But A, it has to be right. It needs to be at least reasonably accurate and it’s not today. So that’s refinement though. And then to your point Einar, I want to see it reference sources of some kind because that’s important. When I do a Google search and I see 10 results, I’m absolutely looking at those domains. I look at the headline to see the result and then I’m like, “Who told me this?”
So for example, I just searched how many Google searches result in zero clicks because I actually think this is perfect for that, right? Sometimes I want to search and I want to say top websites for this or I want a list of 10 apps that do something because I’m trying to compare them, right? And in Google that works today because I get 10. But there is a portion of time where I literally just want to know a fact. I want to convert Fahrenheit to Celsius, I want to know the average rainfall on the Amazon basin to reference that Farside comic. Once again, I want to know something that maybe is a little plain flight duration from here to there, whatever. And those zero clicks, which they’re around 20 to 30%, depending on how you count it according to Search Engine Land.
So I did that search in Google just now and I saw these numbers and they’re all conflicting and Search Engine Land is a brand I trust or at least it’s a resource that I trust to be relatively accurate. And so that’s what I want is knowing the source helps me have confidence in the results, right? Which I think GPT can add, as you said. The other thing is I thought to myself, “You know what I want? What if I want five or 10 different SaaS apps because I just want to kind of noodle through them?” Well you could ask… What are we calling it?

Einar Vollset:
ChatGPT.

Rob Walling:
Chat-

Einar Vollset:
GPT is the underlying thing.

Rob Walling:
Okay. ChatGPT

Einar Vollset:
That’s why you didn’t find anything. GPT is like the-

Rob Walling:
No, because I was like, “Open AI chat, blah blah blah.” But so if ChatGPT, I could just ask it, “Give me the top 10 blah,” and it could give me the 10, right? That was a mental hurdle early on of like, “Well, I like having a bunch of results in a Google search.” ChatGPT could do that if you just ask it. You just learn how to use the… It’s just a slightly different interface. It’s really interesting.

Einar Vollset:
It allows you to think and really ask queries about over data sets that you couldn’t possibly because you are not Google. Google can figure things out like this but you can’t because they’ve constrained the interface to be this, this is what it does, and the technology doesn’t understand if you query it differently. Whereas with open GPT, really you can query it in different ways. And that’s the most interesting thing because you could have your own special way to talk to the Oracle, whatever, that gives you the data in a certain way that you really want. That’s only the way that you do it. That’s not possible in Google, which is pretty cool.

Rob Walling:
Think about that interface inside a company. We spent so much development time pulling a report for our BI team or pulling a report for the CEO of about metrics and this and that. We didn’t have metrics. Imagine if you had this interface over a sequel database and certain people have.

Einar Vollset:
And they actually still exist. You should look at some of the language models that chain them together where it’s like you basically just describe… So instead of a writing API code and having your code doing it, you have a description that’s just a word description of what this is, what the API does, here is the parameters, this is the kind of questions and answers you can get. Go use this API, which is pretty cool. Then you can chain these things together and you can do honestly what a lot of developers do, which is chain different APIs together and add some secret sauce. That becomes much more fungible and much easier to do and then it can hallucinate facts.

Rob Walling:
Yeah.

Einar Vollset:
Someone said that on Twitter. Again, clearly I live on Twitter, and someone said, “One of these days, very soon, an open AI will hallucinate, basically come up with something that isn’t true and we will just assume that it is and we won’t find out until it’s been considered a fact for years.”

Rob Walling:
That’s going to be one of the challenges.

Tracy Osborn:
I feel like I kind of do that with Google’s Instant results. I just take them by fact too and I’m like, “Oh I trust Google.” But I don’t know, it could have been feeding me wrong facts. The other day I searched for converting so-and-so Euros to USD, which has always worked perfectly, except for last time it decided, I think it took my local location and instead of doing USD, it did Canadian. So I just completely ignored that side of the thing. And I almost grabbed the number before I realized that the little calculator said.

Einar Vollset:
The Canadian dollars are pretty much worthless, right? It’s like two to four or five dollars?

Rob Walling:
Hot Take Tuesday.

Tracy Osborn:
Yep, which is why I wanted to do USD but it was just like even Google is like… I don’t know. It feels like they’re getting… I was going to say getting wronger. They’re getting worse. And it’s just like, “Oh come on.” It says my query has a USD. It’s right there.

Rob Walling:
Yeah. Wrapping up this section so we can move on to the next topic. Tracy, I want to get your thoughts on, it feels to me like a lot of AI is open source slash commoditized. It’s given away. So this is a show about startups, right? About building SaaS companies, B2B in a lot of cases. Is there an approach? What’s the path to bootstrap or mostly bootstrap a great company in this space or is this one of those spaces where that maybe just isn’t likely to happen? I think about VR for example, and it’s hard to bootstrap in that space. You can be a game developer, you can be an indie game developer, but actually B2B stuff, it’s either expensive to build or whatever. So I’m curious to get your thoughts.

Tracy Osborn:
I mean it’s kind of like my husband’s an author of the popularest, whatever word… Of Python open-source project Euro lib three. And it sucks that he built something that’s used in pretty much any system that’s using Python. If you’re using PIP or Virtual End, it’s using those systems. But it’s the same situation where there was a tool that was created, it was opensource, people did it for the love of the everything. And then it is being used in companies that are now the startups that can do more because they have these open source tools. So there’s the same thing when it comes to AI and it sucks that there’s probably a lot of work, just like in open source, where a lot of people are putting out a lot of hours at their time, they’re not being paid for those hours of time, and then it’s going to be used in other places where the companies are going to be the ones creating revenue.
So it’s the same situation as the open source world and the open source world is constantly doing conversations about how do we fund open source creators? How do we support them? And they usually surround foundations and grants and big organizations like Google paying out for those, some of the largest ones. And possibly that’s what’s going to happen with the AI, right? Where it’s like how do we, I don’t know, support the development of this? But then there’s going to be this whole other layer of startups that are rebuilding, utilizing these tools.

Rob Walling:
And we at TinySeed have backed at least two AI focused companies. So it’s all B2B stuff. You can look it up on the portfolio page. So we think there’s some opportunity there. But I’m curious, as we wrap this topic, Einar you have other thoughts on that, about whether there’s opportunity here or whether it’s going to be an uphill battle due to the hotness? Is it so popular everyone’s going to jump in?

Einar Vollset:
Yeah, I mean unlike Tracy, I’m not an open source communist.

Rob Walling:
Hot Take Tuesday.

Einar Vollset:
No, no, I’m only kidding. But I think I actually worry less about like, “Oh, is this open built and open source and then commercialized.” I understand that take. I think one of the more bigger challenges is, let’s look at right now, what is the best tool out there? Large language model. It’s open AIs, whatever, blah blah blah. That’s a commercial tool. I think what’ll happen is people will experiment with this on an open source or closed source free version, get to where they want to do and then they’ll realize, “Okay, we have to train our own models.” I think that becomes a key thing. I think if you’re going to do an AI startup, eventually you’ll end up at least fine-tuning or if not building your own models from scratch, obviously using libraries and things. The way that I think a ChatGPT is, like I said, it’s similar to Google.
Do you build a startup on Google? No, not really. You don’t sort of… You can’t build that into as the foundation and then build on top of it. You can build alongside it, you can build competitors, you can use tooling, whatever. But I think it’s the same thing with Open GPTs, it’s sort of an amazing tool. I think it’ll be hard to have a competitive moat if you don’t have your own language, if you don’t have your own training sets, if you don’t have your own model. I think that will be true.

Rob Walling:
Right. Because otherwise it’s a commodity. It’s kind of like forking an open source project and just trying to sell it without-

Einar Vollset:
Yeah, I do think some… There’s opportunity certainly for people to write, who use this or you can license or do this kind of thing and then customize that interface to whatever work situation makes a lot more sense than just an API call or a chat interface. I do think that makes a lot of sense for people. But for example, I don’t think everybody… And this is already going on. The best example of this is all these copywriting AI companies. Basically you could do whatever it is that they do using open GPT and it’ll be much cheaper than their interface. But the fact is their customers don’t care that much. They just want the value from it. And so if it’s 25 times more expensive but it’s more tailored to their use case, maybe the model’s tuned a little bit, that makes a lot of sense.

Rob Walling:
Our next topic is the worldwide economic climate. Case in point, when I go to Google and say, “Is the US in a recession right now?”, the top result from forbes.com says, “Yes.” We entered it in summer of 2022, the next result says, “No.” And that’s from another relatively reputable source. So my question to you, Tracy, we see a lot of companies across our portfolio. Do you have thoughts on whether… Are we seeing evidence of recession across B2B SaaS companies or, I don’t know, in your everyday life?

Tracy Osborn:
I want to note that there’s like a layering of hot takes. Because when you’re looking at Googling and reading these results, then it’s like one is a hot take saying, “Yes we’re in a recession” and then one is a hot take saying, “No we’re in a recession” and then here we’re hot talking and hot taking on the hot takes. Anyways, just noted that. Company wise, I don’t know. I am not an economics person and so I feel like there’s scientific things around a recession. There is people talking about having trouble closing enterprise deals. I think Einar probably can speak more towards that in terms of people not wanting to spend right now, they want to save and maybe punt on some of the big deals that could be going through. There are a lot of people who are doing quite well. So I don’t know, you guys probably can speak more about what the difference is between those two companies.

Rob Walling:
And the way I’ve been describing it is between TinySeed and my own stuff I’m invested in, I think it’s like a 125, a 127 companies. And at any given time, just in normal times as things are growing, there’s always a chunk, 15, 20% who are growing really well. There’s a certain number, maybe 15, 20% who are really struggling. And then there’s this whole middle that is growing decently but not amazingly. And they’re figuring things out and those numbers aren’t exact, but you get the idea.

Tracy Osborn:
They haven’t quite shifted, right? It feels like it’s been relatively the same.

Rob Walling:
No, I feel like it has shifted. I feel like they’re… If it’s normally 15, 20% are seeing slower growth, I think that number maybe is like 25 to 35% right now. It’s not everyone, but I think the number is larger and this is… There’s a bit of gut feel here. I mean we can look at the graphs and such, but that’s kind of my sense of it. And I’m definitely hearing more… I’m hearing more chatter about that from companies I’m invested in. Now I also wonder if sometimes that-

Tracy Osborn:
Is it kind of like a loop? I mean, I’m not saying that-

Rob Walling:
The cycle.

Tracy Osborn:
There’s things that are definitely happening right now, but once people start talking about it and more people start talking about it and then everyone gets worried about it. So again, I’m not actively tracking this.

Rob Walling:
Yeah. Einar, what do you think?

Einar Vollset:
I believe that I saw in the sort of May, June timeframe, July, definitely a spiking churn. I think around that time is when a lot of companies were like, “Okay, we’re definitely heading into recession. What software aren’t we really using? What should we cut? What should we renegotiate?” That sort of thing. I think that played out. I saw a number of portfolio companies reporting. I mean some that had never had churn being like, “Oh crap, we had our first churn. Somebody canceled. Hopefully they’ll come back.”, type thing. So I think that’s true. I do think that too is right.

Tracy Osborn:
Yeah, a lot of you people saying big accounts are dropping. Do you think it’s… Is there a difference between the big accounts and small accounts?

Einar Vollset:
I think I see more churn in… I think I saw more churn in the smaller accounts.

Tracy Osborn:
Okay. Yeah.

Einar Vollset:
I think the bigger accounts. I think what happened is I see that enterprise sales cycles are lengthening and I see that the churn is increasing in the smaller accounts. I think certainly there’s so much uncertainty that I think a lot of the stuff that I’ve been hearing has been like, “We thought this thing was in the bag. We’ve been negotiating for nine months and now they say they’re going to do a budget review and get back to us next year.” I’m hearing a lot of that on the enterprise side and I think that’s true.

Rob Walling:
To wait and see.

Einar Vollset:
Yeah, and it’s funny because some founders, they going into this year or during the year, they were like, “How can we increase our prices to make sure that we make up for inflation?” And I was always like, “Yeah, how about trying to keep the customers at the price that you’re doing right now?” Yeah, but I think that’s what I’m seeing. Lengthening enterprise cycles at a bump in churn. I think churn has come down a little bit. I think we definitely had a situation where a lot of people were canceling things that maybe would’ve been spread out over the next six to nine months when they realized that we’re not really using this thing. And so maybe it was sort of front loaded in, sort of, that May, June timeframe. So I’m hoping that’s the case. But certainly on the enterprise side, longer sales cycles and like, “Hey, let’s talk next year on things that people just assumed were in the bag.”

Rob Walling:
Prediction time. We are recording this in December of 2022. Tracy, six months out, let’s say June of 23. Are things better? Are we starting the upcycle again? Are things worse or are we still kind of bumping along where we are right now?

Tracy Osborn:
I mean it’s hard not being an optimist. I think it’s my role here is always to be the optimist, to be the foil to Einar’s pessimist sometimes.

Rob Walling:
Hot Take Tuesday.

Tracy Osborn:
I just want to have hope for the future. So, I mean what? A lot of the recession is probably lingering effects from the pandemic. And the pandemic is at a point now, I think, of things are truly now starting to return back to somewhat what was going on in say 2019 and things are wobbly, but that by June maybe we’re in a better place. So I feel optimistic. Einar is probably more scientific about this. This is all gut feelings for me.

Rob Walling:
I think it’s all gut feelings for all of us. It’s a prediction of the economy. No one knows what’s going to happen.

Einar Vollset:
There’s more science on my side.

Tracy Osborn:
I mean he reads Financial Times and Twitter.

Rob Walling:
And they’re just making guesses too. Einar, what are your thoughts here, six months from now?

Einar Vollset:
Yeah, so I think a couple of different things. I think that depends on who you’re asking is it going to be better for. I think consumers are still working through a cash cushion that was excess savings from the cash injections that came during COVID. So I think there’s a lot of people… You see that with credit card spend versus savings, that sort of thing. I don’t think that’s really played through the markets yet. And I think those type of things will be reflected and will start to hurt more consumer facing companies. But by June, do I think the stock market will be further down? No. I went long on the S&P 500. So maybe that’s the jinx that means we’ll go out with another 20% now.

Rob Walling:
Oh no, you doomed us.

Einar Vollset:
But I don’t think the stock market will be worse off. I think some of the uncertainty will have played out. I think some of the expectations, particularly if you’re looking about investment side, I think finally some of the founders will realize that valuations have been reset and you can’t… You’re not going to be a billion-dollar business with three million ARR. That’s not a thing anymore.
But yeah, I think there’s consumer hurt coming and more through that timeframe and I think as a result more consumer facing companies will be hurt more. I think B2B SaaS will be relatively insulated and honestly I think most of the pain that Python in that sphere is done. I mean you look at the B2B SaaS, public B2B SaaS companies, multiples are way down. From 21 times forward looking revenue to six or five or whatever it is now. I think that’s too low. I think… And you know can just look at the cloud ETFs, they’re down 60% from the peak, type thing. Do I think they got further down to go? I mean maybe, but I think they’re going to come back faster than people expect.

Tracy Osborn:
One thing on the consumer side, don’t you think that consumer hurt is already here and you think it’s going to get worse, because the inflation stuff? I know that my cost of living in Canada, I mean probably everywhere because of inflation, but in Canada things have skyrocketed. So do you think that consumer… You think it’s going to get worse from what people are already affecting right now?

Einar Vollset:
Yes. I think consumers are being cushioned by the pain of inflation by their savings, still. And I think that’ll run out sometime in the year and that’ll then impact earnings on the consumer facing company side. That’s what I think.

Tracy Osborn:
Interesting. Okay. Yeah, I’m hearing a lot of chatter. Just again, it’s my local area.

Einar Vollset:
This is sort of what you need. You basically need… This is how you get inflation down, is pain. People are… I don’t understand politicians who are like, “What are you doing? You’re causing unemployment whether you’re raising your rates.” I’m like, “Yeah, that’s exactly what needs to happen.” You need to increase-

Rob Walling:
It’s a cycle.

Einar Vollset:
Yeah.

Rob Walling:
We have to have down cycles to have anything and-

Einar Vollset:
You got to do it. This is literally what they’re trying to do. It doesn’t make any sense to complain that, “Hey, don’t you know you’re causing this?” I’m like, “Yeah, that’s exactly what they’re trying to do.” Yeah, it’s not going to be super nice but I think on the B2B SaaS side is relatively insulated.

Rob Walling:
That’s the thing to think about. It’s so interesting to ask that question from a consumer perspective, from a large business perspective, from a public company perspective, from a SaaS company or a startup that was three million ARR and raised it a hundred million or 500 million valuation. Each of those will have a different outcome. And the people who raised big buckets of money at these outsized valuations have a hell of a lot of work to do because multiples have collapsed so far that they have to 5x revenue, 10x revenue to get back to the valuation that they got two years ago. So that’s a whole different story.

Einar Vollset:
There were SaaS companies. In 2021, there were SaaS companies doing three million ARR that were raising in a billion dollar valuations.

Rob Walling:
Bananas.

Einar Vollset:
There’s a lot of things. With the public market, multiple… I can’t even do the math in my head. 300 times ARR or something insane. Now a public company is trading at six times. There’s an awful lot of things that have to go right for you to get even close to that.

Rob Walling:
Yeah, and so that’s where the resilience of SaaS in general, especially B2B SaaS, but also companies with unit economics that actually kind of make sense. And look, there are absolutely venture backed companies that are growing fast, that do have decent unit economics. We hear the news stories about those that don’t because they often implode, but the majority of the MicroConf, TinySeed, bootstrapped, mostly bootstrapped ecosystem by definition has to be pretty capital efficient. And so I do think there’s insulation, even if there’s headwinds depending on your space, right? Because we can each industry, if you’re servicing schools versus government versus SMBs versus large… Each of those is reacting slightly differently. But across the board, I agree with you, I think I’m a fan. B2B SaaS.

Tracy Osborn:
That’s why we do what we do.

Rob Walling:
Before we move on, I’m going to weigh in. I think that within six months, same question I was asking the two of you. I think it will be about the same unless some world event happens and the longer we’re in kind of this bumping along, the more likely something is to happen because it’s just time. And I mean by someone invading another country, heaven forbid. Bad things that have happened that have sent us into recessions before. There’ve been black swan events, terrorist attacks, pandemics, whatever. Again, I’m not predicting nor desiring any of those, but if one of those happens, we will see another big drop. And if that doesn’t happen, I’m probably just in the middle. I’m neither bull or a bear on the next six months.

Hello listener, this is Rob. Chiming in about a week and a half after this episode was recorded. I wanted to intro and perhaps caveat this next segment where Tracy, Einar and I discuss Twitter, and Elon Musk, and all that. And the challenge with recording on news topics like this is that sometimes these stories change so quickly and certainly the Twitter story has unfolded over the last few weeks. This episode was recorded before the journalist were suspended. It seems like the verdict is still out on what is going on with that. But I just wanted to put a caveat in here to realize that our opinions expressed in this episode were from news as of a couple weeks ago and as things unfold in the coming weeks, I imagine those opinions might change. So with that, let’s continue the episode and dive into the next topic.

Last topic of the day, Twitter. Elon Musk. This is truly a topic for Hot Take Tuesday. Tracy?

Tracy Osborn:
We have the two opposite sides. The court, Tracy and Einar.

Rob Walling:
I don’t know. We’ll see, right? So Tracy, Elon, obviously I don’t need to… He took it private, everybody knows this. He’s making changes. You can pay eight bucks to get a blue check. There’s stuff happening. He’s trolling people with his tweets, etc. A, are you still on Twitter, and B, do you think Twitter is better or worse given that Elon is running it?

Tracy Osborn:
I have been trying to kick the Twitter habit for a long time and I stayed on it because it was useful for my career. It was useful for me to get information from other people that are in my space and get early information, I would say, as eventually people write blog posts and whatnot. But that was truly the place where to find what people were actively working on. It led to a lot of speaking opportunities in my career. I’ve been on Twitter for 10 years, but for me, it was devolving into going on there and going, ugh, because there was so… It was incentivizing. This is pre Elon. Twitter was already going in the direction of incentivizing a lot of Hot Takes and a lot of knee jerk reactions, a lot of negative negativity and whatnot.
And for me, personally, my life is stressful enough already. And so I will open it because I’m like, “Oh, I should do this for my career.” And then I’d be like, ugh, and I close to move on to something else, the more… I’m kind of moving into more private communities and that kind of stuff.
So the Elon thing was like, “All right cool.” I have the reason, I have the perfect motivation to just be like, “I don’t have to be on here anymore. At least until the dust settles and maybe evolves into something different.” And it’s a little depressing at being such a fan person of Twitter for so long and then utilizing it so heavily for my career. It is kind of disappointing to feel like, “Oh crap, now I’ve lost this opportunity that I had in the past that… I don’t feel like… Feel exists at this current moment.” And it is funny, when I do click on… I sometimes accidentally click into it and it’s like, “You have 25 notifications,” and I click onto the notifications tab and it’s like, “You missed these tweets from Einar Vollset.” It really wants me to read it.

Einar Vollset:
That’s what you get.

Tracy Osborn:
It’s all Einar.

Rob Walling:
Cursed.

Tracy Osborn:
Every single one I think. So…

Rob Walling:
The algorithm is doomed.

Tracy Osborn:
Really. I’m missing out on all the tweets of Einar and it’s really reminding me every time I load. But that’s my personal thing. I want to say one other thing in terms of that’s my personal tick. There has been something I’ve been seeing with TinySeed because I follow all the Twitter companies that if someone is accepted into TinySeed, the TinySeed account only follows folks that are in our ecosystem. So generally our founders and their companies, if they have Twitter accounts. And that has been decreasing in number and the more… I’ll find accounts where they’re inactive, they’re not really being used. So, company wise or for TinySeed, as a company account, it’s also becoming less useful because the folks it seems like that we are investing in and the folks who are probably applying are using it less and less. I don’t like LinkedIn.
Kind of feel like that’s LinkedIn now. And I have to figure out how to investigate that because I am years of hatred of LinkedIn, just again that’s on a personal account. But I have been noticing this trend as I’ve been running the TinySeed Fund Twitter account and that the folks that are apply… People either don’t have accounts or the accounts are not used very often. And there are some people who do have accounts and that’s really great. But overall it’s kind of become less useful for TinySeed Fund. Still going to use it for TinySeed Fund and stop using it for personal stuff. Of course, we’re still running our accounts for TinySeed Fund because I think it’s a really great. It’s still a resource to find those folks, but just overall it feels like it’s different than it was in 2019.

Rob Walling:
Einar Vollset. Same question.

Einar Vollset:
Yeah, yeah. I’m still on Twitter. I don’t see myself leaving Twitter. That’ll be crazy. It’s half my life. I have the completely opposite view, I think. Well, so I think first I will say this, I don’t think the algorithm really impacts me because I don’t use it. I have it set to the latest tweets and when I switch it to whatever Home is, aka, the algorithm, I see a lot of crap. And I think in general, for a long, long time, both Facebook and Twitter and whatever their algorithms were basically just optimizing for the most engagement, which a lot of the time ended up just being rage. So that’s unrelated to Elon, but that’s sort of how I interact with Twitter. And I think, honestly, I don’t think I’ve seen much change on Twitter. It isn’t different to me. It doesn’t matter. And I think that combined with the fact that I think the news media has completely lost their mind when it comes to Elon Musk. For some reason he’s become the big bang.

Tracy Osborn:
It’s the trash fire everyone wants to follow.

Einar Vollset:
And it’s completely insane to me. I’m like, “What did the guy do?” Let’s just calm down, stop hyperventilating and think about what he actually did. Did he buy a company and fire a bunch of people? Yeah, sure. But so does a lot of people. I think it’s telling to look at the way in which these news organizations have been treating the way that Elon Musk legally bought Twitter and was forced to do so and wanted to back out. But the board forced him to go through with it and then he fired people and people are trying to get him to fire… Stop advertising, get companies to stop advertising.
He’s like, “Well then he has to fire more people.” Then you’re using that as a bad… He’s such a big bad man. Compare that to how they been reporting on SPF. I think it’s disgusting. I think the way that somebody who’s been portrayed in the news media, if you just read the main news media about Elon Musk and about SPF, you would think that it was Elon Musk who stole billions of dollars from people and was just waning about in The Bahamas. But it’s not. That to me is completely insane.

Tracy Osborn:
Elon Musk is also… He’s been spending months. He has years of being on Twitter, being a troll in lots of different ways. It’s not like, “Oh random CEO took over Twitter and is making changes.” It is a very controversial person who has inserted himself into the conversation in crazy fat manner.

Einar Vollset:
But he doesn’t… Don’t follow him then. Turn the algorithm off.

Tracy Osborn:
But that’s the media. He brought the media to him and then he can’t complain about the media then following him to Twitter and then reporting on his things because he’s been doing this service to bring the media’s attention and everyone’s attention on him.

Einar Vollset:
Yes, I don’t mind them reporting on it, but if you look at the angle, it’s like every day it’s like, “Oh, Twitter.” It was only three weeks ago, Twitter was supposed to go down. Sourced in the big news. NBC was saying goodbye. We’re giving up and this is going down anytime now. Well sourced, sources. Complete as usual. Honestly, to me, people have completely lost their mind here. If you didn’t know that Elon bought it, if you didn’t read in newspapers and you didn’t follow Elon, you wouldn’t know. That’s my Hot Take Tuesday.

Rob Walling:
Hot Take Tuesday. This is where I… There’s a nuance to this because I don’t like… I’ve seen some tweets of Elon’s that I do not, I do not agree with. I do. They are trolly, but I have always respected him as the Tony Stark of our day of an industrialist who’s getting done in a way that no one was building rockets. And he figured it out. No one was doing electric cars and he figured it out. So I have this push pull of, I have respect for things that he’s built, but I also don’t. He and I don’t agree on a lot of things and I wouldn’t represent myself in that way. I have made predictions, so many predictions about Twitter over the years. We used to do prediction episode at the end of each year, and in 2017 I predicted Twitter would have major issues continuing a decline.
And in 2019 I predicted that they would be acquired. And much like the person who predicts eight of the last two recessions, I feel like I should be vindicated that I finally, they did, they lived up to this. My take on whether it’s better or worse at this point is TBD. I don’t think it’s better for sure. I mean the blue check mark, whatever. I don’t know that I’ve seen other changes. Like you, Einar, I don’t really use the home feed that much. I use it a little bit, but not much. I do think that the circus, the media circus around it is not helpful. Now we can blame the media for that. We can blame Elon for that. We can blame both of them for that. And that’s the way I’m thinking about it. I think that’s detrimental to the whole situation because it’s just a bunch of noise. And as we just agreed, if none of that was being reported on, would we have noticed much of a difference. Tracy, any closing thoughts?

Tracy Osborn:
I mean, the Elon thing is funny because I feel like he’s a kind of bull in a China shop and it just was something we weren’t really seeing with his other companies. And now that he’s in a company itself that is a media communications company and then firing a bunch of people and then that all those people are going to be already using that service to talk about those things and blows up. I feel like this thing was kind of happening at other companies like Tesla that we just didn’t see. I mean there’s a lot of-

Rob Walling:
Do we know that or are we… Because I haven’t looked into this, but I haven’t heard that. So I hate to speculate and act like…

Einar Vollset:
The problem is for me to say… I want to say I’ve read that, but I can’t have a proof right now. And I do say that there is… I’m in the market for an extra car and I’m not getting a Tesla, not because of Elon, but because there is a whole subreddit just talking about the quality issues. They’re having huge QA issues right now with Tesla. So it’s one of those things where they’re like… I’m happy that they’ve started and they really started that trend of electric car companies. I’m at this point where I’m just like, “I’m not going with Tesla because they’re having major growing pains right now because of the way that they probably had to start up because they were the first, and that’s why I’m going with different car.”
But I’m just like, “It’s interesting about how he obviously has a management style and that management style was perhaps the same in these companies and perhaps it was less visible because it wasn’t on a media company.” And it’s kind of interesting to think about what effects happened when someone who has a certain management style but goes into something that is public or so wildly talked about publicly.

Rob Walling:
See, it’s interesting for me because one of my sons came to me a couple days after the Twitter acquisition and he said, “Yeah, Elon Musk bought Twitter.” And I said, “Yeah, I know.”
“And he got rid of the board.” And I said, “Yeah, I know. If I took a company private, I would too. That’s what you do.”
“And he fired all the execs.” And I said, “Yeah, that’s what I would’ve done too.”
“And he’s going to do layoffs.” And I said, “That’s what I would do too.” To him he… And at school it’d have been presented like, “Oh my gosh, this guy did this stuff that’s so unpredictable.” It’s like, “No. No. No. If I had bought a company like that, I probably would’ve done all the same things.”Again, Elon and I do not agree on a bunch of stuff, but if I’m going to buy a big company that’s over-

Tracy Osborn:
I was going to say, would you do Friday 2:00 AM code reviews? I think that’s more the astonishing thing.

Rob Walling:
No, no. And that’s why I’m saying, but that’s a detail. Yeah.
I’m not saying, “Oh, everything Elon did was good.” I’m saying these top level bullets that my son brought are like… I was like, “No, that’s what you do when you buy a company.” But no, 2:00 AM code reviews or the “get it done by this or you’re fired” or whatever. There’s a bunch of stuff. It’s like, would I run a company like that? No, I wouldn’t. So let’s talk about the.. That’s kind of what I told him. I was like, “Everything he’s doing is not right. But the four things that you just mentioned, I actually think are what any sensible person would do.”

Tracy Osborn:
I mean, everyone else’s going on layoffs, Google, Meta. Everyone else too, and they’re not being reported on the same way.

Rob Walling:
Exactly.

Tracy Osborn:
But it is like the, “Ooh, look at this Twitter- tweet of this person holding up a stack of papers talking about, “Okay Elon, I’m ready for my code review.” And everyone’s like, “That’s ridiculous.” And then it just goes viral. That kind of stuff is not helping.

Einar Vollset:
But again, think about why did you see that? Why did you see that? You saw that because the algorithm surfaced it for you.

Tracy Osborn:
I follow Leah Culver too. Who was the one that did it.

Einar Vollset:
I didn’t see it. Because I don’t follow people who are in that drama thing.

Tracy Osborn:
Leah Culver is an old friend.

Einar Vollset:
Yeah, I just don’t follow those people. Again, so it doesn’t come up because I don’t follow the algorithm. I mean, honestly, my honest to God view on this, and it may be deeply cynical, is that I think what has happened, the reason why there’s so much heat and so much drama around this is because to journalists Twitter’s very, very important and they had a very special status under the previous regime, and they’ve lost that status and they’re losing their…

Tracy Osborn:
I mean, worthy. I thought that was the best part of Twitter is when that we moved into this world of having news access, easier access to folks and easier access for information to come out from journalists and governments and companies and support teams and all that. Now it feels like those are the things that I care about the most and they’re going to go away in favor of people all the time.

Einar Vollset:
I only use it for posting, so this is great.

Rob Walling:
Oh, wait a minute. This is-

Tracy Osborn:
I know.

Rob Walling:
Ladies, gentlemen, folks, listen to this episode. That is why we have Hot Take Tuesday, is that we can get opposing viewpoints, sometimes agreeing, sometimes opposing viewpoints on the topics of the day. If you want to follow our panelists, Tracy Osborn-

Tracy Osborn:
Follow her on Twitter, who’s not on Twitter’s on anymore, but I’m on Twitter at Tracy Makes.

Einar Vollset:
@Tracy @Mastodonsocial.

Rob Walling:
Oh yeah. What’s Mastodon? @Mastodon.something.

Tracy Osborn:
Oh, my God. I’m not giving you a response. I don’t use Mastodon either. I’ve decided I’m done. Oh, God. There goes my camera.

Rob Walling:
No, that was a table flip.

Einar Vollset:
No.

Tracy Osborn:
Actually it looks better now. So that’s great.

Rob Walling:
@Tracymakes on Twitter.

Tracy Osborn:
I’m shaking my computer so much that my ring light fell down. Tracy Makes on Twitter. Thank you. Follow me with not responding there. Follow Einar and you’ll get spams with all of his tweets.

Einar Vollset:
That’s right.

Rob Walling:
Einar Vollset on Twitter if you want to hear live tweeting of sporting events. And of course, as always, I’m @RobWalling. We’d love to connect with you. Thanks everyone for listening and we’ll see you next time. Thanks to Einar and Tracy for taking time to join me on this pod today. As we enter this holiday season, I hope that you are having a restful time, or at least looking forward to having a restful time over the next few weeks. This is a great time of year to take a step back, to reflect on the last 12 months, the progress you’ve made, probably the hurdles that you faced and even the progress that you didn’t make that you wanted to. It’s a time of year to take a minute or an hour or a day, if you can, and look back and look ahead and reflect on things that you wish had gone differently, things that went amazing, and look ahead to think about things you want to get done in the next year. As always, thanks for joining me today and every episode. This is Rob Walling signing off from episode 640.

Rob Walling:
Welcome back to another episode of Startups For the Rest of Us. I’m Rob Walling, here with the cold that I’m getting over. I caught it last week while in Malta. We had an amazing kickoff for our European TinySeed batch followed by MicroConf Europe in Malta.
I did not leave unscathed though. For the first time ever, more than 30 in-person events, I missed a day of MicroConf. I was so sick I had to stay in bed. It was absolutely devastating to me. I effectively lost my voice, and it wasn’t going to be a good scene if I went and tried to MC it.
So mad props and thanks to producer Xander and the rest of the MicroConf team for stepping up and making it happen. Just goes to show you we can’t do these things alone. These should be lessons that we all know by now. But at some point, you’re going to get sick. At some point, you’re not going to be able to show up. And having amazing people that you work with that have your back is what it takes to do this over the long run.
Today I’m talking with Andrew Berkowitz, the founder of Suggestion Ox. And we dive in to the secret sauce to building happy, motivated teams. We talk a lot about trust. We talk a lot about not having these strict policies that have been in place for a hundred years because the job market and the way we run companies today is and should be different than the way we ran companies 50 or a hundred years ago.
So without further exposition, let’s dive into our conversation. I’d like to welcome Andrew Berkowitz to the show. He’s the co-founder and CEO of Suggestion Ox, which is a feedback platform that helps HR teams build truly candid communication between leadership and employees. And before that, he co-founded TeamSnap, which was a sports management platform that was acquired in 2021. Andrew, welcome to Startups for the Rest of Us.

Andrew Berkowitz:
Thank you, Rob. It’s great to be here.

Rob Walling:
Absolutely. It’s good to have you. Today we’re going to be talking about trust, the secret sauce to building happy, motivated teams. That sounds like a book title and a subtitle. Are you secretly working on a book?

Andrew Berkowitz:
I might be secretly working on a book. Might be at least secretly working on some content to help get more customers.

Rob Walling:
A manifesto? Yeah, great.

Andrew Berkowitz:
Yes.

Rob Walling:
That’s awesome. I’m glad we’re talking about trust in building teams because this is something that I think when I started… When I started as an entrepreneur, it was all four hour work week type. You hire a bunch of freelancers; no loyalty to you. And really, they’re a black box I need a thing done. They’re task-level thinkers, right? And I was the project owner level.
Eventually I realized, if I want to get big, seven, eight figure company, I need to start hiring what I call team members, right? Employees, but team members who are in it. And whether they’re W2, whether they’re 1099 is irrelevant. Because sometimes 1099, someone’s overseas, you just have to do it, right? So that, the designation of how they’re paid is separate in my head from whether they are a core part of your team.
And a big thing that I always leaned into was this concept of loyalty. I’m loyal to you, you’re loyal to me. And what I learned is that’s a byproduct of trust. The trust is actually the core. I thought loyalty was the core because that’s how I was raised. But trust is the core. Trust between the employee and the employer. Tell me why you’re fascinated with this topic; what you’ve seen that basically instigated you reaching out and saying, “Hey, let’s record an episode about this.”

Andrew Berkowitz:
Fundamentally, there’s been a shift in the balance of power between employer and employee over the last 20 years. It started with the internet where people could work from anywhere, so suddenly you could take your skills anywhere; not just to your town, but anywhere around the world. So accelerated by COVID, employees have so much more power now. There’s not just one game in town for where they can work.
So when you think about what people are looking for, they want to be part of something. They no longer want to just feel like they are working for a company, that they’re owned by the company. They want to feel like they are part of it. And I always like to say, about my employees, “I don’t want them to feel like they work for my company. I want them to feel like they are my company.” And that comes from being bought in, from being passionate about what you’re doing. And I think the root of that is really trusting people like you’d trust your family members. We talk about companies being like a family. And companies aren’t really a family because you can’t fire your family members. But when you treat people with that trust, they’re part of your family, they will dive in with you, and they will run through walls for you.

Rob Walling:
I always caveat the idea of a company being a family with more of the Netflix approach, which is the company is a high-performing team. And you can think of it as a sports team if that analogy works for you. It could be a chess team. It could be a group of adventurers in a Dungeons and Dragons adventure, whatever analogy. But it’s a team trying to accomplish a goal, and there’s trust there too. I ran track which individual but also team sport ’cause we had relays and no team scores. And also played football. And you had to rely on the person next to you. And frankly, I wanted the best players on the field. And if you were my friend or not, if you weren’t the best right outside tackle, then I didn’t want you because then I was going to get hit because you were going to miss the block.
And I think we’re on the same page with that, right? Whether it’s family or team, there’s a level of trust and a level of wanting to be around other people who are good at their job if you are, so that they don’t drop the ball.

Andrew Berkowitz:
Yeah, and the pushback that you hear on building the trustful organization is essentially, “If I give this trust to people on my team, are they going to perform?” You see it all the time with people asking, “If I’m not tracking the hours that my people work, are they going to goof off? Or if I have a flexible vacation policy, are people just going to take off for six months?” And the answer to that is, if you have high performers on your team, in no way are they going to do that. Because high performers, they want to perform. They want to take pride in the craft of their work, and they want to do great stuff. And so when they feel like they are working for you as a hired gun, and they don’t have your trust, and you don’t have their trust, they’re not going to be interested in doing that.
But when they feel like they are completely bought-in, part of your team, they want to do great work. And think about the great people who have worked for you. They want to do the great work. You don’t have to police them.

Rob Walling:
Yeah, did I ever track the hours of my best engineers, my best whatever, program managers, event…? Nope. Never cared. I want to dig into this so that people understand, a founder or aspiring founder who’s listening to this understands exactly what we’re saying. Perhaps the difference between maybe the old way of doing things and what you’re proposing, which is it’s not like you’re proposing something that should happen in the future. This is happening. Companies are already run in this deep, deep trust fashion. You already mentioned something like not tracking vacation time, not tracking hours, more looking at results.
This is how I run my companies. I have. So I’m saying this for the listener of I’m going to play devil’s advocate during this episode because otherwise I’m going to nod and agree and say, “Yep, that’s pretty much how I do it. Yep, that’s how you should do it. That’s worked for me.” But I want to play the other side of the coin because there are absolutely people listening saying “Yeah, this won’t work, and here’s why not.” And so I need to play that role in this episode. So we named a couple things like some specifics of unlimited vacation policy. That’s something you were saying.

Andrew Berkowitz:
And I wouldn’t say unlimited. Unlimited always gets people freaked out because they’re like, “Okay, Joe’s going to take off for six months to the Himalayas.” So I like to say, “Flexible vacation policy.” And again it’s, do I need to police my people’s vacation, or can I trust them to take the right amount of vacation? Because the old model is essentially you get two weeks or you get three weeks a year, and you basically take that. You ask for permission, and you take that.
The new model is: what do you need to be highly productive? It starts with high productivity. And then it’s going to be different for different people. I have had employees who are, they basically, they’re like a nine to five person, Monday through Friday. And they slow and steady. And they get stuff done that way. And a couple weeks of vacation a year is all they need.
I’ve had other people who, they burn really hard. They’re 12, 14-hour days to push out a feature. And then boy, they need a week off to decompress. And so, one-size-fits-all doesn’t work. And I need them to say what’s going to be right for them. And I need to push down to the team what’s right for the team. There’s a big fear that well, if I have a flexible vacation policy, everybody’s going to disappear at once right before our big release. Well, you put it on the team. You say, “Our vacation policies, you’ve got to coordinate with your team to do the right thing for yourself, the team, and the company. You put company before team. You put team before self. And then you put yourself. And it’s your job to work with your team to figure out what the right thing is.”
I’ve had people come to me and say, “Can I take vacation at this time?” And I’m like, “I don’t know. Talk to your team. I’m the boss. I don’t know what you’re working on. I don’t know what your team is working on. Work it out with your team.” It makes no sense for me to approve your vacation because I don’t know what you’re doing.

Rob Walling:
Right. Okay, so that that’s vacation policy. Let’s talk about there’s hours, right? Flexibility of work hours.

Andrew Berkowitz:
Yeah. That’s the big one. I mean people really want to be able to set their own schedules right now. And it’s partly because they’re trying to find that work/life balance. But it’s also because everybody is productive in a different way. And we all know you can have somebody sitting at their desk from nine to five. Maybe they’re getting something done, maybe they’re on Facebook. If they’re a developer, they might be working on their side project because every developer’s got a side project. Hours as a proxy for getting work done is totally meaningless. So what people want to be able to do is set their own schedule.
And again, the fear is, if you let people set their own schedule, they won’t work. Or they won’t be there for that client call, or they won’t be there for their team meeting. Well, that’s not how you manage trust. You say, “You’re in charge of your schedule with your team and with our customers and with the company. Set the schedules that’s going to work best for all of those.” And it’s going to be different for different people. But somebody can’t say, “Well, I don’t work at nine, so I’m not going to do the team meeting at nine.” That doesn’t work. Trust is saying, “Within the parameters of being highly productive with your team, what is your schedule going to be?”
And the magic of this is when you stop saying, “These are these specific hours that you must work,” people will give you a lot more flexibility in terms of what they are willing to work on. So I’ve seen a lot of founders say, “I can’t get my people to work on weekends, or I can’t get my people to work evenings when the servers go down.” And that’s because you’ve told people, “Well, your hours are nine to five. And boy, it sure would be nice if you gave some extra time.” Instead, just say to people, “Your hours are you make your hours. You figure out what we need.” And highly motivated people will figure out, “Oh yeah, we need to do this release at 10:00 PM on a Saturday night, not at 2:00 PM on a Monday. I’m going to work those hours because I have the flexibility to figure it out.”

Rob Walling:
Do people want some type of idea of how much they should work in a week? Like, “Hey, you can work when you want, but our standard work week is a 40-hour week. And if you need a day off, take a day off because we have that flexible policy.” So it’s like, “If this week needs to be 32, that’s fine. And some weeks it will need to be 48 because we have a deployment, because for whatever, because we’re working an event. Some weeks, it will be 60.”
I was in Malta last week with the TinySeed MicroConf team, and I can’t even count. I don’t know if we worked 60, 70-hour week. It was crazy if you count all the stuff we were doing. And then immediately I tell everyone, “The moment you can take one or two days off, when we’re back, in addition to Thanksgiving,” because Thanksgiving is sometimes fun and sometimes stressful, depending on your family. I was like, “We need to take some time off. Everyone try to carve that out.”
But all that said, I’ve always thought of it as, “You’re flexible. Get your stuff done. Let’s collaborate in essence and be a team that’s driving it forward.” But personally, I’m not saying right or wrong, but this is how I do it. I like to say, “Our work week is a standard 40. In general, try to get 40 hours of work done a week.” Do you think that’s helpful or harmful? Do you think that that is more of a butts in seats attitude of hours worked?

Andrew Berkowitz:
I think guidelines are helpful for people. I think if you have nothing there, it’s hard. So I do like to say… I think a policy I wrote before was essentially, “Yeah, we work an average of 40 hours a week. But there’s going to be some weeks where you put in 50 or 60 hours; there’s going to be some weeks where you put in 20. And the key is, we’re not counting, you’re not counting, none of us are counting. We’re just trying to do the best we can.”
And it’s the same with vacation policy. On a flexible vacation policy, I think people want some guardrails. And so I think the policy I wrote before was, “Most people take about three weeks of unplugged vacation a year. But maybe your daughter’s getting married, you got a special opportunity to go to Indonesia for a two-week wedding. This year, you’re probably going to take a little bit more than that. Another year, you might take a little bit less than that. And again, we’re going to be flexible on it. We’re going to figure out what you need.”
Because really, if you are trying to hire really great people, and you should be trying to hire the best people, you should be thinking about the long game. It’s not how much vacation somebody took this week or this month or this year. It’s how productive are they over their career with the company? And I want somebody to be thinking on multiple-year horizons. I want my employees to be thinking about, I’m going to be here for many years, so what I do this month or this year is not as important as what I do over my career at the company.

Rob Walling:
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And is location and other factor here? ’cause we’ve talked about vacation time and work hours. I realize COVID changed this. But in 2019, if you went to so many companies and said, “Your people can work from anywhere. Would you allow that?” it would’ve just been so many more nos than I think today. But do you factor that in as well as a level of trust of “I don’t care where you are as long as we’re not breaking any state laws.” ’cause if people move to another state, you’re supposed to pay taxes in that state, blah blah blah. Let’s put that stuff aside. But let’s assume they almost become nomads, and they’re kind of moving. Do you factor that in to this flexibility?

Andrew Berkowitz:
I think it’s part of it. I don’t really want to relitigate the work from office, work from home thing again. Because honestly, you can have remote workers with no trust whatsoever. You go on Amazon, you see devices that people can buy that jiggle their mouse every two minutes, so the tracking software that their company has can think that they are sitting at their desk. So companies have any number of ways of tracking their workers who are working at home. So I think they’re kind of separate.
I am obviously a strong believer in remote work. I think it’s great. I think, in general, people can be more productive at home than in an office, over the long haul. But I think that is somewhat separate from trust. And I think for most startup entrepreneurs, you’re not opening an office the first thing you do. Generally speaking, in 2022, you are generally starting remote.

Rob Walling:
Getting an office, in this day and age as a startup, is an antipattern now. I see it when people are like, “So I’m going to raise some money so I can get an office.”And I’m like, “But what? Are you manufacturing hardware device? Warehousing things? Why would you need this?” Yeah, it’s a trip.
So I always hated being in the office. When I was an employee, I hated being in the office five days a week. I hated the nine to five or whatever the numbers were. I hated all this structure. And so when I started companies I said, “We’re not doing that.” So that’s why I started it, was because I wanted to build a company that I wanted to work at. But what you’re saying, I never really factored in. I figured maybe it’ll be more productive, less productive. Maybe I’ll get better people. I don’t know. That’s just the company I want to work at. So that’s why I built it.
You’re coming at it from a different angle though. You’re actually saying, “No, this will allow you to hire and retain better people. You will build a stronger team, and you will have a better company.” Right? Or am I putting words in your mouth?

Andrew Berkowitz:
No, that’s exactly it. Think about what people are looking for right now. Essentially, anybody who works for you can walk out the door and find an equivalent or better job somewhere else because we can all work location-independent now, essentially. So the question is, what are people looking for?
And I think what people are looking for is what we’ve always been looking for as humans, is we want to be part of something. We want to feel like we have a community. We want to feel like we are bought into something. And I think that really comes from the culture you are building and that culture of trust.
So one thing we really haven’t touched on… We’ve talked about the mechanics of how you run, where people work, how they work, what their day looks like. But there’s really a second component to trust, which is the what are you communicating to your company, to your employees, and how are you using transparency to really build that trust?
Because I think there’s also the old school way of doing it is you just tell your employees the minimum that they need to do their job. You don’t tell them what your big company plans are because your fear is that they’re going to run to your competitor and share that information. You don’t tell them the financials because you don’t want them to tell competitors if your numbers look good. Or if your numbers look bad, you don’t want them to immediately go out looking for another job because they see that the company’s in trouble.
But contrast that with what’s a trustful approach? A trustful approach is you share all of that with your employees, so they feel like they are partners in the business. You tell your employees the same thing you would tell your co-founders. And if there’s bad news, if the numbers don’t look good, your employees are going to figure that out eventually. They’re not stupid. But why not tell them that now and let them run through a wall for you to solve that problem.
At my previous company, we had some months that looked pretty bad. The numbers just weren’t adding up. And we didn’t hide that from our employees. We told them. They could see, boy we really need to turn this around or else obviously we’re going to have to lay some people off. And so they immediately dove in, worked harder, looked for ways to save money. They were partners in making things better rather than people who we had to hide things from.

Rob Walling:
But what if you have something that’s maybe a crisis but you believe that it’s temporary? You believe, oh we hit a bump this month, and this happened. Or whoa, we got a big tax bill. Suddenly the company had to pay 300 grand out, and we’re coming real close to not making payroll, but I think we’re going to make it. We’ll be okay. What about that? I realize this is kind of edge-case stuff, but I think, a lot of times, a lot of things in a startup are transient. And they come and go quickly. How do you think about that?

Andrew Berkowitz:
It’s a good question. A CFO I worked with once told me that transparency isn’t necessarily sharing everything. It’s being willing to share everything. So I don’t think you necessarily have to share every potential bump in the road. The problem is, if you don’t share it and then it becomes a thing, then your employee, you’ve essentially busted your trust. Your employees are going to be like, “Oh, you knew about this three months ago. Why didn’t you tell us this?” So you need to be darn sure that it is transient and that you’re going to turn that around. Because if you don’t, then you’ve lost your trust.
And it’s always a challenge to know what should you share and what is too much information that that will get employees spun up unnecessarily? But in general I think share more. You also have to share the context. A lot of employees are not going to have the business context that you do. But being forced to share that context actually creates much more business-literate employees, which is going to be better for your company.
If most employees in most companies don’t know how to make a business case, that manifests in people constantly calling you up and going, “Well, we need to add more head count.” That’s the first thing employees say. “We need to add more head count” because they just see there’s more work that needs to get done, so let’s just add more head count. And so really having them understand the fundamentals of the business and how business works and the levers that you use to make money helps them think through, oh, I see we can’t afford more head count/ we need to be more strategic in terms of what we’re trying to achieve, or something like that. And when employees feel like they’re partners in this, they’ll also push back on you. They’ll turn around and they’ll tell you, “Your roadmap is completely ridiculous. We cannot achieve this with the people we have.” But unless they have the full context, they can’t tell you that.

Rob Walling:
One critique of this that I’ve… I was going to say, “I’ve heard,” but maybe it’s in my own head, is that I do most of this, but I run small companies on purpose. At scale, I really question if this works. This works at 10 people because I’ve done it. I bet it works at 50, maybe at a hundred. At a thousand people, I question. Or 5,000 employees, I question if this level of trust will work because it’s like anything else. The more humans you get involved, the more likely you are to have outliers, both good and bad; the amazing people and then the bad actors who are silent… What is it called? Silent quitting? Quiet quitting that’s happening these days? Which I heard is this big overblown thing and is not happening any more than it used to. But whatever, it’s people just slacking off because they’re remote, and they have the mouse shaker thing you talked about earlier, right?
It’s the same reason that we often hear, “Countries like Denmark have this amazing system, healthcare, whatever it is, and it just works. And why can’t we do that in the US?” And it’s like, “Well, because aren’t there 10 million people in Denmark? And there’s 300 million in the US.” It’s just more complicated. You know what I mean? So I feel like that same, as things scale, (beep) breaks in ways that are really unpredictable.
And any system that I’ve seen scale needs usually more structure. Bigger companies have more structure, I think, because they need it. If I was at a private school with a hundred kids… I was at a public school with 180 kids, growing up. Very little structure. My son goes to a public school now with 2000 kids. And there’s way more structure. And I think it would be absolute chaos if they didn’t. So what do you say to that critique of this idea: this trust works amazing. But yeah, until you grow up?

Andrew Berkowitz:
Well, I think it’s going to look different at every stage. That’s the thing I’ve definitely seen over my career, is every stage of company looks completely different. And so what trust looks like at a two-person company, a 10-person company, a 50-person company is going to be way different than a 5,000-person company. But when you think of a 5,000 person company, it’s really a collection of smaller teams. And each team can still have this same microcosm of trust, even if it doesn’t manifest it the same way for the entire company. So it’s going to be different at whatever size for sure. But think about the team size. And really a lot of building a trustful organization comes down to your managers. And as a startup entrepreneur, it’s you. You’re essentially the manager. And so you’re managing whatever it is: three, ive, 10 people. As you grow and you start getting other managers in, you have to train them in thinking this way too.
And it’s tough because most of us do what has been modeled to us,, and most of us have worked in traditional companies where the company owns your time and the company tells you exactly what to do. So you really need to bring in managers who are a hundred percent bought in on this. I think one of the keys to trust, which really this works in any size company, is that it goes both ways. It’s not just me, as a manager, trust my employee to get their work done, say they’re doing what they’re going to do. It’s also employees really trusting their manager and leadership. It’s really trusting my manager to be super candid with me about what’s going on in the business and how my performance is. We’ve all been in the experience where we go into our quarterly or our annual review and we got our fingers crossed that we get a good review. And that should never happen.
Your manager should be telling you how your performance is weekly or biweekly or whatever your one-on-one schedule is. So part of trust is me, as a manager, being willing to say the hard things. Being willing to say, “Hey, your performance has not been good. You need to pick it up.” Or “Hey, I know we give you a lot of flexibility to set your schedule. You’re not producing. I don’t really care when you work, but you’re not producing, and you’ve got to do that.” So it’s really managers saying hard things, which is hard. Having those hard conversations is hard.

Rob Walling:
That was the hardest part of learning to manage for me. I see management as there’s leadership, and then there’s supervision or management. It’s two components. And the leadership was always like, “I know where I’m going, and I’m excited about it. Anything I do, I’m stoked to do it. Otherwise I’m not doing it.” And so, to get other people stoked about it has never been a challenge for me. The hardest part has always been, man, I’ve got a good team, I really like them. How do I tell this person they’re dropping the ball? And I do it now. But it took me years and years of practice.
And I think that if you’re hiring people who are generally good people who are generally nice as well, and they’re becoming managers, and you’re training them, that might be the number one thing that I try to communicate is, “You have to do this. You just have to learn how to do it.” And if we need to role play it, if we need to buy books, if we need to watch YouTube videos or buy courses or whatever, learn how to give constructive feedback. There is a book called Crucial Conversations that I read. It was recommended to me by Ruben from Seinwell, where I still almost all my good ideas. That book had a real mental shift for me. So I think if you’re listening to this and you’re wondering, how can I get better at that? I really liked it. Andrew, do you have any other resources you use to get better at that?

Andrew Berkowitz:
I think one thing that’s really helped me as a manager is create an atmosphere, in my one-on-ones with employees, where it’s really clear that we are going to spend time in every one-on-one talking about the negative things. So I used to manage a lot of designers. And designers are notoriously stoic, for whatever reason. And so basically in our one-on-ones, I would basically say, “You have to complain about three things in this one-on-one. And one of them has to be something about me.” So I basically force them, “You cannot say nothing.” And they can always come up with something. “You don’t give me enough feedback” or whatever it is. So basically, every time we get into a one-on-one, we’re not just going to talk about happy, positive things. We’re going to talk about the problems.” And some weeks they’re very minor problem.
Some weeks, you have to complain about something like, “Well, I felt like this release came out a little bit too fast, and we should have had a different color of blue.” But then some weeks it’s going to be like, “I think our parental leave policy sucks.” So you need to prime that. And when you start priming that, then I think it becomes easier for you as a manager to realize, okay, well, I’m going to have some too. So we’re going to talk about some things that were negative here too.

Rob Walling:
Touching on a couple points we’ve talked about and some critiques of this approach that I think would be interested in going down is one thing you said is, “You have to hire great people for this to work.” There are only so many great people. Where does everyone else work? If you’re great, are 10% of worldwide…? Or let’s say you’re hiring in the US because and I are in the US. For the sake of this, even though we both hire outside the US.
But just for simplicity, how many potential employees, team members are there in the entire US of working age? Then how many have any skills that maybe you and I could hire for? And then what percentage of those are quote, unquote “great” and would work with this? Is it 10%? Is it 50%? It’s not 90%, right? So where do those people go work? And how do you make sure that, as you scale this, again, can I find 10 great people remote? Probably. Can I find 500? I don’t know. I think, at a certain point, the bell curve kicks in, and a certain percentage of your employees are not great by definition.

Andrew Berkowitz:
I think that’s true. And maybe great is too high a bar. Maybe solidly good with good intentions. I think that fundamentally, up until a few years ago, the world of work was predicated on this theory that, left to their own devices, my employees will goof off. If I don’t police my employees, they will goof off. If I’m not watching them, they won’t work. And also, if I don’t police my employees, they will steal from the company.
That is how we have thought about employment for years and years. And I just think most people are better than that. I think the vast majority of people are not going to steal from the company. The vast majority of people, they want to do good work. And they want to do good work because they want to accelerate their careers. It’s great when somebody is totally bought into your mission and wants to help you build the widgets that you’re building and wants to change the world.
But it’s also okay if they just want to do great work because they want to make their resume better because they want to move up in your company, they want to make more money, they want to grow that way. Either way. And I think most people do. Now, are there bad apples out there? Absolutely. There are people who will try to steal from you. There are people who will goof off and not do the work. But when you build your company policies around the lowest common denominator, you end up punishing everybody, and you end up ultimately punishing your company.
So you need to think, what is the penalty for getting this wrong? For example, if I have a super flexible vacation policy, and somebody books a three-month vacation, what is the penalty for that? Well, for one thing, you’re probably going to fire that person. But is your company out of business? You’ve been embezzled? You haven’t. So just think about, don’t make policies for the lowest common denominator.

Rob Walling:
Speaking of that, we have a flexible vacation policy. Every company I’ve ever run has had one. But I still approve vacation. I know you said earlier, you don’t. You say, “Go talk to your team.” Oftentimes, like if you look at the TinySeed team, there’s five of us. So it’s not, “Go talk to your team.” We are the team. We are just one team. So I still do that. And same on the MicroConf side. There’s five or six of us. And people do come in order to coordinate. We have to coordinate schedules. Like you said, you don’t want everyone out of… No, we have an event that week. Everyone can’t be gone. A few of us have to be here.
So what I’m saying is, even within this realm of trust in building these trustful companies and trustful teams, there is still flexibility because you know said, “You don’t need to run it by me, go to your team” Whereas I’m saying, “No, I still do that.” But I feel like we’re still in the same orbit compared to the bigger momentum of the last 50 or a hundred years of institutionalized work is what you’ve been talking about, which is nine to five and the lack of trust and a bunch of guardrails in place to keep people in line.
One thing you just brought up that I want to touch on is you said, “There will be bad apples.” People embezzling from you is one thing. And I think that’s a very, very… It’s possible; it’s a very small number. People who will slack off, I think, is a larger percentage. Is that just a cost of this approach? And is it just…? What do you call it? It’s collateral damage, right? If you build an amazing team using this approach and you get to the point where you’re at 40, 50 employees and you do have one or two people who slack off, that’s just the price you pay?

Andrew Berkowitz:
I think you’re going to see that whatever kind of company you run. You can have a company where it is strict nine to five, we’re watching you every minute, there’s no trust whatsoever, and you’re still going to have a couple people who are slacking off. Because again, whether somebody is actually being productive when they are sitting at their desk is highly questionable. So I think the beautiful thing about trust is it turns this conversation to productivity and to results. We are really gauging people on what have you produced? And when I hear founders say, “I’m afraid to give people this kind of flexibility ’cause I’m afraid I’m not going to know if they’re working…” If you don’t know if your people are working, you have a problem with understanding what the outputs are for your team. For a developer, I’m pretty clear on what the outputs are. And those outputs are not sitting at your desk from nine to five. Those outputs are pushing bug-free, workable code.
And if I’m hiring a social media manager, I’m pretty clear on what those outputs are. It is managing my social media. So I really don’t care anything other than what you’re producing. And it makes the conversation so much simpler because you stop having these conversations where people say, “Boy, I’m working really hard.” It’s like, “I don’t care how hard you’re working. I care about what you are producing.” It simplifies the whole thing. And you can find your bad apples really fast because they’re not producing.
And the magical thing about this is you can’t hide in this way of working. At a strict nine to five, sit at your desk, show up before the CEO shows up, follow all the policies and procedures, you can hide for a long time. Because you can look really busy for a long time.

Rob Walling:
Even more so at in-person.

Andrew Berkowitz:
Oh yeah.

Rob Walling:
Have you ever been in an office with cubes where it’s like, “Well, everyone had to show up at nine, and we leave at six, and we have an hour lunch,” And there’s five people in my department who were doing jack (beep) all day, but I knew it because I was on their team and I’m like, “I’m shipping five times more software than this person.” But they showed up, and so no one asked questions. Whereas if we had been remote… To your point, Tracy Osborne is also the biggest fan of remote. She always says, “Just because you show up at the office doesn’t mean you’re actually working.”

Andrew Berkowitz:
Yeah. You got to know what your outputs look like. And if you don’t know that, if you’re not sure how much a senior developer should produce in a week or a month, that’s something you got to get calibrated on because you just don’t know what your outputs are supposed to look like. Similarly, you can hide a lot as a leader if you’re not forced to stand up in front of your company every month and show the financials.
We’ve heard so many stories of like, “Oh, I was surprised that they just laid off a thousand people. Because as far as we heard, everything was going great.” So being forced to stand up in front of your company and tell them everything, it really makes that conversation a lot simpler. People really hate uncertainty. And people will write their own stories. So if you are not transparent with your employees and telling them what’s really going on, they will write their own stories. And you’ll lose far more people who just imagine that things are terrible than just telling the answer.
One of the great things I learned from a previous co-founder was he loved to stand up in front of the company and answer hard questions. And so we’d do a company meeting every couple weeks. And we’d have an anonymous form where people could just, in real time, submit whatever questions they had. And it was tough stuff. It was, “What is happening with our strategy? This makes no sense.” Or “Why don’t we have more diversity?” Or really hard questions. And he just loved to stand up and answer those questions because it built trust with the team. They knew we can ask whatever we want to ask, and they’re not keeping secrets from us. And it turns out that people don’t necessarily need to love your answer. They just need to know that you’re listening and that you have an answer.

Rob Walling:
And is one of the reasons that you built Suggestion Ox, at suggestionox.com, because you wanted people to be able to anonymously submit feedback to their teams and their managers and such?

Andrew Berkowitz:
Yeah, I think, as we talked about earlier, everybody wants to build a company culture where everybody can be a hundred percent candid all the time and say the hard things and ask the hard questions. But the reality is not everybody is willing to do that. And a lot of employees have been burned. A lot of employees have been in a company where you asked a hard question, and you got fired. It takes time to build that trust. So that’s why we built that particular product, is we just know people need psychological safety to say the hard things, ask the hard things. And as a manager, you need to know it. If there’s a problem, you need to know it.

Rob Walling:
Folks want to keep up with you and see the subsequent content you’re creating around this. I hear a book on the horizon. They can head to Twitter. And you are Andrew Berkowitz, just like it sounds, or suggestionox.com. Thanks so much for joining me today, sir.

Andrew Berkowitz:
Thanks for having me.

Rob Walling:
Thanks again to Andrew for coming on the show. Thank you for listening. I hope you enjoyed that talk. I enjoyed the spirited discussion and the ability to just bat ideas back and forth and talk that topic through. I hope you enjoyed it. This is Rob Walling, signing off from episode 639.

Rob Walling:
Welcome back to another episode of Startups For the Rest of Us. I’m Rob Walling, and today I welcome Justin Vincent on the show. We talk a bit about how to generate startup ideas, plus look at eight ideas he brings to the show that you can steal. Justin and I had a great time talking through these ideas. He had sourced them from a few mastermind friends of his, as well as his own brand. He has a tendency for coming up with ideas. I really enjoyed our conversation. If you don’t know of Justin, he is the co-host of the TechZing Podcast, and he also, last time he was on this show, was running nugget.one, which is a community for early stage founders, as well as bunch of business ideas, 4000 he tells me. I thought it was 800, but 4000 different business ideas that he had gathered over a few years. He is no longer focused on that. He’s moved on to a new idea, which we will talk about in the show, so let’s dive right into our conversation about generating startup ideas.
I want to ask you about coming up with startup ideas because A, it’s something that you have done a lot. I mean, I heard you do it on TechZing, your podcast, many times coming up with ideas and even just bringing new ideas, talking through them with your co-hots. But I also watched you start Nugget, nugget.one, which we’ve talked about here on the show before, where you didn’t generate all these ideas yourself, but you did bring them in, evaluate them, and kind of churn them through, and there’s 780 of them or something like that.

Justin Vincent:
4000.

Rob Walling:
Are there? Oh, my gosh. I was looking at the premium ones. So 4000, holy moly.

Justin Vincent:
Yeah. That’s right.

Rob Walling:
And you have generously allowed me to talk about some of them in the YouTube series that I’m doing. About every six weeks, eight weeks, I do a, here are some SaaS ideas to get your mind going basically. And so the YouTube channel, I’ll start showing some of those. But really today I want to talk about A, your process for coming up with ideas, and then you had some ideas you wanted to bring to the show, that you wanted to talk to listeners about.

Justin Vincent:
Yeah. So since we set this up, I’ve just been thinking through stuff. I’ve asked a couple of people for some ideas. And let’s see, I’ve got nine ideas for you. I’ve got two ideas that I think would be good for solo boot strappers because there’s a specific kind of context. I think your context really matters about the idea that you pick. And that’s actually kind of a big part of why I started Nugget in the first place, because I realized I was really bad at picking ideas, so I wanted to just do that thing where I got a chance to test it out many, many, many times. And ultimately, you know what I’ve learned over 25 years? I’ve learned that I need to do a to-do app because that’s where I’m at. That makes the most sense for me. And it’s finally, I’m going to actually build something very good that’s very useful. There’s so many different lessons that you learn as you execute ideas and realize things.
For example, building on Twitter or building on other platforms, it’s like, “Okay, these guys can shift the ground from under my feet.” That’s a really high risk. So okay, I’m going to pick ideas where I don’t build on other people’s platforms, or other things that I learned like with Light, the mobile delivery app. No, don’t pick an idea where you have to manage loads of people because that’s really painful. Just do something that … So ultimately, it just boils down to, okay, for me, the best thing for me to be working on is something that I can just totally do by myself. I can be the sort of one man wrecking crew, and I can bring really high value to people, and I can work with customers and develop features that they like. That’s my sweet spot. Might be different for other people.
So anyway, that was a little side tangent there. So I’ve got two solo boot strapper ideas. I’ve got four ambitious boot strapper ideas for you. I’ve got two VC ideas for you. And I’ve got one absolutely out there idea.

Rob Walling:
All right. Shall we start?

Justin Vincent:
Yeah, please do. Yeah, let’s go for it. Okay. Let’s go through it in that order, so we’ll do first of all … And as I go through them, let’s do some banter as well. So if you just give me your instant impression, then we’ll have a quick little talk about what a go to market might be, what the downsides and upsides might be. Okay, first one, this was something that I actually had a look at and had a go at doing a few years ago, maybe four or five years ago, transcription for team meetings. I did pretty well, I file dated it, I got it out there on a few different sites and I did really well at that first stage of getting consumer interest. But when I actually went to really build it, it didn’t match the expectations. And the main reason is because transcription for meetings is a really good thing to have. You want to be able to take notes. You want to turn them into text as you’re having a call like this or just a regular Skype call with your coworkers.
The issue is that the AI was just not good enough to transcribe audio that had background noise, or had crappy phone connections, or whatever. But now there’s a new game in town, OpenAI Whisper. And I’ll send you a little link to this, but basically it’s completely open and available to use. It’s un-restrictive software. And the key point here is it’s finally good enough to transcribe really bad phone audio quality into good meetings. And so people might say, “Okay, there’s going to be a lot of competition in this space,” and this is something else we should probably touch on as well. Competition doesn’t matter in my opinion when you’re talking about the beginning of seeding something. I mean, look at you and Drip. I mean, you went into a space that had an insane amount of competition, and you just executed and executed, and all of a sudden, you built a mountain just as big as the other people’s mountain. That’s the point.
So actually, competition is great because it means there’s validated market here. So what you can do is you can use a system like this and you could build a custom SaaS app for teams to share and search their notes. They can maybe comment on transcriptions. They can share transcriptions, export them. It could be a plug in at the computer level that plugged into Zoom, or Slack, or many different things. Or you could plug in at the operating system level and just start tracking the audio, the audio stream, and start transcribing from there. That’s the first one.

Rob Walling:
All right. So my first question to you is: Who needs transcriptions of their meetings? And the reason I ask is I have this thing called the Five PM Framework, where it’s five Ps and one M. It’s the problem, the purchaser, the pricing model, the market, product market fit, or product founder fit, and the pain to validate it. And it’s a mental framework of thinking through. It’s idea evaluation, just a checklist of a bunch of questions and stuff. I’ve talked about it eight episodes ago or whatever. And they’re in that order, it’s problems, number one, purchaser, number two, blah, blah, blah.
I don’t have this problem, and so I’m wondering who does. I’m not saying no one does. I know someone does. But why is it that I run two teams of however big they are, six and five? And we have team meetings and we just never record them. We either take notes, or we remember, or whatever people put on their to-do list. So who does have this need?

Justin Vincent:
That’s a great question. And I think it’s about notes and getting it into … When you just take notes, it’s kind of a bit limited because you’re in the middle of … You’re thinking about two things at the same time. You’re thinking about taking the note, capturing what they just said, and you’re thinking about what they’re saying right now as you’re writing the note, so you’re a little bit bifurcated mentally. So I would imagine that for the person taking the notes, it would be super helpful to just have this stream that they could just really quickly type in the keywords, just quickly go through it, and just go, “Okay, get that out into the bullets,” and then also be more present in the meeting. I think that would be my answer.

Rob Walling:
So your ideal customer, or in this case, the purchaser would be someone who works at a company where they tend to take a lot of notes in their meetings. And again, that’s not me. That’s not our company. I don’t know why. We’ll have meetings and it’s like, “Okay, so now we know there’s an action item.” We assign it to Rob. It goes in my Trello board right then. And then we sent it to Tracy, it goes into whatever her to-do list app is. So yeah, there’s really relatively few. I guess, you know what the difference is, those are update meetings and planning meetings. Brainstorming meetings, we do take notes. That’s the difference. So it’s when we’re trying to come up with this whole new concept for a new type of MicroConf event. We run through a bunch of stuff. We put it in Notion, actually, and we just have bullets and we’re moving them around and blah, blah, blah. So maybe is that the case where this works better?

Justin Vincent:
I mean, I think so. I mean, I’ve had hundreds of those kind of brainstorming kind of meetings. And you write stuff on white boards, and you say a lot of stuff, and a lot of it gets lots. And then a couple of days later you’re like, “What was that thing I said?” And you kind of look for it, but the white boards erased. The notes are gone. It’s like having an undo button.

Rob Walling:
Yeah, where you can go back to it. Yeah. So I can imagine producer Zander, producer Ron and I are having a brainstorming meeting, and we record it, and I can send it to rev.com for a buck a minute or 45, whatever, 75 cents a minute. Or I could send it through … Castos has AI generated transcription built into it for nothing, 10 cents a minute or whatever. And there’s just some services. So what is the idea that you have, how is it specifically good for meetings? What is built on top of it that is more than just me taking an audio and getting a transcript?

Justin Vincent:
Let’s just go back to the previous question you asked. I could do this other thing. Why should you use your product? That as a basic reason to stop to someone doing a product doesn’t make any sense to me because new products come out all the time. Why should someone use Drip when they can use Constant Contact? You know what I mean?

Rob Walling:
Drip was a better product. I mean, it was substantially better. It was noticeably better.

Justin Vincent:
So it would obviously be painful to send in … It’s annoying to have to like … Okay, you need to extract that audio into a file in some way. You need to send it. If it’s a purpose built tool, then it’s going to basically automatically do all that stuff for you. You don’t have to think about it. It’s operating like the NSA. It’s like-

Rob Walling:
Actually, have you ever jumped in a Zoom meeting, and then the person shows up, and then their AI bot jumps in? And I think that’s what it … I don’t even know what it’s doing. I think it’s recording and transcribing. Yeah.

Justin Vincent:
I don’t know. I don’t know.

Rob Walling:
There are sales tools that do this, where they will transcribe and then analyze how often the person says, “Um,” or how often, which keywords when used a lot, tend to lead to sales or whatever. So yeah, this is interesting.

Justin Vincent:
But it’s also about the character of the app. It’s about who you are as an entrepreneur creating the app and how you connect with your audience. That’s a huge part of it as well, so you can build a really interesting and strong audience just from the character that you are, how you promote it, the reasons why you do it, so all that plays into it as well. This is where I was talking about why I love the fact that you’re kind of passion driven about the market comp stuff is it’s not just about executing a business. It’s about you, you the founder are in the middle of that business, and that’s a huge part of why it’s going to succeed or fail, product founder fit, just like you said.

Rob Walling:
And specifically because you said these two ideas, the first two, are for solo boot strappers. These are more lifestyle boot strappers. This is not a multi million dollar ideas as you’ve presented it. It could feasibly be, but probably not. It’s more like a: Can I get this to 10K a month? Can I get it to 20K a month? Right? And for that, this could be it. And so for someone listening to this, if I were thinking about a next step is I would try to talk to as many people as possible to find out who has this problem, what they’ve done to solve that problem, much like out of The Mom Test. You have this problem. What else have you done? And if they haven’t done anything, maybe it’s not worth it. How much would they pay for it? These are the conversations I’d be looking at to have next.

Justin Vincent:
That’s true. Yeah, okay, so let’s move on to the next one. We’ll count that one as transcription for team meetings, idea number one.

Rob Walling:
Right.

Justin Vincent:
So number two, this comes from a TechZing listener on the TechZing Discord, Will Whit, online time capsule. And this again is for solo boot strappers, so all the caveats that we just said apply to this. So basically, online time capsule, upload files that get encrypted and give them a release date that would automatically trigger de-encryption at a point in time, days, months, years, or decades into the future. You could release it to a specific email address or you could release it to a public release stream on the main site. So on a public page, it shows a list of upcoming releases and it allows people to specify if the title is visible for the release or not. So the key point here is this could be useful for journalists. It could be useful for promotion. It could be useful for PR, or it could be useful for your family for stuff [inaudible 00:12:27].

Rob Walling:
Fascinating. And so it could also send a Tweet, feasibly. That could be the release of it. Right?

Justin Vincent:
Yes, it could send a tweet, yeah. Absolutely.

Rob Walling:
Or a Facebook post, or post to Reddit, or post to Hacker News. Sorry. I’m just [inaudible 00:12:40].

Justin Vincent:
So basically, it’s fully encrypted data release on a time. But it’s different to a dead man’s switch. It’s different to a dead man’s switch.

Rob Walling:
Yes, because this is based on time rather than a particular event. It’s not like when I do … Because I actually thought I have some information I want to relay to my family when I kick the bucket, but I don’t particularly want to give it to them now. And I’m wondering how to do that in a way that is easy. But this isn’t that, that’s the event, in the event that I die. This is more like a date based thing. Right?

Justin Vincent:
To do what you want to do, there’s a site called deadmansswitch.com, which would do what you want to do. But then this becomes super interesting idea. Who is the person behind this? Do I trust them? Is this really going to be released in 50 years?

Rob Walling:
Will it be around? I mean, that’s the other thing. As a solopreneur, how many of these apps do we see built and then gone within six months because they didn’t generate enough revenue? And so yeah, if I book it for five years. So what problem does this solve? The one thing you named that is someone who … Because I also can’t see myself using this, but maybe I’m not thinking creatively enough. So I’m wondering who would. Would a journalist? Let’s say I’m under embargo, which means I get a story, I can’t release the story until 8:00 AM on Thursday. Normally, you go into your CMS, you schedule it to go live 8:00 AM on Thursday on your WordPress instance or whatever. How do you think about this working for journalists?

Justin Vincent:
I mean, I didn’t until just this second, but-

Rob Walling:
Until you said it. Yeah. Or anyone else. Who has the problem?

Justin Vincent:
I think the point is it’s about … I mean, you could really use this for nefarious means. Couldn’t you? You could release different information bombs. You could use it in a bad way just as much as you could use it in a good way.

Rob Walling:
Absolutely. Especially can it be anonymous? We haven’t talked about that.

Justin Vincent:
Yeah. It could be like with WikiLeaks kind of usage.

Rob Walling:
When you first started saying that, I was like, “Is this a WikiLeaks link?”

Justin Vincent:
Because the other point is, other point with the ideas that I’ve come up with here, we could’ve come up with really sensible ideas. I could’ve just said, “Okay, build a CRM,” because essentially, if you want to make money and you want to guarantee to make money, go into a huge market, compete with other people, and just build something that people are already using and this definitely makes money, like a CRM. Just take your own niche version of it. But the problem is that’s kind of boring to talk about on a show.

Rob Walling:
It’s boring and it’s also very, the table stakes now are very, very high. To build Drip today, years of development as a solo developer that you cannot get anyone to sign up, so those are amazing markets if you have funding, or if you have multiple people working on it. But yes, these ideas are certainly less boring than just talking about that. So yeah, let’s look at our next. You have three or four for the more ambitious boot strappers.

Justin Vincent:
I’ve got four ambitious boot straps, four ambitious boot straps. This next one is, a lot of you talk about my process. So for me, a lot of ideas that I come up with are just as I’m walking around and it just seems like, “Huh, that should be the solution for that problem.” So this one is an ambitious boot strapper project, and it is pest control using drones. So where I live in this big complex, there are seagulls pooping and congregating on our roofs.
And the complex owners have spent tens of thousands on a laser system to get them away, and those lasers are really not very good, whereas what you could do is you could simply just put a drone that parked on the roof. It has a little parking spot, and when it sees a bird, using AI, it just sort of flies up and sort of acts aggressively and it chases it off. And the innovations for that are, it would need AI to check, to sort of decide when birds were there. It would need to be kind of quiet, and it maybe could emit some kind of noise to annoy birds or something like that. But that I think is an interesting, ambitious bootstrap.
Oh, the other thing is you, just generally speaking, you could use drones for pest control in many ways. So you could use it in a field to get rid of crows that were eating crops. You could use it to get rid of, I don’t know, foxes, or rabbits, or whatever, many different applications.

Rob Walling:
Interesting, this feels less like a boot strapper idea and more like something I would raise funding for. How would you bootstrap this?

Justin Vincent:
Well, because you’ve got to many builder kit drones these days, it’s not super expensive to do that. You’ve got so much access to AI stuff, data modeling and stuff like that. So I think it’ll probably take more than one person. I think it could take a couple of people. Look, by default, if something is an ambitious bootstrap, it can be a VC. It can be VC funded. But the problem with VC funding is, as you know, you gradually lose agency and control of your business, and use lose more and more percentage of it, and you end up working for someone else. So what would be nice if you were going to do something like this would be to try not to get into that position.

Rob Walling:
So obviously, the problem is obvious. What you’re saying is pest control, I used to life in Temple City, and there were these parrots. You know the parrots. I’m sure you’ve heard them. Yeah, they’re very loud.

Justin Vincent:
Yeah. We’ve got them in Pasadena. Yeah.

Rob Walling:
Yeah. The rumor is they escaped from somewhere at some pet arboretum at some point, and they bred. And they’re these wild parrots. They’re so obnoxious. So I think the problem is pretty obvious, and you’re saying this is not a hardware play. You don’t make your own drones. It’s a software play. Is that right?

Justin Vincent:
I’m saying it’s a whole, it’s a holistic play. Obviously, as something scales, you get better. You bring more stuff in house. I mean, that’s what Elon Musk shows us. If he’s proven anything, over time to become more and more successful, bring more stuff in house. But yeah, in the first place, you buy it, you don’t build, so you sort of cobble the pieces together, and then you just work out. Because when you get deep into a problem, like the list problem is I’m doing this text editor thing, the deeper you get into it, the more revelations you have. Holy crap, if I do this kind of thing, I could make it amazing because of these little granular tweaks. Well, that’s what any startup’s like. And I think this would be like that. The components would be the hardware. You’d need to get the good hardware to do it. You’d need to have a good AI to do it. And there’s also, there’s a charging station and just it needs to be quite autonomous. That’s another kind of point about it.

Rob Walling:
That’s a thing. I agree. I see the money in this one not being in selling to individual apartment complexes, but in going to facilities, like let’s say a campus, like Facebook campus in … Is it San Jose, or Campbell, or wherever they are? And they have all these buildings, and you know that they have bird problems and pest problems and whatever, and selling to … Start with them because that’s a big sale. But you kind of get your proof of concept going and then you figure out people. I’m even thinking whenever I’m around Europe, Italy, or France, or whatever, there’s just all these pigeons everywhere. And they have all these spikes that look ridiculous and don’t actually … The pigeons still land everywhere.

Justin Vincent:
Exactly.

Rob Walling:
So there’s in those public squares and all that.

Justin Vincent:
It could definitely be a VC. I mean, it could definitely be a VC idea grow at a very fast pace and it could be a massive business. And it’s not just the birds thing. It’s also farming. For organic farming, think about that. One of the hardest things about organic farming is not using pesticides or whatever, I don’t know, whatever chemicals they use to keep things away.

Rob Walling:
Yeah. This one’s interesting. I do think if I were to do it, I would raise money right from the start. I would not try to bootstrap it. Not saying you couldn’t, I just think when you bootstrap you go slower because money in your personal life saves you hours, money in your business saves you years. And so this is one that is probably inevitably going to happen I think. This is just going to be a thing, so I need to get there faster. How fast can I get there by raising money right?

Justin Vincent:
Just to what you just said, this is inevitably going to be a thing. I mean, that is actually, that’s true with pretty much any idea. If it’s worth any salt, it’s going to be a thing, so just another reason why I get kind of irritated when people say, “Oh, you can’t do it because of this and because of that.” Okay, next one, prerecorded live interviews. Here’s an example of it. I think it could be used in multiple ways. This one comes from, by the way, comes from Jeremy Nunan, who you matched me with in my mastermind group, who I really appreciate. I’ve got two great people in my mastermind group, Chas and Jeremy.

Rob Walling:
Awesome. MicroConfmasterminds.com.

Justin Vincent:
Yeah. So screening job applicants with prerecorded questions, but getting live answers. So the key point here is applicants go to a page, you can talk to them by text, or you can talk to them by video in a prerecorded way. And then ask them questions, and then they respond to the interview, but they don’t really have time to go away and Google it or whatever, so you can get their sort of moment of thinking answers, but you can do it at scale. So think about you could really scale the applicant inbox review process. You can get way more than just a resume. For example, let’s say you wanted to create a really deep pre qualifying applicant funnel for developers. The first one could be simple resume level, just ask some basic questions. Then the next one gets deeper on technical stuff. And so you can get those higher quality candidates in an automated, scaled way. And there’s a lot of different customers for this. Customers could be companies. Customers could be agencies, many different customers.

Rob Walling:
That’s interesting. So you’re saying me as the interviewer, I would pre record five different questions of, tell me about yourself. What are your biggest strengths? There would be better questions than that. But I record those individually, and then they would be in an interface like QuickTime, or Loom. I mean, it’s obviously a built interface, but they basically … Or almost like a Zoom thing, where it comes up.

Justin Vincent:
Yeah.

Rob Walling:
That’s interesting.

Justin Vincent:
And it’s live, and so the other thing is, by the time the … Because think about how much time is wasted just getting to the right people. So by the time your staff, who are your really good people who work for you, who are expensive, by the time they get to see anyone, they’ve got a show reel to look at. They’ve got a show reel. So that just helps everyone in every way of that hiring process.

Rob Walling:
Yeah. There’s something I like about this and something I don’t like about it. And the thing I really like about it is the efficiency, like you said, and I love asynch, oh, my gosh. I want my whole life. I want my whole life. I wish you and I could record this podcast asynch because just finding time on both of our calendars, I guess you and I are probably an exception because we actually have pretty open calendars. But a lot of times, I’ll go to try to record a podcast and it’s like, “Well, the next time we can do it with a busy person is a month from now.” And it’s like, “I’d really like asynch.” So I like those things.
Couple things I struggle with, with this, is I think as a candidate, I might feel like this is the dystopian future, 1984, cattle call, really couldn’t even take the time to chat with me. There’s always the charitable view of technology, and the uncharitable interpretation is like, “Well, if big tech just put me through a process, inhuman,” so I think that some people could feel that way.

Justin Vincent:
Let me just say, so that could be set up with expectations. That could be sort of kind of managed through expectations, and even the person asking the question could say that. And by the way, just so that everyone knows, on every idea I’m personally undecided, every point, until I see it’s successful. So I’m not pitching it as I definitely believe in every idea, I don’t know. I’m in the same position as you. I’m sort of like, “Yeah.” But I think it’s interesting.

Rob Walling:
Oh, totally. Well, that’s why it’s helpful for us to play the opposite side. I mean, sometimes on this podcast, I will literally play devil’s advocate, where I am saying things that I don’t agree with because if we both agree, it’s not that interesting.

Justin Vincent:
Right, right. Yeah.

Rob Walling:
So I’m coming up … I’ll come up with a pro, you can come up with a con. I don’t have an issue with that. I know that when we’ve tried to have developers record a 60 second video of just tell us. And we’ll get very few applicants because developers don’t want to. Other roles, like sales, customer success people who are more used to being on camera don’t have as much of an issue with it. So I do think there’ll be a hurdle, like a hurdle, and maybe this is better for certain roles.

Justin Vincent:
Maybe it’s just audio.

Rob Walling:
That might be even better too because I have another thing I heard, and then we’ll move off. I don’t want to spend too much time on this. But someone had a hiring process where they did require video, and someone brought up the idea of diversity, and of someone not wanting … That some folks shy away because it’s like, “Well, when they see me on camera, if I’m not a cis white male, then maybe I’m lower on … ” Right? So but audio could potentially get around some of that, although you’d still have gender stuff. Whatever, yeah. I don’t think we need to go too far into this, so interesting idea. What’s the next one?

Justin Vincent:
Okay, next one. So we’ve had to interesting, that’s all I actually want. I just want to see if you find them interesting. That’s the main point for me. Okay, so number three, this is actually for me, this is something that I’ve posted in Nugget. It’s a problem that I had thought about. I never really got into it because I think it will require a significant amount of work, but I do think that there’s a lot of potential here. A special diet builder, okay, so special diet builder. So step one, scrape every food recipe on the internet. Step two, create an interface to build any diet you want, gluten free, vegan, nut free, paleo. Step three, present recipes in a unified format with a link to the original. You can sell this to nutritionists, to the general public, medical professionals. Or you could create multiple landing pages and do an ad or an affiliate play. But a key point is, with a food framework, if you just limit to a specific food framework, it’s much easier to stick to an eating and diet plan.

Rob Walling:
I’m much more bearish on this one. See, I don’t like B to C stuff. You need buckets of money to churn as high, blah, blah, blah. Would copyright be an issue with this, or scraping all the stuff? And then even if you link to it. But you’re selling it to them, yeah.

Justin Vincent:
Well, you’re selling it to nutritionists, and you could sell it to nutritionists. You could sell it to … I mean, there’s a consumer aspect, which you could sell it to consumers. But probably another aspect would be to sell it to businesses, so it’s both.

Rob Walling:
All right. I’m just going to squint my eyes at you and say, “What’s the next one?” I don’t like this one. That’s my least favorite of all.

Justin Vincent:
Okay, yeah.

Rob Walling:
This one and online time capsule, they’re together at the bottom of the list for me.

Justin Vincent:
Okay, I’ll give you online time … Okay, so this one I just thought of. This is my most recent one, so I’ll just read through the spiel and then we’ll talk about it. Casting director talent finder, this is one of many possible ideas that there are for things like Midjourney and DALL·E2. But it’s just something I’ve been thinking about a lot recently because there’s so much of it out there. I’ve seen some blogs recently where they imagine what cartoon characters would look like in real life by working them up in DALL-E or Stable Diffusion. And the end result looked like real people, real and very well done. And I’ve also seen how easy it is to create people’s faces based on a description.
So what I was thinking is you could build a system for a casting director talent finder, like a SaaS solution. Essentially, it would have two steps. One, generate the face that you are ideally interested in for your project. So you go through your whole project and you develop all the faces. And then step two, basically, you use facial recognition to search through IMDB and all the different talent websites where actors are available, and then sort of pull them back. So some notes about this, the movie business is all about the look. That’s the primary driver of talent search. This would increase the number of close matches for casting directors significantly and save them an insane amount of time. It’s a nice B to B revenue model. It could be sold as two separate products or plans. Number one, the ability to build the face, and number two, the ability to find the actors. The key point here is that it could save hours of legwork and get better results.

Rob Walling:
That’s super interesting. This is what I love honestly about running TinySeed, is that we get these applicants and I’m able to look through just ideas I would never even know about or think about, and this idea is one I would not know about or think about, but I like the use of just the roundabout, it’s the look to AI, to reverse image search is really what it is, which I think is great. So here’s where I like this one because it’s fun and it would be the validating this is not that hard. Right? If I were to try to, next step from this, I need to talk to 20, 30 casting directors. I need to say, “If we built this, does this make sense?” And find out. Is this not within their process? Do they not start from the look? Do half casting directors don’t give a crap about the look, and they give a crap about something else? That’s what I want to know because I know so little about this industry and this process, that I want to know how do they actually do it across 20, 30 different casting directors.

Justin Vincent:
They must just have to look through thousands of photos.

Rob Walling:
Maybe. I don’t know. I don’t know how they do it, and so I’d want to find out, and not just from one because I guarantee there’s … Is it casting directors? Or is it … Yeah, no, I guess that’s what it is. Right? It is, that’s the right role.

Justin Vincent:
But it could be casting directors, but also, it’s the other people, like the main director and that kind of stuff. So it could sort of create this central hub around the casting of it. You could have a dashboard for the director, for the producers, and then I think there’s something there. This could be a VC kind of thing, or it could be a bootstrap kind of thing as well.

Rob Walling:
Yeah, it’s interesting. All right. What’s next?

Justin Vincent:
Okay, so we’re onto the VC ideas now. I’ve got two of them here, one of them from Chas, who’s also in my mastermind that you set up, and then another one that I just thought of. And I genuinely have no idea if this is any good, or this is a complete pile of crap, I just don’t know. But what I see is, I see VCs in the media kind of complaining about stuff like founders having parties, stuff like that. So I had an idea to create a cash burn alert for VCs. So you use Plate to plug into all the startups’ accounts, look at the spending heuristics. If a huge party spent on ridiculous stuff happens, alert the VC. VCs can offer potentially better terms on the deal if you’re prepared to just at least have this basic monitoring.

Rob Walling:
Oh, man. I love your stuff. This is so funny. So this is monitoring. It’s like, “I’m going to invest and I’ll give you an extra million dollar of your valuation if you allow us to … ” [inaudible 00:30:30].

Justin Vincent:
If I could just check that you’re not being a total child with the money that I give you.

Rob Walling:
Oh, you’re killing me. So yeah, that’s interesting. So you can get alerts, that’s the key thing.

Justin Vincent:
Yeah, it’s alerts.

Rob Walling:
Because obviously, VCs have the information right, so they can look at your books. But do they want to every quarter comb through it and look at every expense? No, they don’t. And so you’re saying you’d set up some type of way to look.

Justin Vincent:
You’d have good heuristics, but just say, “Eh, eh.” They hired a yacht with a hot tub.

Rob Walling:
Oh, my gosh. How would it know that though? It would just see a big expense. It could be the office rent, or it could be payroll, or it could be a one time expense to invest [inaudible 00:31:12]?

Justin Vincent:
That’s implementational details. That’s not my problem.

Rob Walling:
Oh, man. You hand waver. Dude. Okay. So I’m just going to shrug my shoulders and say, “Hey, it’s VC backable idea.” I could see it. I’ve seen weirder ideas backed by venture funding.

Justin Vincent:
This could help de-risk investment potentially, if anyone was prepared to [inaudible 00:31:33].

Rob Walling:
It’s pretty rare, honestly, the big launch parties and the yachts. It is so rare, so few companies do it, so that’s where I’m a little bit like … I really like it. All right. What’s the next one?

Justin Vincent:
This next one is, I’m afraid this isn’t funny. This is Chas’s. This is really serious. This is a proper business. It’s the least fun of all the ones we had, but it’s probably the most serious that you could actually turn into something big. Basically, ETL data pipeline modeling tool, a no code tool that can ingest and transform huge amounts of data and export it in a transform format to other systems with parallel processing, IE, it’s a pipe between two systems. It kind of sounds like Zapier, but that’s actually different because that just works one event, one line at a time. This is for bulk data movement, so think Yahoo pipes, but industrial scale.
So examples, let’s say you have to migrate one petabyte database from Postgres to a different structure, no SQL database, rather than writing scripts and spinning up lots of infrastructure, you just point this tool at it and it will auto scale that massive data slurp and save on developer time because that’s what normally happens with these kind of situations. You just have to create a whole bunch of stuff that you never use again. So ETL extraction transform the load, and it is really slow waiting for big data to move around the place, really, really slow. I think that a lot of companies, just to pick something out, Facebook or whatever, just a tool that could just really scale and make it fast to move massive amounts of data around could be very, very helpful.

Rob Walling:
This feels like an almost boot strappable business, at least to start with because you could built it on a smaller scale. I mean, first thing I would do as a founder is I would want to find out. What does the landscape look like? Not to say, “Oh, someone’s doing this, so I’m not going to build it.” That’s not what I’m saying. It’s: Who’s doing it? Who’s adjacent to this? How are they doing it? What’s working for them? What’s not? What’s my angle to get in? How am I going to be better, or different, or something? Right? And this is a piece of software that maybe you start with it only does MySQL to Postgres. What are the biggest, what are the most common, what’s the single most common database migration today from one to another? If I were to boot strap it, if I were to venture, you build 10 at once because you have 10 million in the bank. But if I were to take it slow, it’s like a lot of people moving from MySQL to Postgres, let’s see how we do that. I like your no-

Justin Vincent:
No code.

Rob Walling:
No code. Yeah, no code, sorry. And I see a need for this if it doesn’t already … If the problem is not already solved really well, this is a fascinating idea, and I could see it both being boot strappable and VC because you could … This is one that where you could make enough money to make it make sense, even at a small scale, versus some of the other ideas. A lot of VC ideas, they don’t work at small scale. That’s the point of them. Right? This is a dev toolkit, but also the whole service to do it as well.

Justin Vincent:
It’s the service that … But let me just, I’ll play a little devil’s advocate about this one. I was sort of thinking about it because I’ve done these kind of things a lot as a developer of 25 years building big systems. One issue that I was thinking is, okay, you make the middle part really fast, so you scale up, you do parallel processing, but you’re kind of limited by the input and the output points. If that database you’re slurping from is slow, or if the database you’re inputting to is slow, that’s sort of your limitation. So you could make it really fast in the middle, the transform stuff, but you might be a big limited on both ends by what’s already there. But maybe that’s fine, it’s just still this point of I think a lot of cases are, it’s slow in the middle. It’s the transform stuff. It’s transforming so many petabytes, and you have to build parallel system that transforms that and keeps it all in order and stuff.

Rob Walling:
All right. So you’ve brought eight ideas, thanks so much, two solopreneur, four ambitious boot strapper, and two VC. Although, I think you could kind of bootstrap one of them. But do we want to go high and low, top one or two favorites? Do you have favorites? Or are you just agnostic to all of them? Because see, I have opinions. Right? That’s what I bring to this, is through my lens, the ones I think that are most interesting, through my lens of boring because I like boring businesses. Right?

Justin Vincent:
That’s a really good point that you bring up, because of thinking through 4000 ideas, I am agnostic to all ideas. And I believe that any idea can be successful until it’s proven otherwise. And that’s kind of why I believe in the whole fail fast concept. Just go out there and test it and speak to people, and just fail fast and move through them as quickly as possible.

Rob Walling:
Yeah, awesome. Do you mind if I do my top two?

Justin Vincent:
Please do, yeah.

Rob Walling:
So my favorites of this, I mean, obviously, I really like the ETL data transfer tool because it’s technical. It’s just nerdy enough, it’s just boring enough, and I’m sure it solves a problem someone has, so I really dig that one. I also, that casting director talent finder is just fun and interesting. And I’m not saying I would go out and build it, and I personally wouldn’t even be the person to build it. But if someone is in that sphere at all, where you’re around filmmakers, casting directors, the movie industry, it’s just a fascinating use of a new technology, and it’s that get there early. Right? One of the advantages I talk about in startups is getting there early, and this could potentially be something where you could get there early. There’s obvious headwinds, obvious behavior changes, blah, blah, blah. We could talk through the negatives, but I dig that one quite a bit.
For me, the funniest one was the cash burn alert for VCs. I don’t know why that tickled me, it’s hilarious because it’s so out there, and I’m going to throw that. And then probably my least favorite, the ones that I don’t quite understand the … I think I just don’t understand the problem they solve is the recipes, it’s B to C, and the online time capsule one, where even transcripts for meetings, where I don’t have the problem myself, I’m sure someone has that problem. And the drone pests, I wouldn’t do the drone one because I don’t like hardware. But it’s a problem. And so how are we going to [inaudible 00:37:34] each of these applicant pre recorded interviews, it’s problem, so each of these I can see, except for again, I’m not saying there’s no problem, it’s just of these eight ideas, those are probably my two least favorite for me. Well done, sir.

Justin Vincent:
Oh, sure.

Rob Walling:
Justin, thanks so much for bringing all your amazing ideas to the show and discussing them with me. If people want to keep up with you on Twitter, you are at Justin Vincent. And of course, nugget.one if they want to see the project you used to be working on, and now see trylist.io for what you’re working on now. Thanks again for coming on.

Justin Vincent:
Thank you. Thank you so much for having me.

Rob Walling:
Thanks again to Justin Vincent for joining me. Thank you for listening this week and every week. It’s great to have you here. I appreciate all your support on social media, Reddit, Hacker News, all the mentions, they mean a lot to me. This is Rob Walling signing off from episode 638.

Rob Walling:
If you’re looking for the podcast where we talk about non venture track startups, how to build them, launch them, and grow them, you’ve come to the right place. It’s Startups For the Rest of Us. I’m your host, Rob Walling. This week I answer listener questions ranging from which is better B2B or B2C hiring for your first sales role, bootstrapping a two-sided marketplace, and many more. If you’re in the US, I hope you enjoyed your Thanksgiving last week, and if you’re everywhere else in the world, I hope you enjoy this episode as I dive in to listener questions.
Before I do that, if you haven’t checked out our YouTube channel, it’s MicroConf.com/YouTube. And I’m releasing a video every week where I talk through specific topics. I actually have a full video on B2B versus B2C SaaS, which is better. I’ve talked through funnels, talked through validation, talked through lowering churn, all kinds of stuff. Every week a new video is coming out. I’d encourage you to check it out, MicroConf.com/YouTube. And with that, let’s dive into listener questions.
Our first question of the day, it’s actually not a question, it is a statement made in a tweet by Daniel Nguyen. He runs KTool.io. And this sentiment just resonated with me, so I wanted to bring it up in this episode. His tweet reads, “You either die a consumer startup hero or you live long enough to see yourself become a B2B SaaS founder.” And that is like the nerdiest humor, but I like it. I’ll be honest, I have seen quiet a few B2C founders pivot. They see the churn, they see the price sensitivity, and they wind up pivoting into B2B if at all possible. And KTool actually looks like a pretty interesting tool. Send anything to Kindle Fast. So you can send blog posts, Twitter threads and newsletters to your Kindle. When I check out his pricing, it’s five bucks a month, eight bucks a month, 15 bucks a month for family. And those price points are in line with something I would pay for.
I think I pay, what do we pay $16 for a family plan of Spotify. And you think of the Netflix and the Disney Pluses and all that. But at this price point, I imagine his churn’s quite high and his average revenue per user is probably 5 to $8 a month. And that makes it tough to do anything because you can’t really afford to run ads, you can’t afford to do most of the marketing approaches that I often talk about here on the show. And so that is, that’s the pain of running a B2C business. But I hope Daniel is doing well with it and obviously wish him the best to grow in the business.
Our first question today comes from anonymous, and it’s a question about hiring sales people.

Speaker 2:
Hey Rob, a question for you. I have a SaaS product that is targeted towards medical professionals, so either dentists or doctors. And I was thinking of hiring a salesperson to engage with specific clinics. And the reason for that is the sales cycle’s a bit longer. Medical professionals don’t necessarily buy technology or SaaS necessarily just by visiting a website from my experience. And so I think you’ve made an analogy, is it a vitamin or is it medicine? Like they take it once or do they need to take it daily? And I thought to explain that, I don’t have enough credit necessarily yet to kind of have that displayed on the website and I’m working towards that with content. But would sales people help me elevate or accelerate faster? And if so, where would you find great sales people and what criteria would you use to hire them? And then another part of that question is how would you compensate them? What would the compensation structure look like? Thanks so much.

Rob Walling:
Thanks for that question. So one clarification I wanted to make is vitamin versus aspirin is not about taking something once versus needing it daily. It is that aspirin is an urgent need and you want to be an aspirin. You want to be a medicine as you said. But when I have a headache, I will drive to the store and buy that right now because I need it to cure a pain point, versus a vitamin is a nice to have. That’s what those terms really mean is you will see some SaaS apps and startups in general that really struggle to gain traction. You’d say struggle to find product market fit if we’re going to be jargony about it. But people just put off the buying decision because they can. If I run out of vitamins, I don’t necessarily run down to the store that day. I may even forget to take them for weeks or months. It’s not such an urgent pain point.
So that is a problem and it is a challenge if you build a vitamin app. A lot of analytics dashboards or vitamins, people don’t tend to want to, founders and marketers. I guess there’s a left brain marketers that really like the analytics dashboards and there’s a lot of analytics dashboards that I’ve seen launch and fail because people just sometimes don’t really need to dig into that. Well, they should be, but they don’t want to. Maybe another analogy is like spinach versus ice cream, where everyone wants ice cream and most people don’t want to eat spinach or kale. But realistically, it’s what they should be doing. I view that as separate from this conversation a little bit. It ties into it, but if you’re targeting dentists or doctors, they’re not going to self-serve onboard. You are choosing customer pain over competitor pain.
Hopefully, you don’t also have competitor pain. And the difference is customer pain is when you tend to have a longer sales cycle, you definitely need to do high touch sales. And oftentimes, they are lower on maybe the technical acumen, so they’re not designers or developers or founders or people who are just native online all the time. They’re non-technical, and they’re going to run into some issues. They’re going to need more onboarding and support than other folks. And that’s what I mean when I say it’s customer pain. If you choose competitor pain, let’s say I’m going to start an ESP or CRM softwares, there’s a lot of competitors. But oftentimes, especially in the early days, you’ll get folks who kind of know what they’re doing and your early customers will be early adopters and they will be more technical and usually need less handholding. The worst of both worlds is if you have competitor pain and customer pain.
And that is not something that I would be trying to do these days. So in this case, you’ve chosen customer pain and in that case, you absolutely need to be doing high touch sales on this. Yeah, I don’t know of a single app aimed at this type of dentist, doctors, legal, professional folks who are going to want to self onboard and just figure stuff out. There are just so very few early adopters in those spaces. In addition, if you’ve gone into that space where there’s going to be a sales cycle and more support and you’ve built a vitamin, that’s a real problem. Yeah, that is a business ending issue. And I think that if you have a feeling that you have built a vitamin and you have customer pain, I’d be looking to pivot whether I pivoted my ideal customer or whether I pivoted the app into something that is an aspirin, that’s something I’d be thinking about.
Your actual question is whether sales people would help you accelerate. And what I don’t know, the hard part about this, I have no context. So do you have revenue? Do you have customers yet? Are you a team of five and you need a salesperson? I’m going to make the assumption that you’re early stage, you haven’t found product market fit. And in that case, I cannot imagine anyone but the founder doing the sales. I don’t know of a single instance where that has worked. Most people don’t even try it. You, as a founder, you know the product the best, you know the space the best, you know their pain point, you know the problem it solves. You have all this stuff in your head that you’re going to take for granted. And if you hire a salesperson, they’re going to have none of that. There’s no process to give them because you have no process yet. This is again, making that assumption that you’re solo or you have one employee or something and that your sales process is not documented and working as a well-oiled machine.
I would not bring a salesperson into a sales process until we had a repeatable sales process that is relatively proven. And I do the demos similar each time, and you can teach someone to do that or the visits to the dentist’s office. And if you’re working nights and weekends, and this is a side project, then this is a bad project to build as a side project. This is where you need to quit the day job to go sell this thing. And if none of that works, then you pivot, right? Or you just pick a different product altogether or you go try to raise funding and that allows you to then quit the day job. If you do have a proven repeatable sales process and you’re going to look to hire sales people, in terms of where I would find sales people, I would hire a recruiter.
And I wouldn’t be going after whatever the full service, like 15% of first year salary recruiter. I’d be looking at a more startup focused, bootstrapper focused service. There is Remote First Recruiting from Dan and Ian at Tropical MBA. And there is Avra Talent, which is run by Maren Kate, who was a MicroConf speaker last year. And these are more reasonably priced recruiting services and I think you get plenty of value out of using them. Those two firms and other firms like them have hired more salespeople than I will ever hire in my life. And so I would not be going out looking to do this on my own. And they will be a big help in figuring out criteria as well. And you can always look at Steli Efti’s material on how to hire salespeople. He has a bunch of MicroConf talks as well as eBooks often that he gives away for free, or very reasonably priced. You can read to learn more about that. So thanks for the question, anonymous. I hope that was helpful.
My next question is about bootstrapping a talent marketplace. It’s from Ben Atwood.

Ben Atwood:
Hey, Rob. Ben here. I am a graphic designer based in London and I’m in the process of building a design specific marketplace. So we want to be competing with the big boys like Fiverr, Upwork and 99designs. However, those platforms are generally strongly disliked by the design community. So our big idea is building a platform or a marketplace that designers actually want to use and want to get work from.
Now, I really want to bootstrap this business. However, I know in the past you have said that it’s very difficult to bootstrap a marketplace. So I’ve been thinking about this problem and have a potential idea I wanted to run by you. So I was thinking maybe instead of focusing on design as a whole, we could narrow it down, niche it right down to a specific subset of design, for example, UX/UI, which in theory would mean would be able to target our customers a lot better and recruit them easier. And then over time, kind of build the marketplace out into all categories of design. So do you think that’s a good approach to take? And if not, do you have any specific tactical advice on how to bootstrap a marketplace? Thanks mate. Bye.

Rob Walling:
All right. So my first piece of advice is don’t. I don’t know, why does everyone do this? Just stop with the marketplaces already. Just build a SaaS app or build a step one business and provide value when you have one customer, or 10, or 100, you provide the same amount of value. Charge real money for a real product that you sell to real customers and really stop it with the two-sided marketplaces. Now with that said, I will answer your question of if someone put a gun to my head and said, bootstrap a two-sided marketplace, what would I do? Well, number one, I wouldn’t bootstrap it. I’d raise funding because you’re going to be fighting a war on two fronts, so you’re going to need a lot of ammo. Number two, I would build one side of the marketplace first. So if you recall when I say don’t bootstrap a two-sided marketplace, the end of that sentence is unless you already have access to one or both sides of that marketplace.
So for example, if you think of starting a startup accelerator or a venture fund that’s going to invest in startups, it’s a two-sided marketplace. You need to find both investors to invest in your fund and you need to find founders who are willing to take money from you, who are interested in what you offer. So if I had neither of those, I would not start a venture fund. I would not start a startup accelerator. It just so happens that through this podcast and MicroConf and all the stuff, the blogging and the books and everything that I’ve done since 2005, I happened to have access to both of those and frankly, didn’t know I had access to the investor base. But as we did raise the funds, I realized just how powerful it was to have built the audience and the network and the brand that I do have.
So with that said, how do you translate that to you? Well, I wouldn’t go out and start a marketplace. I would start a service or something that provides value to designers. Some examples, Dribbble started years ago. Should Dribbble maybe start this marketplace? They probably should because they already have access to them. So how do you replicate that? I’m not saying replicate Dribbble, I’m saying replicate the access to all the designers. So whether that’s a blog that they all start reading, think of like Smashing Magazine could do this, right? Because they have a bunch of designers and they would just need to then bring in people who want to hire designers. That’s not that hard. So do you start with a content play to drive designers and you build that up over a year?
See, people who start two-sided marketplaces don’t want to hear this, right? It’s like spend 6, 12, 18 months building up one side of that audience and then boom, your cold start problem really is not that big of a deal. That’s when you can bootstrap it. So whether it’s a content play, you start a blog, whether it is a gallery or whatever you call it, Dribbble, which is where you can post, like a portfolio site and you get a bunch of designers on there, whether you are teaching things, whether you start a stack exchange like thing for designer. Whatever it is, start something that gets a bunch of designers there and now you only need the other side of that marketplace and that other side actually isn’t that hard to find, right? You could do that through ads, you could recruit one on one. We know a lot of people who want to hire good designers. So thanks for the question, Ben. I hope those thoughts were helpful.
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My next question is also anonymous, and it’s about acquiring an app. Anonymous writes, “I’m in the middle of buying a web app right now, my first one. Based on my initial conversations with the seller, it looks like I can get the app for two years worth of revenue.” And he tells me the numbers, asked me to keep it confidential. It is low revenue and almost certainly does not have strong product market fit unless he’s just not marketing it at all. Otherwise, I would expect the revenue to be higher. Back to the question. “I do have some concerns. First, the tech stack he uses is non-standard and it’s not hosted on one of the major cloud players. I’m an engineer but my preferred stack is not the one that he’s built it in. And I’m sure I could take the time to learn his stack, but I’m not sure I want to learn everything from scratch on a new code base. Second, the app is based in a particular country and the domain name is not a dot-com, it is that country’s top level domain.”
So for example, there’s what co.UK or .DE for Germany. It has that specific thing. “And when I signed up for his app, the registration email went to my spam folder.” So that’s a little disconcerting. “That said, there are a few positives to the deal. I was considering building my own competitor but figured if he would like to sell, I could kill two birds with one stone and eliminate competition, essentially have a good business which I could take over and improve. I believe I can take this to the next level. How should I go about valuing such a business and figure out whether or not it is worth acquiring?” Yeah, this sounds kind of rough. I’m going to be honest. At this level of MRR, and just for you as a listener, I’m going to say it’s somewhere less than 2,000 MRR. At this level you don’t have much, right?
You have a few customers and you have a code base, but it’s a code base that you don’t even want to code in and you don’t have enough revenue to hire someone to run this business or to code on the business. Now, I bought an app called HitTail that was doing, it was right around 2,000 actually. It was probably 2,000 MRR. I paid 30 grand for it back in 2011, and it was in classic ASP, which is a language I knew but didn’t want to code in and would be hard to find developers for. The reason I bought it though was that it had been a lot bigger. It had had a free plan, it had a bunch of links and mentions in the New York Times, Wall Street Journal, Forbes, Entrepreneur because the previous owner was a PR person. And so they got a lot of press mentions when the app launched in like ’06, ’07, and then it was just kind of dying off in 2011.
But I knew that there was a lot of data, there was some proprietary stuff in the code, but there was also just this big footprint that I knew I could build SEO on and I knew that it had stuff that would’ve been hard for me, hard or impossible for me to replicate. And so that’s what I’d be looking for, is if you’re going to pay this sum for this app, it’s like is the code base a year’s worth of work, six months worth of work? Or, do they have already a flywheel of SEO or something else going on? Or did they do a launch? Customers trickled in and they’re just kind of hanging around because you kind of have a cold start problem. You’re a little bit ahead of where you would be if you were just starting out. But I struggle with having to get a new domain, because you have to get a new domain for this because I wouldn’t leave it as the country specific. I’m assuming you want it to be more general.
I’m less worried about the fact that it went to your spam folder, that stuff can be fixed. But the tech stack, if this was doing 20 grand a month and I had product market fit, well, it’s a whole different story. I know it’d be a lot more expensive. But then you could say, “Well, is it worth rewriting this?” Right? So that’s what happened in the end with HitTail is I worked on it, I hacked the code myself for a bit. It was pretty painful because classic ASP, even in 2011 was like over 10 years deprecated. But I did later find a classic ASP developer who worked on it and then I got HitTail up to about between 20 and well it was about almost 30 grand a month. And then when I was thinking about selling it, because Drip was taking off one of the developers I’d hired to work on Drip, we were Ruby on Rails stack, I had him rewrite HitTail in Rails and that made it, I’d say, a sellable asset at that point. Because I think in classic ASP would’ve been very, very hard to sell.
But it doesn’t sound like the parallels match up with this app and I would either be looking to acquire it for less money. And personally, I don’t even think the purchase price is the problem. I think it’s more of even if you paid half of what you suggested, is this still worth it? And that’s where there are some details that I would need to dig into, to really know what the value it is that you’re acquiring. Those are my thoughts, Anonymous. I hope they were helpful.
My last question of the day is from Prabat. Subject is Mom Test. Pratt asks, “Hey, Rob. I’ve been following the instructions on your podcast. Let’s hope someday I will be able to write in and be a proud listener with a successful business. I’ve been doing some mom test interviews for my products. However, sometimes I’m still scared of being copied. I know I might be paranoid. Am I?” Keep sharing.
So number one, products. Why are you working on multiple products at once? Focus on something and roll with it until you decide to bail on it and then move to the next one. But the other thing is, yeah, this fear of being copied, if I were to tell you, oh, don’t have any worries about being copied and then someone copies you, that kind of sucks because it can happen. It’s just very, very, very, very rare. It’s more likely that you’re going to be copied if you launch and have success and talk about it online. And then at some point… We saw it happen with Baremetrics. We’ve seen it happen with some other apps.
I mean even Drip, Drip started having success and then there were some kind of copycats that crept up. When HitTail was having success, there were copycats too. That was kind of an interesting one. It was like the exact same value proposition. But someone sees you having success and they come out of the woodwork to do that. The thing you have to keep in mind is, number one, you are going to have to out execute competitors at some point. The other thing is hopefully you have some secret sauce, you have the knowledge or the skills to be able to implement this. And I would question if most of the people, unless you’re talking to a bunch of aspiring startup founders in MicroConf Connector on Indie Hackers, then yeah, maybe some of those people would copy you. But if you’re serving a niche of non-starter founders, it’s just the odds of someone copying you are so, so small.
And even within the startup founder space, everyone has their own ideas that they love. I’d say it’s more unusual for someone to do this than I think most people think. With that said, it obviously happens from time to time. In fact, most of the things I’ve done in my life that were worth doing were copied at some point, including TinySeed, people have tried, after MicroConf had success, people have tried to compete with that. And that’s where you do have to think about how can I build moats? How can I build a brand such that if they replicate my features, it doesn’t matter because they’re a commodity and I’m not? And this is where you have to think about, eventually you are going to have competition. And while you don’t want it right out of the gate, I think the value of doing mom test interviews or the value of validation and the value of talking about your product before it launches outweighs the risk that someone copies you.
That’s just a personal decision for me. Everything I’ve ever launched, I’ve talked about way in advance of launching it. Drip had a 3,400 person launch list before we launched. And that was because I was talking about it far and wide on this podcast, on every podcast interview that I was doing around that time. I was running ads to it and we didn’t have a product, right? But someone could have come along and copied that. But I figured, well, someone will do it eventually. And at this point, I wanted the interest, I wanted to beat the drum and have that great launch list and that early traction. And to me, that was way more important than the potential small percentage risk that someone was going to copy my idea. So thanks for the question Prabat, I hope that was helpful.
That’s our final question of the day, but if you have a question you’d like answered on the show, please email questions@startupsfortherestofus.com, or just head to the website, click ask a question in the top nav and you can submit a video or audio, which goes to the top of the stack. Or if you submit text, I will definitely get to it at some point. Thanks to everyone who keeps sending the questions in. I think these episodes are super helpful for the audience. I’ve had overwhelmingly positive feedback about them and there are no episodes like this if people aren’t sending in their listener questions. So thanks to everyone who’s been sending them in. This is Rob Walling signing off, from episode 637.

Rob Walling:
Welcome back to Startups For the Rest of Us. I’m Rob Walling, and in this episode I’m talking with Claire Suellentrop about the new book she co-wrote with her co-founder, Gia Laudi. The book is called Forget the Funnel, A Customer Led Approach to Driving Predictable Recurring Revenue. Gia and Claire have run a consulting firm for the past several years where they are working with startups and SaaS companies to help them learn more about their customers in order to drive more revenue. And this book is essentially a distillation of a ton of their learnings. So with that, let’s dive into my conversation with Claire. Claire Suellentrop, welcome to the show.

Claire Suellentrop:
Rob, thanks so much for having me.

Rob Walling:
It is so nice to talk to you again. It’s been… I was trying to think, was it MicroConf, do you remember, 2017 in Vegas?

Claire Suellentrop:
2017 or ’18. But really in either case, what feels like a lifetime ago now.

Rob Walling:
It’s been a while. Yeah. Well, and I was telling you before we hit record, it was super cool to meet your co-founder of Forget the Funnel, Gia Laudi. It was super cool to meet her. And today we’re here to talk about the book that you have co-written with Gia. It’s called Forget the Funnel, A Customer Led Approach to Driving Predictable Recurring Revenue. First question, Forget the Funnel, why that title? And I think it’s the name of your company as well, but where did that phrase come from?

Claire Suellentrop:
Yeah, it is the name of the company as well. And Gia was just recently on Lenny Rachitsky’s podcast. They were discussing the same why Forget the Funnel. And there’s this really funny clip of Gia going, “Funnels are gross.” But to be more specific than just funnels are gross, what that really speaks to is the fact that even prior to Gia and myself having met, we were leading marketing at two different, both very fast growing SaaS companies, way back in the wild days of the 2010s. And really it speaks to the reality that for a SaaS business, for a recurring revenue-based business, thinking of marketing as an activity that ends when a new customer signs up is just the tip of the iceberg. Because if the business lives and dies by customers being retained over time and expanding their usage over time, then the idea of a funnel doesn’t really work as an analogy anymore.
That is the origin story of Forget the Funnel. We bought the domain when we met in person probably about a year before my first time speaking at MicroConf. So it’s been, what is that, I guess coming up on six years now that we’ve been working under that moniker.

Rob Walling:
Yeah, well the cool part about it is it’s so intriguing because the first time I heard it I was like, “Well, what does that mean?” And maybe want to ask more. And that’s a cool phrase. That’s a cool way, a purple cow if you will, that gets someone’s attention. And so in the book, you’ve actually broken it up into three sections and you have this three phase process for customer led growth. The first step is get inside your best customer’s heads. The second is map and measure your customer’s experiences. And then the third is to unlock your biggest growth opportunities. Let’s start with the first one. Get inside your customer’s heads. Is this Jobs to be Done interviews? How do you go about getting inside customer’s heads? And actually you know what, I’m going to pause that question and I’m going to go back and say does this apply to really early stage folks? If I have 10 customers, I’m doing $300 a month, am I too early? Or where are we starting to think that we can take this approach in this book?

Claire Suellentrop:
That’s a super good context setting question. So, the process or the framework that we’ve put together over the years can be used at the super early stages to at least guide your efforts in figuring out who your best customers are, how they think, what the struggles are that they feel. It definitely is more suited to and more kind of easy to walk through when you have a larger set of healthy, engaged, paying customers. There’s two chapters right next to each other, Learning From Customers and Learning From Future Customers.
And the future customers one really speaks to that experience of being early days enough with your product that you don’t have an ideal customer base to learn from. But when we talk about getting inside your customers’ heads, and you mentioned job interviews and that is a part of it. But even before that, where we really start when we’re working with a company is getting clear with the team on whom within your customer base right now gets your product? They get it from a mindset perspective. They’re not trying to force it to work in a way that you didn’t really design it to. They’re low burden on your customer success team. They pay for it happily. They’re not asking for discounts and they’re the people that you want to go clone more of.
So in contrast, I was recently just on a kickoff call with a company we are in the process of starting to work with right now and I had the head of sales there, the CEO, the president, really important people, stakeholders in the room. And in this conversation I was trying to get from them, who is that best customer for you at this point? And asking that actually helped them realize we don’t actually have internal alignment on what makes up a best customer. We’ve got these big enterprise deals that we’ve pulled through the sales process that are healthy from a monthly recurring revenue perspective, but also we don’t really know if we want to serve the enterprise or if we want to move down market and expand. And so it triggered this whole internal reckoning.
So getting clear on who your best customer is in the first place is ground zero, step number one. And then from there, yes, using jobs interview. We also have a short survey, which is kind of like a mini jobs application, mini jobs interview to understand not just why did they sign up for your product, but before that, what was the trigger in their life that made them realize their old solution wasn’t working? And then what were the methods they used to find new ones, which is massively useful in prioritizing your marketing channels. And then when they found your product, what was the differentiator that drew them to you versus anything else on the market? And oftentimes what we find from that is internally teams don’t really have a research back sense of what differentiates them in their customer’s eyes.

Rob Walling:
And that’s where surveys and interviews. There’s different ways to couch it from there. If someone’s hearing this and already they’re like, “Take my money,” they can go to forget the funnel.com, there’s a link in the footer called our book and you can get the pre-release because the book comes out next year in 2023. But you can get a PDF of the book for $25 if you want to check it out.

Claire Suellentrop:
Yes. And additionally, if you want to just shoot me an email, if you do want to buy the book and then you want access to the Jobs to be Done interview questions that we use, we have those for free in our resource library on our site. So, we’ve got lots of materials to help with that piece as well. I know interviews can be really intimidating for some.

Rob Walling:
Yeah. But what I like is that 10 years ago I would hear talk to your customers and I was like, I don’t know how to do that.

Claire Suellentrop:
What does that mean?

Rob Walling:
Yeah. And now there’s books like Forget the Funnel there. I had Jim Kalbach on the show. He has an amazing book now I forget, I think it’s called Jobs to Be Done colon, some subtitle, but someone could search the archives if they want to see it. Michele Hansen has a book, Customer… Do you remember the name of it? Deploying Empathy I remember because it’s a pun on deploying code, Deploying Empathy.

Claire Suellentrop:
Yeah. I love what she did with the title. I guess I’ve been under a rock because I had not heard of Michele’s book until just a couple of weeks ago. And then I was like, oh my god, everybody needs this.

Rob Walling:
Right. And that’s the cool part is I just named three people who are talking about Jobs to be Done. [inaudible 00:07:40] is another, but you each have different angles on it. And that’s what I like is for me, I am absolutely still a nube talk to customers person. Each time I read one of these books, like Forget the Funnel, I think, oh, that’s a different angle on that, even though I’ve heard pieces of it before. Because as you and Gia you’re running…. Do you call Forget the Funnel a consultancy or an agency?

Claire Suellentrop:
We call it a consultancy. It could be a whole nother conversation on are you an agency, are you a consultancy? How do you figure that out? But yes, we do call it a consultancy. So keep going.

Rob Walling:
And you’re working with SaaS companies day to day. And so I imagine years and years of experience doing that. It just piles into your brain of these are the best practices and these are the ways we do it for our customers and that our clients and that’s what’s baked into this book.

Claire Suellentrop:
So I really like that you raise that jobs can be applied in different ways. And if you Google Jobs to be Done, there’s even of the people who develop the framework, there’s different approaches and applications of it. So, you’re absolutely right that the way that we run these interviews and these surveys is what has worked really well for us over the course of working with SAS companies for the past however many years. But that said, there is such a wide application of the jobs framework. So it was the same year that I spoke at MicroConf big year for speaking. I spoke at Business of Software and I was so intimidated because I was giving a talk about using Jobs to be Done for messaging and copy. And Bob Meoesta was in the audience and I was just terrified because this person who pioneered this framework is watching me present on it. But he was such a chill guy.
And afterward I shared that with him and he was like, “You got to know, you’ve taken it and you’ve figured out a new way to use it and that’s great. And somebody else is going to take your way and they’re going to figure out a new way to use it. And that’s great.” And there was a lot that you can do with the jobs framework. This just happens to be how we have kind of operationalized around it, so to speak.

Rob Walling:
And I like your thought process in the book. You have some prescriptive questions and you have examples of bad questions and good questions. You have leading slash closed questions and then in this table you have on the right, you have open ended and good questions. So I want to read the bad and the good. The bad one is, “Are you happy with your experience so far?” Presumably using my SaaS product? And the good phrasing of that is, “How would you describe your experience so far?” Because it’s not leading. You’re not saying, “Are you happy?” Because then it’s like uh. And then another bad one is, Which competitors have you tried?” Versus, “How have you tried to solve this problem in the past?” So again, open ended not leading. And then the last one is, “Which is your favorite feature, A, B, C, or D?” Versus, “When you first tried a product, what was it that convinced you it would solve your problem?” You have a whole list of questions that you can ask. I assume these are just taken from practice and practice and you doing a bazillion of these interviews.

Claire Suellentrop:
That’s exactly right. And the I guess rule of thumb that guides all of these is when you’re trying to figure out what experiencing your product was like for a customer, the goal is to get out of their way. We all have the curse of knowledge about our own products. We know all the ins and outs, we know the full feature set, but customers don’t live in the world of your product day to day. And so by keeping these as open-ended as possible, you actually invite them to give more organic and natural responses. And it’s really surprising. It sounds common sense to say, oh, to the point you raised earlier, learn from your customers. But there is a lot of surprising amount of technique involved to make sure that you’re not accidentally adding in bias or giving them a false set of choices that they wouldn’t have made for themselves.
So that last one, for example, which is your favorite feature, A, B, C or D, could give you an indication of, okay, of these four features, this many people said this was their favorite. But had you left that question open ended, they could have volunteered a totally different aspect of the product that you wouldn’t have even been aware was important. So, learn from your customers is, it’s really good advice, but it’s very generic. And so what we were doing with the book is trying to remove that level of vagueness around talking to your customers so that it can be a more paint by numbers practice.

Rob Walling:
And that’s what I like about it. I like fairly prescriptive books. And how do I say this in a very complimentary way? What my books get complimented on is people say your books are short, but they’re really compact. And this is, I have a pdf, it’s 121 pages. I can read that in a few hours in an afternoon and I don’t need a 400 page treatise on Jobs to be Done or in talking to my customers, I really want 100 to 200 pages of just tightly packed with examples and pretty prescriptive these days. When the book tells me, “Talk to your customer” and then has three paragraphs about what that looks like, I’m like this is not helpful. But you have, “Here’s the questions to ask. Here’s a way to ask it in a good way and a bad way.”

Claire Suellentrop:
The level of brevity and compactness, I have to give credit to April Dunford for. I’m sure many folks listening have already read her book, Obviously Awesome. It’s on positioning your product. And she described speaking to her target audience, which is founders and executives at mostly B2B, more enterprise SaaS companies or tech companies. And she would ask, “When do you do most of your book reading?” And the answer that she heard a lot was, “Oh, if I’m on a flight somewhere or if I’m driving somewhere, I’ll listen to an audio book.” And she was like, “Okay. So on a flight, how much of a book do you usually get through”? And a very common response she got was, “I don’t know, about half.” And so she decided, okay, I’m going to write half a book. And we took that example, that experience that she had and ran with it, number one, because she’s very successful and smart. And two, because we really appreciated how compact and actionable her book was. And we wanted to emulate that with ours as well.

Rob Walling:
I wrote my first book was 40,000 words. It’s 204 pages in a pretty small format. And I did it because I was so tired of slogging through bullshit books that were padded to fit on a Barnes and Noble shelf and have a spine that was wide enough to whatever. And my spine was not wide enough to have anything on it. But it didn’t matter because we’re selling in a new… It’s like five hour audio book or something.
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I want to ask you about, so chapter four is called Learning from Future Customers and I’m intrigued by that phrase, tell us what that means and if you have an example you’d like to give so folks can understand it, that’d be great.

Claire Suellentrop:
Sure. So future customers could also just mean target audience. There’s nothing that really sets it apart from the target audience concept, but two chapters back to back that both say learning from some type of customer just seemed to be a better theme. Examples though. Okay, so this does speak to how this process can be adapted if you don’t yet have a bunch of happy, engaged paying customers to learn from. So, the best example I can reference is actually the one that’s in the book itself. I could come up with others, but the innocent spring of 2020-

Rob Walling:
I remember it so fondly, wasn’t it great. How is this story going to end, Claire?

Claire Suellentrop:
Oh no, I’m already waiting for the punchline. We had started working with this really cool product that targets restaurants. So really, really robust basically all in one restaurant management software. So it managed the front of house, it managed payment acceptance, it managed back office things, like bookkeeping, product inventory. It was this big product, long sales cycle, heavy implementation. Especially if this company’s target customer is restaurant groups that have at least several locations and they have a large enough operation that they realize they need to streamline things. Well, then COVID hits and every restaurant is forced to shut down and they’re trying to figure out how to stay alive. And Gia and I are like, “What are we going to do?” No one is in the market for operations software right now. They’re all trying to figure out how to keep the lights on.
And so we have to sit down with the team and admit as a group, “Okay, we know this thing is not going to sell as is until restaurants are in a better position. So, what can we do in the meantime?” And what we started doing was looking around at various Facebook groups, forums, different online spaces where restaurant owners and managers and operators can hang out because even though it’s a very, very large market, it’s also a very connected market. There’s a lot of online activity within this target audience. And what we saw as a pattern was, and I’m sure you experienced this as well, a lot of restaurants had primarily… They hadn’t had to prioritize their online presence prior to COVID. Maybe they were just super popular in their region and they got a lot of foot traffic or their online presence was really just a display of their menu. But suddenly everybody’s like, “Oh my God, we have to become a takeout restaurant now. How the fuck do we do this?”
So within the larger feature set of this product was a really genuinely pretty simple and clean online menu and ordering system. And so what we did was with the team, we pulled apart, and I don’t mean from an actual product perspective. If customers signed up through this experience I’m about to describe, they basically sell all the other robust functionality hidden away. And we in a sense from a marketing perspective, separated out this online menu and ordering system part of the product and made it free and available to restaurant owners or managers who were trying to get set up with an online ordering system for the first time. It also had the competitive advantage of if you wanted to not only directly accept orders, but if you wanted to take orders through DoorDash and Uber Eats and all the other third party players, it had that capability as well. And so with that, we launched a wait list to see, okay, is there enough room in the market for people to even be interested in this right now? And it turned out that the answer was yes.
So, I’m describing something that sounds like we came up with it over a weekend, but obviously this was several weeks worth of work to go out, learn what pain points people were expressing in the various environments that they hang out in, come up with a way to map a specific feature of the product to that pain, build out a landing page that has messaging that matches that pain to see, okay, is there demand? And ultimately the company ended up onboarding I want to say it was just under a thousand different restaurants onto that mini version of their product. And those that actually ran restaurant groups later then became paying customers of the full fledged product. So, hit me with follow up questions because I know I kind of rambled through that, but that’s one example of target audience research versus customer research.

Rob Walling:
Yeah, no, that was a really good example actually.

Claire Suellentrop:
It’s very akin to Amy Hoy and Alex Hillman’s 30 by 500 approach where they talk about sales safari. So if anyone’s listening and went through 30 by 500 or read any of their books, this should probably sound familiar.

Rob Walling:
Right. As you said, it’s audience research. It’s going out, people who aren’t using a product already because really the latter half of the book focuses on you have a customer base. How do you find more people like that? It’s about growth, not necessarily this can be applied to early stage customer development, but that’s not what the book focuses on. The book focuses on, you’re here, you’ve had some success to whatever degree. I would say 10K MRR, 100K MRR. There’s some number that you have, now let’s double down on that. And how do you provide them with enough value that they stick around and how do you then find more people like them? Find more customers.

Claire Suellentrop:
Yeah. A lot of companies when they come to us, they have reached some level of success, exactly like you said. And they’re like, “Okay, how do we double down on that? Or we’ve gotten this far mostly through word of mouth. We’ve never done really any organized marketing. Or we’ve tried marketing, but it’s been really piecemeal. One time we ran some ads, one time we tried blogging, one time we tried a podcast, but we don’t have a system in place yet.” So that level of we’ve gotten this far, now how do we get this far is I would say, yeah, really the sweet spot for where this makes the most sense.

Rob Walling:
And a really good example I’m seeing in the book is a company that our listeners should be familiar with. It’s SparkToro. Rand Fishkin has been on this podcast at lease once. I’m actually an angel investor in SparkToro. And so I’ve talked about them before. But something, if we jump into the latter part of your book where you talk about, let’s say you do interviews, you do surveys, you have this information, how do we then operationalize that? How do we take that? There’s a whole section I’m skipping due to time, but it’s about mapping it. Mapping the raw information to kind of takeaways, that’s not the technical term, but a term I’m going to use here. But then how do you take that and you bridge your customers success gaps? And I know that you did a project with SparkToro where it was something about, was it onboarding? It was struggling to reach first value. Can you talk us through how that worked? And wherever you want to start in that process would be great.

Claire Suellentrop:
Yeah, so this is one of my favorite aspects of the whole process. So as you mentioned, part of the middle of the book that we’re kind of skipping past covers the process of taking all this raw data that you’ve just gathered and figuring out what the so what is. And we do in the book and with the resources we’ve built, we have a pretty systematic way of being like, “Okay, this question we asked provides this data. Question two provides data point B.” Anyway, once you’ve gotten past that, then what you have is this organized understanding of four customers who are hiring your product for a specific job to be done. What were the particular aspects of your product that they found especially valuable in solving their job to be done?
And what we get to do at that point, which is always a huge value and so much fun with companies, is map what customers say is valuable to the actual product attributes that create that value. So the customer says… Let’s actually use SparkToro as an example. We’ve found a couple of different jobs to be done people hire SparkToro to do. But just one example was it makes me look good in front of my clients or my boss or whoever I have to pitch my marketing plan to because I’ve got data to back it up. So knowing that it makes me look good or smart in front of other people tells us, “Okay, what are the features in SparkToro that enable someone to do that?” There’s an export feature. There is a invite other users feature. What are all the other… We can basically sit down with the SparkToro team and say, “Tell us all the ways that someone can take the data they got from SparkToro and make it visible to other stakeholders.” So, that’s just one.
There’s other value themes that people express with SparkToro. There’s one that I’m forgetting now. I think it was being able to monitor trends over time on certain searches and SparkToro has this lists feature where you can… I’m going to mess up the exact tying of the functionality, but all said and done, customers say these things are valuable, these are the features that deliver that. With that understanding, you can then, honestly, we do encourage people to put themselves in their customer shoes and go through the experience themselves. So Google your own product’s name, click on what the search result is, look at your homepage, look at your product page. Where are all the different places that that value isn’t being conveyed or made obvious as it could be? So with SparkToro, there was huge opportunity to better convey that value that customers found and the features that drive it in the onboarding process.
So there were a number of things that they implemented. One, their head of marketing, Amanda, who is a rockstar, wrote up an onboarding email series highlighting what those features were and where you could find them within the product. I want to say the team implemented a product like an onboarding checklist. So create your first list, invite your first team member, or do your first export, whatever it might be. So really what they were doing was onboarding optimization or conversion rate optimization. But instead of it just being based on generic best practices, they were doing it through the lens of what their best customers found valuable and using that as the way to decide what actually needed to change about the experience.

Rob Walling:
That’s super cool. So, they implemented that and what were the results?

Claire Suellentrop:
Yeah, so it was about a month later that we checked in to see how things had gone. And just by the onboarding updates alone, no changes to anywhere else outside of the experience, they had doubled their trial to pay or their free to pay conversion rate in a month, which is wild.

Rob Walling:
Crazy. Yeah, that’s great. That’s what we call low hanging fruit is finding something that is not months or years worth of work to widen your top of funnel or do whatever. So, that’s a pretty big win. Claire Suellentrop, thanks so much for joining me. If folks want to keep up with you on Twitter, you are Clairesuellen, S-U-E-L-L-E-N. Of course we’ll link you up in the show notes and as I mentioned at the top of the show, forgetthefunnel.com and there’s a link in the footer to buy this amazing book.

Claire Suellentrop:
Thank you so much for the kind words and for having me on. Always good to be chatting and see you in Denver next year.

Rob Walling:
Absolutely. Yeah. We should take this moment to say that as of maybe a week ago I learned that you’re speaking in Denver, MicroConf US in Denver in 2023. And so we’ll get to hang out again. That’ll be awesome. And then the book will be launching around that time too?

Claire Suellentrop:
Ideally the goal is to have the physical copy ready in advance of that timeframe, so as long as Gia and I can stay on track.

Rob Walling:
Yeah, I know how that is. I’m working on my I have my fourth book right now and I just finished the manuscript. And I look out and I’m like, I need type setting, I need design, I need a cover design, I need printing, I need… I’m like, man, it’s going to be months and months until I can get this thing out of here, so I feel your pain.

Claire Suellentrop:
Yeah. Well best of luck on the… Are you already done with the manuscript? You said you just finished the manuscript?

Rob Walling:
Yeah.

Claire Suellentrop:
Okay, congrats. Congrats on that milestone.

Rob Walling:
Yeah. Thanks. Needs to get edited, but yeah, no, it’s a good spot. But just so people aren’t confused, you have a preview copy people can buy. It’s a PDF, forgetthefunnel.com, if they want to check out the book. And if you’re listening to this and you do buy the book at mention Claire and me, I’m @Rob Walling, and just thank Claire for coming on Startups Pod and dolling out the knowledge. Thanks again, Claire.

Claire Suellentrop:
Absolutely. Thanks so much for having me, Rob.

Rob Walling:
Thanks again to Claire for coming on the show and thank you for listening this week and every week. Whether it’s 5 episodes or 500, I really appreciate you coming back each week, leaving your reviews, leaving your comments at mentioning Startups pod on Twitter. Mentioning it on Hacker News and Reddit and Quora and just anywhere people are asking about podcasts. All of this helps to spread the word and keeps me motivated to recording and shipping this podcast every week as we’ve done for the last 12 years. This is Rob Walling signing off from episode 636.

Rob Walling:
If you love the smell of startups in the morning, you’re in the right place. It’s Startups For the Rest Of Us. I’m Rob Walling, and here we are diving into a Where Are They Now? episode. Today I’m talking with Tony Chan. You just heard his season just a month or two ago. TinySeed Tales season three wrapped in this podcast feed. But what most people don’t know is that the last time Tony and I spoke to record that final episode was eight months ago. So a lot has happened since then. But before we dive into that, I want to let you know about our next MicroConf local. I’m sitting down with Jason Cohen to do another one of our SaaS snapshots where I have a conversation, I ask questions, we hang out and we learn about what makes Jason Cohen tick, what makes him successful, and get all his thinking on all things bootstrapping and mostly bootstrapping.
The event is November 30th in Austin, Texas at the WP Engine Headquarters. If you’re interested, tickets are at microconf.com/locals. It’s going to be an amazing time. It’s a three-hour event. Part of that will be founder connections. We have a lot of socialization time for founders to meet one another. And then Jason Cohen and I will be sitting down for about 30 or 40 minutes and having that SAS Snapshot Fireside Chat. It’s just a couple hours the afternoon of November 30th. And if you are interested, tickets are at microcomp.com/locals. And with that, let’s dive into my conversation with Tony Chan.
Tony Chan, thanks for coming back on the show, TinySeed Tales slash Startups for the Rest Of Us.

Tony Chan:
Yeah, last time I saw you was at MicroConf.

Rob Walling:
April in Minneapolis. Yep.

Tony Chan:
Yeah. Yeah. And you’ve been busy with the European batch and the American batch and so on. So it’s been a while since we’ve chatted.

Rob Walling:
That’s right. And I’ve been attending a bunch of MicroConfs, but none in your area. But we’ve spoken since then for sure.

Tony Chan:
Here and there.

Rob Walling:
The company stuff. Yeah, just haven’t recorded.

Tony Chan:
Via Slack, async, various things. Rollercoaster ride of stuff that we’ve been through.

Rob Walling:
Okay. So yeah, to set the stage, Tony Chan, co-founder CloudForecast, TinySeed Tales season three. And that just went live. The whole season rolled out over the past couple of months. I mean it ended maybe a month ago. But for people who don’t know, we recorded that from about, it was like 20 months ago is when we started and we ended about eight months ago. So it’s been eight months since that last episode was recorded. And right after we recorded that last episode, you sent me an email, it was like a week or two later. You said, “Oh my gosh, this is such a rollercoaster. So much is different than the last episode.” Already things had changed

Tony Chan:
When we first started TinySeed, we got the seed money. I think even a little bit before then we started putting some pieces together to hire a first engineer. So I don’t even know where the time went. Everything that’s happened, it’s crazy.

Rob Walling:
It goes fast. Well, I mean one of the things you told me, again, within two, three weeks of recording that last episode, I believe you lost one of your engineers. She left, right?

Tony Chan:
Yeah, Katia left the company, I mean was on good terms and good for her. She was able to find some upward mobility at a bigger company where she can learn, probably where she felt that her skills can be developed a little bit further. I mean it’s hard at… And at the time it was three of us and we’re onboarding Arturo, our senior engineer, and we’re maybe hoping Arturo would help develop her a little bit. But I think she was looking for probably a bigger company, more structure. I mean we have some structures in place, but it is hard. A lot of it’s individual contribution of what you could do here at a bootstrap startup. So we were happy for her. I mean, we were sad, but it is what it is. It’s just part of the unexpected things that happened, and you just got to roll with it.

Rob Walling:
Yeah, cause that was the first episode of your season was talking about… You were just about to onboard and then episode two was like, she’s amazing, she’s doing great. And did you take it hard when she left?

Tony Chan:
I think we did at first. Well, I think we also saw it as like, wow, that’s opportunity costs on our side. We invested a lot in time in her in terms of onboarding her and getting her set up and such. But also across the year, she also did really good work for her. I think as founders you have to forget fast. You can’t hold grudges. We don’t want to hold grudges, we want to be good people. We were happy for her. We were sad personally, but also happy with the upward mobility that she was able to find. And it sounded like a really great opportunity, and I think we saw it more as positive. Great. She redesigned her own app. She refactored a bunch of things on the front end side, redid our whole front end and tailwind components in UI, and it set it up for success now, today.
And without the work that she did across the whole year, we would be in a lot different place at the moment with our app on the engineering side. And it’s really set up Arturo, our senior engineer, kind of almost like passing the baton. And he’s doing really well on his side. Then we back-filled one of his friends into Katia’s role and he’s done really well. Having her work and that foundation she placed has sped up our features and how our app looks a lot more professional, polished. Overall, I think that’s a good thing. So we saw it more on a positive light, just to sum it up.

Rob Walling:
Yeah. Because when the season ended, it was you and Francois, co-founders, and then it was Arturo and Katia. And obviously, Katia left. You just said that you’ve back-filled her position. Is it still four of you? Have you hired anybody else?

Tony Chan:
So when Katia left, Arturo was just starting, and he was a senior engineer and we saw that as a game-changing hire in which as an individual contributor he can spec out and do feature requests and build out features without having too much involvement from Francois. He can kind of take over things and lead the team in some ways. So when Katia left, he went through his Rolodex like, “Hey, I know two friends that might be interested in joining the company.” We ended up interviewing two people, and we hired one of the friends. We actually briefly considered hiring both of them, but I think what’s going on with the economic situation at the time with Ukraine and all that kind of stuff, we’re like, we should probably be a little bit more conservative on our cash. We just hired Fernando who started maybe two or three months after him.
So the last six or eight months, six to eight months and last few months, have been almost ramping up and getting into a good rhythm between Francois, Arturo and Fernando. And that’s been a big part of our focus of what things that we need to implement so that they can feel prepared, they can feel enabled. And also it’s put Francois a hot seat to make sure that he is organized on his side and that he’s planning things as well. So we ended up going with the base camp motto of shape up with a six wheat sprint, and that’s worked out really well for us so far in terms of getting into a rhythm of building out feature requests and having the engineers also feel that it’s a short enough period where they don’t feel stuck on a project for so long as well. But the rhythm of product features are going to ramp up, which is amazing to see, amazing to even give that news to our customers as well and what we’re building. And it’s kind of given us a way to be more organized about our product features and roadmap as well.

Rob Walling:
Three engineers and you. It’s a developer-heavy company.

Tony Chan:
Yes, I am solo.

Rob Walling:
And some of the things we talked about during the season were there was this constant push and pull of Tony’s doing too much but also something you were not looking forward to is having to give up control. Moving from a business to a company is a phrase that you brought up.

Tony Chan:
Yeah, so it feels good on the engineering side. That part is in a good rhythm as mentioned. That part feels like, hey there’s a lot of promise here with this. Because right now we have the first half of 2022 planned out, and a lot of this is all spec’d out or mostly spec’d out, and we have a good idea of where we want to go with our product based on our user feedback and the resources that we have with the six week sprint. The business side, not so much. It’s been challenging. I think last time we chatted we weren’t even discussing… I think we were discussing unlocking more on the SEO content side since that seemed like a promising channel. But I don’t think we discussed about hiring someone, right?

Rob Walling:
Hiring someone full time? No.

Tony Chan:
Right. I think we talked about agencies and someone, but we tried to hire someone full time.

Rob Walling:
Oh okay. How’d that go?

Tony Chan:
It went okay. We had to let the person go after 60 days.

Rob Walling:
Oh that’s not good.

Tony Chan:
Yeah. Seemed promising. I think these things are really hard. Nothing to do with him or him personally or his skills. It just ended up not working just to cultural and chemistry fit issues. I just could not get into a good rhythm with him with time zone differences as well. It just didn’t work out for me personally. There’s also the lack of… We thought that not having technical and AWS knowledge would not be as challenging, but it was a lot more challenging than we thought it would be. So overall, the person was decent, but we just could not think a scenario that it could work out after 60 days.

Rob Walling:
So are you going to try to backfill that role?

Tony Chan:
We’ve thought about it. We’re still thinking through it, how that could look. I think we’ve been taking a lot of the lessons learned from that. I have been able to find part-time writers that have knowledge in SEO and also knowledge in AWS that were former engineers that are interested in marketing to help us write content. So that might be a play for us where we just continue hiring part-time contractors. I still have to orchestrate that a bit, but-

Rob Walling:
Yeah, then you’re the manager.

Tony Chan:
I think what’s helped was having this person, and we’re working with this person right now. He knows about SEO. He knows about content marketing. He knows what to expect. He’s very proactive. That has been very helpful for us right now, and I think a lot of that was learning from our attempted hire. Honestly, if we didn’t hire and go through the pain of going through those issues that we ran into, I would not have been able to identify what we need. I would not have been able to identify the person we need to hire, whether part-time or full-time. I think we’ll be a lot sharper when we are ready to hire, when we find that right person to hire. I am on the lookout. I think there is a money issue with that too. These people are not cheap, especially needing the technical chops and the AWS knowledge but also interest in the whole economic pricing of AWS as well.
So it is challenging. I don’t think it’s impossible. There’s probably someone out there. But I do think that the journey of the last two years of SEO content… I know a lot more about SEO content today than I did two years ago. I think we will be sharper of who to hire, the culture fit. And these things are unpredictable. It’s really hard, especially when you hire somebody you just don’t know if it’s going to work out or not.
But I think it’s important to document everything possible. We had a 30, 60, 90-day plan, and it was not going to plan, and it felt like it was not a good fit. So I think having that was very helpful because then we were able to go to the person and have a very fair conversation on why it’s not working out and why things are not going the way they are. It ended up being very mutual on that side. We were very fair with the parting as well. Francois [inaudible 00:12:08]. If it does happen, we want to be fair as possible, like what is the fair thing to do on that side? So I think that was very helpful.

Rob Walling:
It is really hard to hire people when you are not an expert at the thing you’re hiring. It’s the unfortunate reality. I see non-technical single founders trying to hire that first developer, and it’s very tough. And so likewise if you’re trying to hire someone for SEO and a year or two ago you knew a small amount about it, it’s pretty easy to make a misstep there. And the more educated you get… I mean the pattern I see is either the founders learn… Usually the founders learn it. If we look across all the TinySeed companies that you know, most of the founders find one or two marketing approaches that they learn enough to implement and start to get the flywheel going, and then they start replacing themselves, either a piece of it… You know look at ScrapingBee with their content. You look at Ruben with his SEO, like starts off just doing a lot of it yourself and then you replace either pieces of it or you replace the whole mechanism. But by that point, you know it so well that it’s quicker. It’s easier. But it’s a budget thing. Right?

Tony Chan:
Yeah. What’s been helpful, I think there’s a few things that I think you hit the nail on it, is hiring out pieces of it. The writing part is a huge part. The strategy part is a huge part. I’m able to, with this new person, at least do 50% of it, hand it off to him, and he seems pretty knowledgeable on how to take it to the rest of the way, which requires me to not have effort other than reviewing his work afterwards as well. So I think that’s been helpful. And I think the other challenging part too is we’re bootstrap startups. And I think with bootstrap startups, time is one of the most important things you can have as a founder, time and the mental energy to work on things that you need to work on. And that generally means that you need to hire people that are mid-level senior. But those mid-level senior people are very expensive as hires.
And junior people, I think they’re… Some TinySeeds founders relish in working with people that are more junior level and they have SOPs and they have processes in place and all that kind of stuff. I don’t think that is something Francois and I are really good at, the process and all that kind of stuff. So I think that’s why Arturo has worked out really well is just the fact that he can contribute individually. We can do what we need on our side and kind of onboard him and he just takes it the rest away. It just makes your life, for me personally as a bootstrap founder, a lot easier because I have other things to focus on. Francois has a million other things. He doesn’t have time to manage someone. So I think that’s challenging too, is the funding part, the money part as a booster founder. It’s like you need to hire these people but you don’t have the money to hire. So I think that’s hard.

Rob Walling:
There’s a reason companies raise money. And I think back in the days when I was bootstrapping, and I still hear people say this, I don’t know what I would spend money on to accelerate growth. And then you had a certain point where you’re like, I know exactly what I would spend money on to accelerate my growth. And usually it’s hiring. Usually it’s hiring a more senior person than you could otherwise afford. When I was starting Drip, didn’t have much money, hired a lot of junior people. And that worked obviously, but it was tough. It was me training most of the people, and it was a lot of management and a lot of my time just maintaining the team. And if I had had a million in VC, venture funding, we would’ve moved way, way faster.
In fact, that’s what I saw once we got acquired, and then the company acquired us had 38 million in funding. I hired 10 engineers in 18 months. It was crazy. Our velocity was… It was so cool. And that’s just a luxury. And so funding is a tool. Funding is not great. It’s not the worst. Bootstrapping is definitely… I think it’s harder than it used to be honest because of the competition. But I also just think in general, it’s a different kind of difficult.

Tony Chan:
Yeah. I liken it to when you’re playing Doom, there’s nightmare mode, where building a startup, like bootstrap startup, is nightmare mode. But you get through it. Is probably one of the most satisfying things you can do, right?

Rob Walling:
Yeah. There’s pros and cons. You retain the control and you retain… And just for people listening, we know you’re mostly bootstrapped. So every once in a while… I know ScrapingBee published a blog post at one point or went to Hacker News and it was like, “How we bootstrapped to a million and a half ARR.” And people were like, “You didn’t bootstrap. You took a small amount of funding.” But look, venture capitalists, if you raise less than a million, you’re bootstrapped.

Tony Chan:
Right. And yes, the hundred thousand plus that we get from TinySeed, it is a significant sum of money, but it is very small compared to raising a million dollars. The magnitude is a lot different. Someone in our mastermind, Newscatcher, they got into YC, raised a bunch of money. And the six figures only got them so far, and they raised a bunch of money, and that’s exactly what they’re doing. They’re enabling the money to hire people to accelerate their growth and magnify their growth as well. The hundred thousand plus, it’s just a drop in a bucket. I think you tell us, try to spend that in a year, right?

Rob Walling:
Yeah.

Tony Chan:
Even less, as much as possible to test out things.

Rob Walling:
That’s one or two hires.

Tony Chan:
Yeah, it goes by fast. So people’s like, “Oh you’re raising money.” No, the order of magnitude’s a lot different.

Rob Walling:
Yeah, and what you can do with it and get accomplished I think is a lot different. Tony, in true TinySeed Tales format, you know that I always have the questions. Things you’re looking forward to, things that you’re dreading, all that stuff. So if we look back at the last eight months since we last spoke, what has been hard? What has been a thing you’ve struggled with?

Tony Chan:
There’s just so many things. I think it’s a combination of just instability. And I think that’s part of being part of a bootstrap startup, instability in terms of hiring, trying to get us into a good rhythm, finding people that can get us into that good rhythm. We mentioned with losing Katia, ramping up Arturo and then hiring Fernando. That’s a lot, that’s a lot of effort mentally as a founder, and we still have to focus on growing the company. On top of that, our revenue has been flat year to date, and I think the last time we chatted we were on the progress towards about half a million in ARR. And I think we were around 450k ARR at the time. But over the past six months we’ve had a lot of churn. It’s the first time in history of CloudForecast, and we lost our third largest customer decided not to renew their subscription.
It’s not like opportunities have not been there, but some of our growth drivers have been enterprise opportunities. And we like those because when you get them on annuals, they’re very solid ROI. They pay back really well, and they help grow your company really fast. Took a few Ls on those enterprise opportunities, did not close. Some were stalled because a lot of our product is selling up, meaning we work with engineering managers and they have to get approval from the whole team. Mentioned we had some churn as well. It was really hard to stomach. And all that, we just had to continue to run the business. Didn’t have a choice. I think that was really challenging because it was a lot of content switching, going from hiring, how do we continue to progress the business forward while we had all this other stuff going on in the background and seeing our revenue relatively flat.
So I think that was really challenging. It was a really rough stretch for us just to sit there and not watch revenue grow, and it was so easy to get discouraged and get into a funk and just give up. And I think that what makes founders like us different is the ability to learn from it, the ability to mentally move on, find people to chat with and people to check in on you to make sure you’re okay. And so much of what we do is such a rollercoaster ride. Literally, it’s setback on setbacks and setbacks. But how you respond and how you forget about it too is really important. And I joke with Tiffany, my wife. She’s a physician and she brings a lot of what she does at work home, and it’s really… She cares a lot, so it’s really hard for her to forget about her day, takes some time for her to unwind.
While she asked me about my day, I’m like, “I don’t know what happened.” Because I think that’s one of my superpowers, to be able to just move on and forget about it and just learn from it and just not let those setback just wear you down. And I think that’s the biggest thing is we were able to weather the storm a bit and just be able to learn from our mistakes, try different things. Not like we sat there and sat on our hands and did nothing. We definitely did some things to try to move the business forward, tested things out, and just try to be positive too. Our goal was we need to unlock Arturo and Fernando faster, and we needed to focus on that. Regardless of what was else happening on there, we needed to do that, and that was the most important priority at that time.

Rob Walling:
Yeah, I mean it sounds rough. Plateaus suck. They really do. And I mean, to your point, so much of being a founder is managing your own psychology. And so I think you’re a good example of that, potentially, of your superpower of being able to forget the day and to have a short memory of this stuff and just keep going.

Tony Chan:
And a lot of that… We kind of listen back to TinySeed Tale. Reflecting that, I felt like the discussion was managing the psychology and be able to chat with you openly about that, I thought that was really cool, was two guys be able to share our emotions as founders, be able to open up in what we deal with. I don’t think we as guys or even founders do enough of that with each other. And I thought that listening back to it, I’m very fortunate to have that space to be able to open up to you about that. And not only with you, there’s other TinySeed founders. I think that’s been the best thing is be able to chat with them openly about things and being very raw about my emotions and doing that because without that you just stew on it, and it just really affects you negatively.
So I think having the outlet and being able to pour out all those things and those struggles were really helpful for us to get through that. And to piggyback on what you asked was like what are we looking forward to? So we are back on the path of getting to half a million AR. The last two months have been really good. We closed two really big new enterprise opportunities on annual deals. One’s going to be our second largest customer, and the other one covered the one that churned. So there are some bright spots, and they’re bright spots that we’re seeing with our engineering team being able to move the way they are and the velocity that we’re seeing.
I joke it’s going to be scary good in terms of what they can turn out, and with Francois planning and that. So I think that’s going to be amazing to see. And we have a few renewals, and customers have already committed increasing their subscription value with us as well. So setbacks, but it’s three steps back. But you got to, as founders, just push one step forward, just keep pushing the boulder up the hill. And I think that is the most challenging thing to do is managing your psychology to do that.

Rob Walling:
Well, that’s good to hear, man. The fact that you’ve… second largest replaced the one that churned. Things may be looking up. And you know what, they’re going to look up just long enough for you to feel like you’re at the top of the rollercoaster and then guess what’s going to happen? Something else will happen unfortunately.

Tony Chan:
Yep, crashing down again. Yeah. And I think the funny thing is we closed a deal recently, and we had a small customer churn literally two minutes later. I’m like, “Come on.” Yeah, can’t catch a break. But I think that’s the beauty of enterprise opportunities is, especially if you can capture them on annual deals, you get that payback all up front, and in a snap of finger you grow your ARR 15, 20%. And whenever I talk to founders who just get started, I highly encourage them, how can you increase your prices? How can you tap into those bigger customers?
Because those enterprise customers, you can charge thousands of dollars, right? Five, six figure in ARR average contract value deals, and they are easy to work with. They provide great feedback to your product, and they pay back really well and they have solid ROI. So I always encourage fellow founders to, if there’s any enterprise opportunity play, go towards that. And it’s a learning opportunity as well. It took us two, three years to get to where we’re at with that area, but it was incremental progress and learning and getting feedback on features that we need to support those types of customers.

Rob Walling:
So I like that. We can kind of end on a high note in that things are looking up and you’re looking forward to the growth and everything. We’ll revisit. We’ll do another where are they now? here in… I don’t know. I bring Craig and Gather on once a year or something. It’s kind of fun just to revisit. But before we wrap this, I wanted to bring up… It’s a bit of a non-sequitur, but about a week ago you sent me a Slack. I would read it on… I don’t read your personal Slacks to other people. But in this case, I would read it. But in this case, it was an audio Slack.

Tony Chan:
It was a pretty late night. I might have been rambling a little bit. I don’t remember. I might have been distraught or something.

Rob Walling:
You sounded fine. But you were saying basically, AWS re:Invent, it’s put on by Amazon. It’s the biggest event, in person event, in your space, I’d imagine. This is the place that if you’re going to sell to folks using AWS and you’re going to do it in person is the place to be. And you had a conundrum. And what was that? What were you asking me about?

Tony Chan:
The conundrum was not going because I get to do whatever I want. I’m a bootstrap startup. I control my own destiny. I don’t need to go. Why do I need to go, right?

Rob Walling:
Because I don’t want to, right?

Tony Chan:
I don’t want to. I don’t feel like it. It did not seem like a good time. It’s a huge conference, like 60,000 people across 10 hotels or something like that. It’s overwhelming. It’s a whole week. So for me, I was thinking like, oh my gosh, this is going to be really tiring. It’s going to be drained. I’m going to be tired. It’s really hard to break through the noise, business-wise. Because the money’s not a problem. The tickets are $1,800. The hotels are 2,500. It’s whatever. However, on the marketing standpoint, if we want to break the noise, we have to spend a lot of money. And I think when Francois and I were talking about it, it’s going to be really hard to justify an ROI from it just because it’s a big conference.
However, I think after much discussion with you and with Francois, like, why don’t you go with no ROI expectations? Just go, have fun, network, make friends. What’s the worst that can happen? The worst is cool, spend a week. But at very minimum, I’ll get to travel, go to Vegas, meet some friends, meet some new people, experience something new, eat good food. And maybe that’s what comes out of it, and that’s okay. And I think just shifting our mentality a little bit on me going and doing things as well that I might not want to do was a big light bulb moment. Because I think a lot of the things I talk about with founders is sometimes you just got to do things you don’t want to do, and you have to do it. And I think you turned that question on me. What was your feedback?

Rob Walling:
It was kind of like I said, “I understand it because I don’t like big events either, and no one’s making you go. But I think you will get benefit from going either, one of you, and probably don’t attend the sessions, but just try to line up meetings, talk to existing customers, try to get intros.” And I talked a little bit about luck surface area, this concept of it just being in the mix, the number of things that I did that just turned into the next thing. I never would was going to be a business to software. And I ran into this guy Jeff Atwood at Joel Spolsky’s event. And I actually literally walked… He was a blogger and I was coding [inaudible 00:28:13] I was so nervous to introduce myself that I walked all the way out to my car. I was going to drive home. And I went, “I need to go back in.”
And I went back in and I was like, “Jeff Atwood, I’m Rob Walling, Software by Rob.” It was the blog at the time. And he was like, “I love that blog.” And we started talking, and he’s like, “You should speak at BOS next week.” And I was like, “What?” And that led to that, which led to… You know what I mean?

Tony Chan:
Yes.

Rob Walling:
On and on. All these dominoes fell from me doing something that I really didn’t want to do. Look, it doesn’t always work out that way. But I find going to in-person events, which is usually something I don’t want to do, even though I host them myself, it’s terrifying. And yet I have a tough time not imagining. You said leave the ROI assumption. Don’t think about it that way. I think there will be ROI by being there.

Tony Chan:
Yeah, I think the part that resonated me the most is the luck surface and a lot of the CloudForecast journey has been increasing luck surface, has been doing things that we don’t want to do and just putting ourselves out there regardless of how challenging it is or how difficult it is or what we want to do. And it has always paid off for us to a point where we’re at now.
And I think when you mention them, shoot, that’s been so much of our story. And me not going would be very hypocritical of me. And it’ll go back to the foundation of how we’ve built the company and what we’ve done, and the three times we interviewed for TinySeed and the multitude of failures of just dragging ourselves to IC interviews and chatting with people and just chatting with people and just trying to find people to talk with and having conversation with them. That’s so much part of our story. And I felt very backwards as I kind of thought through and reflected, like if I don’t do this, that kind of goes back to how we built the company and the foundation of the company. So I’m going now.

Rob Walling:
You’re going solo to Vegas.

Tony Chan:
Yeah, solo questing. And it’s just interesting of just being able to think through it, how quickly it switches. Now I’m excited to go. I can’t wait. Already hitting up some people, no expectations, just going to enjoy myself. There’s some customers that are going to be there, so trying to meet up. And I think you said it best, I don’t have to go to all the things, but just me being there will hopefully increase some luck surface, and we’ll see what comes out of it.

Rob Walling:
That’s a great way to end it, man. I’m glad you’re heading out and hope it’s worthwhile. Folks want to keep up with you. You are on Twitter @Toeknee123. It’s T-O-E, like the body part, K-N-E-E, like the body part, 123, and of course CloudForecast.io if folks want to see what you’re working on. Thanks for coming on.

Tony Chan:
Thanks Rob. Have a great one.

Rob Walling:
Thanks again to Tony for taking the time not only to record with me today, but to do the six recordings for the TinySeed Tale season. And thank you for coming back every week. Whether you’ve been here for six or 600 episodes, I really appreciate you spending time with me each week. And I do not take that for granted. I know that your time is valuable, and I always want to make the best use of it. As a reminder, we have a YouTube channel, microcomf.com/youtube, where you can hear from me even more each week. If 30 minutes in your ears each week isn’t enough, microcomf.com/youtube. Thanks again for hanging out. This is Rob Walling signing off from episode 635.

Rob Walling:
Bootstrapping cares if you can provide value to a group of businesses or individuals who are willing to pay for it. I view it as something that helped me improve my space in life, but also helped me achieve the freedom, purpose, and relationships that I had been seeking for so many years.
Welcome back to Startups For the Rest of Us. It’s another week, another episode. It’s great to be here with you. Thanks for joining me. I’m going to be diving into listener questions today. I don’t know if it’s the YouTube channel taking off, you should check that out, MicroConf.com/Youtube, or if it’s just our audience and our reach expanding through the podcast and other avenues, but I’m getting a lot of listener questions these days, which is great.
Last week I was in Atlanta for MicroConf Local where I sat down with Ben Chestnut, the co-founder of MailChimp, and did what we call a SaaS snapshot where I asked him questions about starting up, about exiting, things he’s learned in his 22 years as a SaaS entrepreneur, if you can believe it. But while I was there, I took a few minutes to do a little workshopping, customer development, as they say. It was just talking to a few of the founders who had shown up for that event.
I was asking folks about their opinions of specific Startups For the Rest of Us episode formats, ranging from we have interviews, sometimes I do founder hot seats, there’s the Hot Take Tuesdays, there are question and answers, there’s Rob Solo Adventures and all these things, and got some really helpful feedback from folks. What I heard is that the Rob Solo Adventures give people frameworks and thoughts to chew on, and that a lot of the questions wind up relating, even if they’re not specific to that founder or that founder’s niche, the specifics and the thought process of thinking them through is helpful.
It’s good to have questions coming through. As always, audio and video go to the top of the stack. A lot of these are video today and they really did jump the line. I think we have almost 20 text questions now. If you’re going to ask a question and you want it answered really in the next few months, to be honest, you’re going to want to send it as an audio or a video question. You can head to startupsfortherestofus.com, click ask a question in the top nav. I’ll dive into my first question in just a second. It’s getting close. MicroConf Europe in Malta is next week. If you don’t have a ticket, head to MicroConf.com/Europe and pick one up.
Hop on a plane. I’ll see you there. I’m so excited. It’s going to be amazing. Great speaker lineup. Of course, Malta, I’ve never been there and I’m really looking forward to it. With that, let’s dive in to our first listener question.

Matt Laskerback:
Hey, Rob, Matt Laskerback with Player Book. If you remember, I asked a question about building an expensive MVP for my gamification of youth playbooks for sports. We did go ahead and get the expensive MVP going, so we’re going to go ahead and have that in about a month. We’re about halfway done there. I did have a question now that I’m approaching marketing about that. We are at a crossroads with the naming, at least initially, of this product. The initial MVP is built around one position on the sports team that is the most complex and I think will hook the right people to being interested in going through our demo process and feedback loop process.
But in the end, the app is more for everyone on the team, and that might be phase two or phase three. Before we get to that point, we want to solve it for this one very complex position. And from there, we can kind of roll it out to the rest of the positions on the team. The question is, do we name at least for the first year or so while we’re getting the word out, do we name the product to that specific position, because I do think that will be an attention grabber for coaches, or do we name it, like I said, Player Book is my original name because it’s for the whole playbook and the entire team?
Marketing toward the initial batching of customers, which will be the hook initially, or to the eventual product, which will be the whole playbook. See? It’s in my head. Anyway, thanks a lot for everything you do for the community. Love to hear your feedback.

Rob Walling:
Thanks for the question, Matt. I do recall your question from a couple months ago. An answer to your question about naming it for the position that you’re going to start in, kind of naming it for a niche, and then land and expand. Personally, names are pretty hard to change. Names start getting tied to your branding. They start getting mentioned everywhere you go in terms of podcasts. You leave a trail of naming breadcrumbs all over the place. If you answer a question on Quora, if you write a blog post, if you get something quoted or published somewhere, it’s going to say Matt, who’s the founder of Player Book, or Matt, who’s the founder of XYZ Position Book, if you pick the XYZ Position.
Personally, I do not like changing names because it’s almost like a positioning pivot, a branding pivot. It’s pretty dramatic. I know some founders who have done it successfully when they realize that the name that they had chosen was not ideal in the space. One example of this is Ruben Gamez had a company called Docsketch that is now SignWell, and it’s an electronic signature app. At a certain point, there was confusion with Docsketch and people would say Docusketch. It was just becoming a headache and an issue that he saw was only going to get worse. He did go through a complete renaming and frankly, it was a lot of work.
It’s not just taking a domain and redirecting things, but it’s all the other work that goes on behind that. A lot of these questions have and it depends, but in this case, I feel pretty strongly about what I would do in your case, and that’s to go with Player Book.

Dylan Pierce:
Hi, Rob. I’m Dylan Pierce from Cleveland, Ohio, and I’m actually a short time listener. I really wish I would’ve found your podcast sooner. I’ve been doing devtrepreneur stuff on my own for about 10 years, and I feel like I could have accelerated my current growth if I would’ve found your podcast much sooner. I had to go through learning this various stages of app development and business development kind of on my own. My most recent attempt has actually been successful, but I’ve hit a plateau. I have an app on a very large e-commerce platform. The first year, it was doing pretty well. It was growing at a very solid fast rate, and lately, it’s plateaued.
I’m wondering if it’s possible to tell that you’ve tapped out a niche. My apps are a certain niche within this e-commerce platform, and I’m wondering if it’s time for me to try to address this niche in a different e-commerce platform with a different app that provides the same solution, or perhaps just add another solution to the existing e-commerce platform I’m familiar with, target it towards the same-ish audience, but with a slightly different solution. How would you determine that there’s no more customers available for you in a certain integration or platform? How would you handle overcoming this plateau and bring your business to the next level?
Keep up the great work. Love the content. It’s very easy listening and very approachable for someone who knows enough development experience to be dangerous and build their own apps and build a business without losing your mind and taking VC money, which is awesome. Great work.

Rob Walling:
Great question, Dylan. Thanks for sending it in. Short time listener, I love it. I love new listeners finding the pod. I like this question because it is a scenario I have lived a few times, and this actually is one of the reasons that there exists a stairstep method for bootstrapping, right? My concept that I talk about where you start with a step one business, which is often a product that has a lot of platform risk. It’s built on someone else’s platform or app store. You do that so that you don’t need to learn all the ins and outs of marketing and you can make a thousand, $10,000 a month, but this is never going to be seven or eight figure business.
And if it becomes that, it’s actually going to have so much platform risk that you could potentially have the entire company tanked by said platform. Dylan, it sounds to me like you’ve built a pretty amazing step one business, which is great. This is how I started too. This is how I see dozens and dozens of entrepreneurs starting, whether it’s an info product, whether it is a Heroku add-on, a Shopify add-on, a WordPress plugin, something built within an ecosystem where the marketing and distribution is mostly handled for you and you just have to worry about writing some copy, doing some support, and continuing to write code and maybe build out features.
Or even in the best cases, you’ve already built the features and there really is not ongoing development, because those are actually the best kind where there really isn’t development, it’s almost more of an autopilot thing. In your case, you have basically an add-on in a large e-commerce player. I’m going to assume it’s Shopify or Big Commerce, WooCommerce or Magento, right? You’re making a decent chunk of money, I’m going to assume 1,000 to $5,000 a month, which is a great step one business. And that makes your car payment, makes your house payment, and it can help you have revenue to then parlay into the next step one business.
You get to step two, that’s when you have enough money coming in monthly to essentially buy out your time, own all your time, and then you can start working on that more ambitious SaaS product or more recurring revenue where it’s a standalone SaaS with a lot less platform risk. What I’d be looking at in terms of is this a step one business and has it plateaued is do I rank in the top three in the App Store? Do most of my customers come from the platform? If they do, do I rank in the top three for the main term or two? If my churn is basically churning out as many new people as I’m getting and I have plateaued, next question I ask is, is it worth going outside the app store, outside the platform to market it?
Can I do SEO to rank in Google for these terms? Are people searching YouTube? Is it worth running pay-per-click ads? Very likely not. Is it worth running ads on Facebook or Instagram? Probably not. But these are other avenues. I actually spent a ton of time, probably six to nine months, trying to expand a step one business, going through all these steps, trying to SEO, pay-per-click, run display ads, doing all types of things, and I could never get it passed… This was DotNetInvoice. At its peak, it was doing about five grand a month, but realistically, most months it was doing 2,500 to four grand. This was not recurring revenue. It was a one-time download.
This is 2006, and I owned that for four or five years before I gave it to a business partner. But I spent a lot of time trying to expand it until I finally realized, unless we completely rewrite this or really expand into different languages and other things, because it gave away the source code with it, so that was one of the key selling points, unless we have multiple source code versions of this or unless we really do expand it, as is, this product really plateaus. It’s a niche within a niche. That was when I realized, well, I actually want multiple step one businesses and clawed my way up to step two. For you, I’d ask that question, do I already rank high in the store?
Do I need to work on my App Store optimization to rank higher, or can I just expand my top of the funnel by doing the steps I just said with SEO, pay-per-click? Answer to those very well might be no, and that’s okay. And lastly, I’d be looking at how many people am I churning out and do I feel like that number is decent? And if my churn is relatively low, then yeah, I think I’ve topped out. But if my churn is high, like higher than usual, and I don’t know what rules of thumb are in your ecosystem, but that’s where I’d be in a private Slack group or a forum or Quora or whatever to try to find out what is a reasonable churn rate in this space?
And if my rate was high, well, then I’d be looking at, well, do I need to build features? Is there a way to retain people, because that can also help you grow past a plateau. Those are the three things I’d be evaluating and looking at. If I realize this business is about as far as I can take it, I would do exactly as you said, which is to be looking at the other platforms. That’s probably the most likely thing I do. I mean, there are two options here.
You could go to the other three or four popular e-commerce platforms and build your plugin for those, or you can think about, does my plugin do something that could apply not to e-commerce, that could apply to SaaS apps or to creators, info marketers, that can apply to designers, developer, whatever else? You take the problem you’ve already solved and you repurpose that. Personally, I think going to other platforms is easier, simpler. You already know the e-comm space and how it works, and just going into the other platforms I think would be reasonable. Of course, I would be doing competitive analysis there where, does this solution already exist in those spaces, and is there an incumbent winner?
How hard is the App Store optimization to rank in these other App Stores? But I think it makes a lot of sense to want to expand it that way. That’s probably the first thing I’d do. Frankly, back with DotNetInvoice, I didn’t have that option. It wasn’t an App Store play. It was getting SEO, some pay-per-click. Was that it? Oh, and some partnerships and such. I didn’t have an easy out to just say, “Well, I’m just going to build this into another ecosystem.” But that is certainly how I’d be thinking about it. Congratulations, Dylan. As a developer who is learning to market as you are and really is in step one and moving towards step two, it’s a great place to be.
Today, you’ve built something people want and are willing to pay for, which is not easy to do. Congrats! I hope my thoughts were helpful. My third question is a text question. I actually snuck one in here because it’s been sitting in the queue for months. I feel like it’s a quick one. We’ll see, but I kind of like the question. It’s from Jonathan Zeller and he asks, “Did you have that initial aha moment when you felt that this was the winner idea to start up? And to follow up, what inspired you to start that first business?” I’ll start with the second question. I wanted to start the first business because I, A, wanted to make more money.
I was always cash strapped as a kid. Kind of grew up working class, made 4.50 an hour at my first job. Really I was working construction out of college and I just knew that I wasn’t going to work a salary job my whole life. I didn’t feel like that was a way to have enough money that I could really call my own shots. And that was my goal, was to work on stuff I wanted to work on. It was never about the money. It was always about the freedom, the time freedom. That was something I had been striving for literally decades, like since I was a teenager. No, I guess it was in junior high. I would buy candy at Costco and sell it when we go on trips, or I’d sell it at school for 5X markup, 10X markup.
And then in high school and in college, I was writing booklets about comic book collecting and about other topics and I was selling them through classified ads. And then I always had zany startup ideas in the ’90s as the internet was coming up. I could never implement them. I wasn’t in those circles to think that that was a thing that I could do. But once it was the early 2000s and I started actually building websites and I realized, “Oh, I’m going to start a business on the web.” I don’t know what it’s going to be, but I did want that next startup idea because I wanted to make it. I wanted to not have to work for other people.
What I realized is I thought that the Silicon Valley venture capital narrative was the only one, and that’s the thing I kept chasing with these really dumb ideas, including DIG for personal finance. Remember what DIG was? I had one where it was a blog submission service called Flogz with a Z. Yeah, no, you cannot make this stuff up. But these businesses, I was thinking, well, I got to build these things and moonshots and it’s got to be in the popular zeitgeist. Look, DIG is popular and blogs are popular. In the end, the first one that made more than a thousand a month was DotNetInvoice, which I’ve already referenced, and that was actually one that I acquired when it was in the alpha stage in essence.
I was looking through these entrepreneurial boards. Well, it was like web marketing boards, internet marketing boards, and someone said, “We’re looking…” It was two developers. We built this product, DotNetInvoice. It’s written in DotNet. They gave away the source code. You download it and ran it on your own web hosting account, right? Because this is 2005 or ’06. SaaS wasn’t a term or barely. It was Basecamp and MailChimp and I think there was AWeber and Salesforce. I mean, this was it, right? There was literally a handful of companies that was not the movement that it is today. The two developers said, “We built this thing and we have customers,” which was kind of true.
I mean, it was an invoicing software that you have one job and it’s to get math right. There were literally math errors, calculation errors in this software. It was pretty rough. But I saw their posting that said, “We’re looking for a marketer to help us to maybe come team up as a co-founder.” I emailed them and said, “I don’t want to be a co-founder, but I’ll buy this whole thing from you.” They only had a month of PayPal. I mean, there’s so many beginner mistakes I made, but they only had a month of PayPal because blah, blah, blah, reasons, reasons. I was like, oh they’re doing, what was it, seven or $800 a month?
Oh my gosh! I’m going to offer money for this. I did wind up acquiring it, and then the next month it did 150, 200. It turns out they had launched their alpha that month, so they goosed the numbers. It was pretty crappy. But what was interesting is it put my back to the wall, because suddenly, I was out thousands of dollars that I paid for DotNetInvoice and I was kind of terrified that I had. It was all the money I had saved up from consulting on the side. I still had a day job at this point. It really made me realize, I got to clean this up or else I just wasted all this money. I actually in retrospect think that was a really good thing, and it was cool that it was launched.
It already had a marketing website. SEO was weak. They were trying to run some pay-per-click ads. They gave me that account. It was AdWords, and it was selling a few copies a month, I think two to three copies a month for $99 each. It was like two to 300. I started looking at things and I said, “This feels underpriced to me.” I tripled the price, didn’t see a difference in the number of copies sold. Pretty much brought it from that two to 300 up to about almost 900 a month, and then I doubled down on the SEO. This is where I really cut my teeth learning SEO, because I wasn’t just theoretically learning things, I was actually implementing them on a site.
It was a nice advantage that I didn’t have to go through all the headache of building this product. At the time, I was working a day job and then charging $100 an hour as a developer, like a contractor, freelancer consultant, and realizing that I could pay thousands of dollars for this thing that would’ve taken me literally I estimated about 400 hours of time. That would’ve been about 40 grand. This is not the way to think about when you’re acquiring, by the way. These days, you would do it based on revenue and all this other stuff. But it was a nice way to leap ahead 12 to 18 months, because it kind of had weak product market fit, but it had a bunch of infrastructure that had already been put up.
I got to jump ahead and not waste 12 to 18 months by spending thousands of dollars basically to acquire that. I knew it was a winner once I had tripled pricing and it still continued to sell, and then once I was able to goose the SEO, increase the pay-per-click ad budget, and just spend time on it. As I said earlier in this episode, I consistently got it up to between three and 4,000, 2,500 to 4,000 each month. It was a great step one business. I learned a lot. The experience was invaluable. It gave me confidence that I could do it.
I didn’t know anyone else, literally no one else who was doing this, who had a small software product, a lifestyle business, I didn’t even know that term, but it was just a little mini software startup. That was when I thought, “Oh, I’m going to grow this to 10, 20, 50K a month,” or whatever. You already heard how that went, but that wasn’t the point. It gave me the confidence I could do it. It gave me the confidence that it was possible, and it gave me enough revenue. It was more than making our house payment. I started stuffing that in the bank to realize, well, now I can buy the next one, or I can use this to fund my time.
I actually did eventually go down to three days a week, four days a week at the day job, and I was buying out my own time with this revenue from DotNetInvoice. Slowly over time, I was able to cobble together that full-time income. It was absolutely life-changing moment, right? Bootstrapping has been so impactful on my life. I think that’s one of the reasons I started blogging about it around that time, and then started talking about it on this microphone 12 years ago. It’s something that absolutely changes people’s lives, and that’s evidenced by folks who send me emails or who comment on the YouTube channel or who write into this podcast, that bootstrapping can change your life.
Whether it’s changing your life for 2,000, 5,000 a month, or whether it is literally having a 10 million exit, bootstrapping, it’s the great equalizer. You may have seen my tweet where I talked about bootstrapping being permissionless, and that expression was actually coined by Bryce Roberts of Indie.vc, but bootstrapping is permissionless entrepreneurship. You don’t need to go beg an investor to give you money, to beg a book publisher to give you an advance and publish your book and put it in Barnes & Noble. You don’t need to go beg a film studio so that you can get the money to make your film.
When you bootstrap it, you do it yourself. It’s not easy. It’s either nights and weekends, or it’s quitting that day job and watching your burn. It’s relying on a spouse or a significant other to support you while you do it. I mean, there’s a reason that bootstrapping is hard. I will say, it is harder than raising money. It really is. Because once you have funding, you can hire people to do stuff. You worry less about all the nuts and bolts of it. There are pros and cons to all this, but bootstrapping is a hard road, but it’s permissionless. And that is a big reason that I view it as this equalizing force. When I said this was a short question, I guess I was wrong on that. Thanks for the question, Jonathan. Hope that was helpful.
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Arvin:
Hey, Rob, love your show. My question is, I’ve been working on a SaaS that built automations in a CRM targeted towards dentist, and one of my dental clients wants to create his own marketing agency and sell his own CRM. He asked me if he can pay me for the IP. He’s going to do it anyways, create the CRM. He wants to pay me for the automations that I’ve created and the workflows, et cetera. One, how do you value your time considering that I started this four years ago? I started off in Excel and now I’ve looked at different platforms like ActiveCampaign and HubSpot to white label. That’s what I’m basically doing, I’m white labeling that solution and selling it.
The question is one, how would you value your time if you have a client that is going to be competing in the same space? I’m essentially a marketing agency and selling a CRM solution. I’m trying to focus more on the technology side of things and just sell like the CRM solution piece of it and if that’s a good idea at all to sell some of that. It’s constantly evolving. But I think as a form of mutual respect, he wants to give me something for that. I’m not sure what that dollar number is and how to value it. I also understand that the only person I can value my time is me. But any guidance or things to think about would be helpful. Thanks.

Rob Walling:
Thanks for the question, Arvin. This is absolutely the first time I’ve ever had this question or thought about it. It sounds like Arvin has intellectual property in the sense that he’s built workflows and emails that are being sent out for dentists. But Arvin is going to be using standard CRMs like ActiveCampaign, HubSpot, insert name of CRM here versus he has a dental client, it sounds like a dentist that wants to start a CRM, write the code and build a CRM focused on dentists and wants to essentially license the automations and the workflows that Arvin has built, which he could have just stolen them and made you come after him.
That would be a total jerk move, but I’ve seen much worse in the startup space, so I do appreciate the conversation. There are a couple ways to think about this. One is, is it worth partnering up? Does this dentist have deep pockets, and do you want to get into the SaaS space in essence of building out a CRM? It comes with pros and cons, right? Right now you’re an agency or a consultant and you sell your time and you make that cash quick, because you get paid for it on a monthly basis versus building SaaS that’s pushing off a lot of that gain for later. But if you do build that SaaS, then it’s a flywheel. It makes money while you sleep, as they say.”Come, start a SaaS,” they said. “It’ll be fun,” they said. But it does make that ongoing revenue and then the exit multiples are outrageously high. We’ve talked about this, right? I say maybe don’t try to sell right now as the economy is having issues. But normal times, if you build a sass up into the one, 2 million ARR and up, you can sell that let’s say four to six, four to eight revenue multiple, versus the consulting firm, I think you sell it for one times annual revenue. I don’t even know how they sell it. It’s just the multiples are just not there. That’s one way to think about it is, is that something to consider given that you’re both headed in that direction? The answer to that maybe no for a bunch of reasons.
So then we think about, well, you have this intellectual property, and to me, it is a competitive advantage in the short term that you have this. But realistically, other people are going to copy it. There aren’t many workflows I can think of, there aren’t any workflows I can think of in the marketing space that aren’t just duplicated. Once someone sees it working, then they go in and duplicate it. I think in the long term, the value of this IP you’ve created goes down over time. It’s worth less and less over time because other people will implement and copy it and the value for your customers who will hire you are A, that they are hiring you to implement it for them, and B, that you’re going to evolve it over time.
I think that’s something to keep in mind is if I were to license this, I definitely wouldn’t sell it. Because you don’t want to sell the ip, you still want to be able to use it. I would give this other entrepreneur essentially a perpetual license or however you want to phrase that, but it would be a forking of it, meaning as it exists today, here you’re free and clear have a license to it. And then I would go on with my new clients and I would continue to innovate. And then if I were in your shoes, I would continue to innovate on this and it will actually be more and more different from that piece that you’ve licensed as the months go on.
I bet you’ll look back in a year or two and realize, “Oh yeah, there’s a huge difference between where I’m at now and the content that I essentially licensed to this dentist.” From there, it’s a question of, do you go after the one-time cash upfront model of pay me X thousand dollars and you have this perpetual license, or do you look at doing payment over time? That as long as they’re using this IP, you pay me I was going to say a portion of your revenue, but, A, that feels aggressive if he gets big and really crappy for you because he’s not going to make it work. I’m guessing he’s a first time SaaS entrepreneur. As we know, most SaaS apps don’t work, and so that’s not a great way to do it.
But a flat monthly fee is what I was thinking, just a licensing fee, monthly, quarterly, annually, whatever it is, and then they can renew the license as they would like. The thing I would be starting with is when you do a consulting engagement and you charge a client to implement this for them, I would start with, well, how much do I charge for that? How much of that do I think is this IP if I had to create it from scratch? There’s some type of value anchor there. And then realize that he’s not asking for you to do this once or to implement it just for him, he’s asking to be able to essentially license it to then distribute it to anyone who’s on his platform. There has to be a multiple of that.If you charge $10,000 to implement this for a dentist, we think you should charge 30,000, 50,000, 100,000? There’s some number that is higher than 10,000 that I think that this would be worth. And then you look at, do you charge that upfront? Obviously you got to think about there’s going to be legal fees here, so you need to be able to justify paying a lawyer to draft up and review contracts. This is an enterprise sale in essence, and it’s probably going to take a few months, and it’s probably going to take some redlining and going back and forth.
I think the biggest mistake you could make here is undercharging for it, much like most founders do is saying, “Oh yeah, it’s worth five or 10 grand because it’s just some emails,” but it’s like, now you’re going to chew through five grand in legal just to get this deal done. Given your time to close the deal and to make sure everything goes well, this does feel like a 30 to $100,000 thing for me. I’m making up numbers here. I’m not actually into licensing nor selling IP, so I’m not an expert, but I’m trying to ballpark it more like from entrepreneurial first principles and thinking about my founder gut feel of the minimum that I would want to make it worthwhile.
And then you can think about, well, is it an ongoing thing? Is it you have to pay every so often to have this? But then if he’s doing that, he probably expects updates, and then it will not be forked from your existing thing. But if I were paying ongoing, I would want some type of updates and maintenance and that kind of stuff. Here’s the other thing I’d be thinking about and it sounds like he wants to build a SaaS app, but does he also want to do the consulting work?
Because it seems like that’s another avenue to partner up is that you, Arvin, could do the consulting work while he is focused on building this product and also being a dentist I guess, but building the product, which is plenty of work on its own, hiring developers, making product decisions, managing that. I would’ve loved in the early days of Drip to have a consultant like you who is knowledgeable and who I could just have handed a bunch of people onto before I had customer success and before we had a really in-depth team to help folks get onboarded. Hands-off to a paid consultant.
I’m wondering if there’s a partnership available there and if there could be some type of trade or payback over time of if he sends you deals that are worth X, that basically you agree on an ongoing licensing fee. And then if he sends you this many deals, he doesn’t pay you anything because he’s giving you the work that is to you worth a lot of consulting dollars. Those are just a few of the ways that I think about this situation. Thanks for writing in, Arvin. I hope that was helpful. Thanks for sticking around as I went through those questions. We have more questions in the queue for next time. It is great to have you here this week and every week. This is Rob Walling signing off from episode 634.

Rob Walling:
Welcome back to Startup For the Rest of Us. I’m your host, Rob Walling, and in this episode I talk with Matt Wensing, the founder of Summit. And we talk about how he’s been grinding away building his SAS and he’s adding a two-sided marketplace. A really interesting conversation, you’re not going to want to miss it.

Before we dive into that, MicroConf Remote is happening today, tomorrow and Thursday. Head to microconfremote.com if you’re interested in early stage B2B SaaS marketing approaches. We’re hearing from Gia Laudi, the co-founder of Forget the Funnel. We’re hearing from the CMO of Crisp, the founder of GymDesk on Capterra marketing, VP of marketing at SparkToro. I’m going to be doing a talk. It’s a fully remote event. It’s very inexpensive. It’s the cheapest MicroConf Remote we’ve ever done. We’re trying to make it accessible to as many people as possible. And even if you miss today, you’ll get the videos when the event ends. That’s microconfremote.com.

And with that, let’s dive into my conversation with Matt. Matt Wensing, thanks for coming back on the show.

Matt Wensing:
Hey Rob, good to see ya.

Rob Walling:
Yeah, it’s great to have you back. Folks know you as the founder of Summit, which is at useSummit.com. And you’ve been on this show, I don’t know, three, four, five times. We answered listener questions at one point, I think. We talked through enterprise sales, I think. And then we’ve talked about your journey with Summit, right? And how the initial launch and then you reroute the code base. And here we are again, this time talking about a pivot. And I’m on your homepage and the H1, gorgeous homepage by the way.

Matt Wensing:
Thank you.

Rob Walling:
Hired an outside designer for this, I assume?

Matt Wensing:
We did. We knew we needed it and they delivered, which was nice.

Rob Walling:
Yeah, it’s really attractive. Folks should check it out. Use Summit.com And the H1 is build low-code simulations, forecasts, calculators, and it’s still flipping. It says Summit Powers engaging apps for sales, marketing and product teams to deploy and use anywhere. Now the last time you were on the show, I would’ve described Summit as a forecasting tool for, originally it was for SaaS, but then I think it just became a forecasting tool for business. So this is different. And today we’re going to talk about how you’ve made that decision, the journey, what is it, 12, 18 month journey to get here. What was the impetus for not continuing to do the forecasting stuff? Was there something about it that wasn’t working?

Matt Wensing:
That’s a great question. Yes, there was. I think the short version is that we found that there’s a learning curve with the product. If you want to become a developer of apps on Summit, let’s put it that way. If you want to build calculators as that, H1 says there’s a learning curve. And that learning curve was really exacerbated by the fact that people would come to it and they would see this canvas, which was something you expect to see in a design tool, but not something you expect to see in a planning tool. You’re thinking, oh, it’s like a spreadsheet. And then we’d always have to explain to people. And no, it has the capabilities of a spreadsheet. But the nice thing is it’s laid out in this infinite canvas, which is much more like a whiteboard. So we used to call it a whiteboard that does math I think was our best positioning statement prior to now.
And through a lot of conversations we found out that while that was resonating with some, and I think that’s always tricky is that it’s working a little bit, that every time we tried to get someone excited to build it, they would get to the end of the road and go, okay, so then? What do I really have? And it’s like, well, you have a canvas, like a blueprint, you can share that with people. And so to answer your question, what wasn’t working was sort what you ended up building with Summit wasn’t a recognizable existing thing, it was a canvas blueprint simulation on a page thing that was completely novel. And there was a lot of chatter about this on startup Twitter, but it’s always this endless debate of a new product category versus an existing product category. And we were basically going down the new product category route, I would say a hundred percent with the whiteboard that does math because that just doesn’t exist yet.
We realized was we need to somehow get people in the position where they can create something that people recognize. And some people wake up every day and go, yeah, I’ve been thinking about that thing. In fact, I’ve tried to build one of those things before and if this is a cheaper, faster, better way to build that thing, then we’d solve that problem. But we just weren’t having enough people wanting to try something new and adopt that learning curve even though the tooling was so powerful. And I think you think about even a new programming language, you could have, I don’t know, go or elixir or pick your language. Sure, some people are going to learn that, but if you really want it to take off, you have to show the world what can you make with this that I need and I can’t make with other things very easily. So we didn’t have that and that was the irritation, if you want to put it that way, the lingering problem weakness that we had in our business was that lack of resonances on what do I make with this?

Rob Walling:
So then folks would be intrigued, they would try it out, they’d never completed the build or they’d complete the build and then be like, I don’t really know how to use this ongoing?

Matt Wensing:
One thing that was really encouraging and remains this way, is that people who want to invest in becoming Summit developers, it’s pretty binary. It’s people either latch onto it and absolutely love it, usually takes a couple breakthroughs, but they go that path. Or like you’re saying, I would say as high as maybe 90 out of a hundred people, they take the two Lego parts. They try to bonk them together, if they don’t click, it’s just not working for them. And that’s the same way as people trying any design tool or new language. It’s just some things fit people’s brains and some things don’t. And hey, if you’re hitting 5% of the population, that’s actually pretty good considering just how unique sometimes these things are in terms of I just don’t think this way. And so they would struggle and they would fall off.
But then what was funny is they still had the original problem. They still wanted to forecast their business, they still wanted to figure out if they needed to raise money, they still wanted to play with their pricing. So all these problems that I just love as a startup founder and it was very frustrating to go, well, wait a minute, why do you have to learn how to develop in this language just to get those benefits? We started to put these two and two together and go, well what if someone who’s already built a thing that does that could just share that with you? Could they publish it somehow and release it to the world and share it with you? Because you want to use something. And this person over here is one of those rare people that built a tool that does that, a thing that does that. How do we connect you two basically became the challenge.
And a lot of people want to read blog post, not everybody wants to write one. And so they were coming to us wanting answers and content and we were sort of telling them, well you got to write your own answers. And we were like, this is silly, why don’t we let people publish their work on Summit? But then it was like, okay, if you publish a Summit thing, what is it? What form does that take?

Rob Walling:
Got it. And that’s when you started calling them calculators because everyone knows what that is. And I’m on your templates page right now and I think most of these you have made you and your team have made to date.

Matt Wensing:
Yep.

Rob Walling:
There’s customer life cycle forecast, there’s a B2B sales pipeline forecast, acquisition and retention calculator, simple monthly savings, ROI calculator. So it’s not all startup based. I mean monthly savings is something a personal finance person would do, but it sounds like the way you’re talking about it, you don’t want to make all of them. You want third party devs to learn the Summit language in essence, which it isn’t technically language, is it? Or is it all drag and drop or do you need some coding ability to be able to build a calculator?

Matt Wensing:
So I would liken it to spreadsheets where you can as point and click, but you do end up typing little snippets of code. So that’s why we call it low code. And it’s a lot of spreadsheet like syntax. And again, that’s where this learning curve comes in and it fits some people’s brains really well. Other people it doesn’t. But it can be learned. And we do have a few hundred folks who know how to make these. We have people publishing new ones, actually we just had our first agency customer learn this as a low code agency tool and say, Oh I get it. We can build calculators for our clients. So that’s starting to happen. But the calculator word just ended up being so critical to solving this puzzle of what is it? And I struggle with that, honestly. That was not an easy word to decide on.

Rob Walling:
Because as you’ve said, you had whiteboard that does math, you had canvas. There are a lot of different words. I struggled with this back in the day. I remember not wanting to be an ESP, right? I was like, well no, drip sends behavioral email at the right time and it does all this stuff. And I kept describing to people what it did. And you know what? I was trying to invent my own category and that was dumb.

Matt Wensing:
Better to be the really amazing player in that calculator space than to invent a new thing, which everybody then has to invest so much mental energy in placing it in their brain. They’re like, but what is it? And I’ll tell you the other thing that bothered me. This sounds like maybe what bothered you too is calculator sounds diminutive, derogatory, just downplays it. You’re like, I mean, come on guys, that’s two plus two. We do so much more than that. And you come to this realization I think when you want to, and that’s sort the other part of this recent journey is when you want to go to market, finally you have to decide, am I going to resonate in appeal to most buyers and bite that bullet if you will, or go cross that step? Or do I want to remain, well this is for the early adopters, the cutting edge. And it’s punk rock, if you’re not into this, it’s not for you.
And it’s like, that’s great, but you’re not going to top the charts. You got to call it something that people wake up in the morning and say, I want that. And that was the proof. So we tried this calculator positioning, I think you probably even saw it in the tiny seed Slack I posted before we went live with the new site. It was like a last minute test, hey, does anybody want a calculator? Just blew up the responses. It was really exciting.

Rob Walling:
I’m going to bring it back to when I finally just threw up my hands and said [censored 00:10:49] it, drip is marketing automation that doesn’t suck. There was just a moment where I was like, I have to do this. Because I didn’t like marketing, I didn’t like the term, it felt so corporate, it felt enterprise. We weren’t that. But I realized we could be that but not be that. We could be the not marketing automation. And so it was a giving into it and it definitely, it allows a customer, you’ve already said it, but when they land on your homepage, they read your H1, what they’re thinking is how does this fit into my mental model of the world and of the software space? How is this something I already know? Is this MailChimp but with xyz? And so if you describe that we’re a whiteboard that does code, it’s like, or whiteboard that does math and we forecast, it’s like okay, I have a whiteboard and you literally have to scroll down.
But if you come to a site that says I can build simulations, I can build calculators, I can build this. At least it gets you part of the way there. You’re right, calculators does not fully describe what these are because when you look at them, they are very powerful. There is a lot more to these your templates than just being a, as you said, nine key calculator or whatever.

Matt Wensing:
Exactly. Exactly. And they’re not even calculators because I don’t think there’s a single one that says punch in nine then plus then three then equals or whatever. Really, they’re programs, they’re apps. But that’s too generic. And I think with positioning you end up having to find a word that gives people just the right grip on what you are and what you aren’t like. I think that was April Dunford’s key insight is that it’s the right words that get people to go, oh, you’re a database for sales and marketing leads as opposed to oh we’re this portal where you do stuff with sales. So calculator ended up being that unlock for us where yes, it’s deme, but based on the responses from all those founders, I think we had a dozen founders respond just to that thread, which I felt like was a pretty good hit rate of people who are even active in the channel on any given 24 hour period, we had 13 people reach out and go, “I’ve always wanted a calculator, we’ve tried to build calculators before. Turns out we needed a JavaScript developer, et cetera, et cetera.” And it was like all this latent frustration and lack of satisfaction with having built calculators in the past. And so we said, okay, this is what they are, this is what we’re going to call them. And then we get people’s attention. And that’s been the hard part.

Rob Walling:
This is actually makes things a lot clearer for me because when you posted in the Slack and you said calculators, I remember thinking, whoa, this is a big pivot. Is this even the same software? Is it the same coat? But now that you tell the story, it’s like, no, it was just what you said. People weren’t quite finishing. There was only a certain subset that want to build it. How can we make it available so as many people want to build can build and as many, many, many more people will want to use them. So therefore we have to make them embeddable and shareable, which is not a… it’s just an extension. This is not a pivot, but it is a repositioning. That’s the big thing, is the words changed.

Matt Wensing:
Definitely. Definitely repositioning. I think the other insight was if you want to make a tool, so ours is a maker tool, you can build stuff with it. If you have a tool like that, they need to be able to make things that people want to use. And that’s extremely reductive. It sounds silly when you say that, but the reason a calculator is exciting is yes, partly because makers recognize those as artifacts that they have seen before and they can make, but then they can also go, oh, I know someone who would use a calculator. They’re never going to want to make one themselves. But if I can make something other people can use, that’s cool. That makes me want to take the time and make the effort to learn how to build these. Because I can think of three people or 20 people or 300 people on my mailing list right now who would want to use a calculator and that’s good for me if they use something I make.
And so that’s the other thing about having a recognizable output is that now the people who make stuff, they know how to communicate that to their audience and say, hey, you think about MicroCon or anything else, hey now we have a runway calculator on our homepage. You can say that as opposed to what would you going to say before? Your audience is going to go, huh? I don’t know if I want to use that. So that was really important to use a term that not only made sense to the makers, but also the makers had confidence that their audiences would also know what the heck that was.

Rob Walling:
Yeah. And so you mentioned to me offline before we started recording that part of this process, this rethinking started when you hired this designer to design this killer homepage. I’ve already said it, but it’s really nice. I’m taken by it. I mean I see a lot of marketing sites for SaaS and there’s something about the fonts and the way it all lines up. I’m sure you paid a pretty penny for it.

Matt Wensing:
Yeah.

Rob Walling:
But what was that and that process you said led you down this thought process of maybe we do need to change things up. You want to tell us that story?

Matt Wensing:
Yeah, that’s worth telling. I’ll condense it down. So we actually thought it was going to be classic project mismanagement or over optimism maybe. We need a new website, we think we know what it’s going to say or we’ll figure it out what it’s going to say part. But the current site, the website we had before was practically fit in one browser window without scrolling. It had 20 words and some testimonials. That was just the movie trailer coming soon poster if you will, with the light saber and the dates. That was pretty much, that was it. It was a promise to ourselves.
And so we basically said, okay, we’re going to figure out the words, but we don’t want to do yet another site using off the shelf components. Pick your framework, let’s hire a designer, or an agency that can help us with that. And they turned out to be, we interviewed a few and they turned out to be strategic in addition to being good at design, which is a pretty rare combination. And the price was, it was pretty, but it wasn’t too many pennies. It was in our budget. We hired them, but they really got us.
And what I mean by that is I don’t think any of us really understood how much work we needed to do to really get that site to where it is today because we did have to go through the repositioning. And I would honestly say, if you can wait to do your new site until after you figure out your new positioning, do it. Because mixing those two together, this is actually the second or third version of a fully designed site that we went through. And the project, instead of taking four weeks took more like six or seven if I remember correctly, maybe eight by the time it was said and done. So it took a lot longer. It was still within budget because it was pretty, I mean it was ridiculous at first.
But the thing they had us do was they really, and I would encourage anyone to do this, just challenged us to tell the story that you need to tell to a before and after day in the life of a prospect. They come to your homepage, what’s the story? What’s the hero’s journey that you want to take that person on from beginning to end? And I’m like, oh, okay. Marketing cliche. But at the same time they talked about jobs to be done, why are they hiring this product? They just asked really deep questions. And I have to say, if they hadn’t done that, it was grueling. I mean, I think 75% of my mental energy and time for all of those weeks went to figuring out the site and the language and the positioning.
So it was a giant investment of company time, but going that deep is, it is the only reason we got the result we did. And so they took us through that journey and they were very patient to adapt as we realized, oh my gosh, they’re calculators, not simulations or whatever that next day’s epiphany was. But they were also good partners in the sense of pushing back on us when we would go a little bit too far and they would say, Okay, now you’re talking about your target audiences, developers in the traditional sense, I don’t think it is. I think low-code developers are probably your audience. Let’s try to stick with that. And so they were that keel right on the ship. But they also forced us to navigate some pretty crazy waters for two months.

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Matt Wensing:
Yeah, it was, full stop. The other thing that we were doing at the time was when we started that journey, we actually didn’t have the published button in the app. So our developer was responding to the positioning changes that we just talked about in real time as well. So we said, and he actually was helping us think up these things like, well what if you could publish it and we put a wizzywig editor or a basic UI on top of it and it was like a calculator interface. This was really a team effort in that sense of going, okay, if we did that, then we would be able to let people publish these and then we could have a page where that thing lived and the user wouldn’t even have to be logged in. It just all came together.
But again, when things come together like that, the biggest risk was spinning and thank goodness was a small team because two months of spinning like that, I told the team this afterwards, if we were a team of 10 or 12 or 20, some people would’ve fallen off the merry go round at some point because they’re like, I just invested a week in this video tutorial. What do you mean we’ve added a publish button? And obviously they’re a good teammate, they’re going to suck it up and delete that, but part of only being able to navigate that in two months and come out the other side with a good result was we’re still a tiny, relatively tiny team working with an agency of two people and we all just had to talk it through and not waste any effort.
And that was probably the hardest part, Rob, was looking at some of our existing help center content, YouTube video tutorials, screenshots, all the marketing work we had out there and going, this isn’t just a change the logo, this is a delete a lot of the existing marketing content. If you do a good job with your positioning, you weave it into everything. And now you’re basically pulling on that route and everything just suddenly looks like, well, on this page you’re talking about building a profit and loss statement. That’s not a calculator. So we have to rewrite that and it guts you in a content sense, which is way more expensive than the… it is actually as expensive as the agency work, right?

Rob Walling:
Yep. And I mean, you called it out, but one of these massive dangers of these companies that raise venture and scale up and hire, you said 10, 20, but I mean think of in the payments space that e-com payments, it’s like bolt and fast were the two and one of them is at like 500 employees or 300 or something and they don’t have product market fit yet. And you have a dozen sales people, like you said, you have videographers, you have people writing marketing copy, you’ve done so much work and then you’re like, oops. Even if it’s not a pivot, if it’s a slight adjustment, it just wastes a lot of people’s time. It wastes a lot of money and it’s why funding should, not funding, but scaling up should come at that point where you have at least that modicum of confidence that you’re not going to have to dramatically change

Matt Wensing:
It. Right. And on that note, yeah, I think there’s virtues in raising some money as we’ve talked about before, but if you spend any amount of money you raise investing in things that you haven’t validated, you run that risk of having to decide to throw it away later. Which means it was a lesson, but it was an expensive lesson. And you’re right. I mean now salespeople, So I did this at my last company. We were were SMB long tail SaaS focus, mostly self-service inbound. And we pivoted completely all into enterprise sales. And we had some sales and marketing folks who either weren’t interested in that transition from a career standpoint because it just wasn’t exciting for them. Or selling a six figure enterprise deal is just a different skill set than answering a phone and selling somebody a $250 a month subscription.
But now you’re talking about lives and careers and that investment is a lot more painful. So yes, absolutely finding that fit first and staying small as you can. I could see a world where you either don’t make it obviously because you throw up your hands or you transition but you don’t fully transition and you half bake the transition and then you’re like, oh, the results aren’t great. Well yeah, that’s because 20% of your team really isn’t bought into it or didn’t update their collateral, so now you’re this two headed thing.

Rob Walling:
And so you’ve made this change and now folks can go and create templates, download calculators, they can embed them, they can do all that stuff. Which your team was kind of, you’re a couple devs, right?

Matt Wensing:
Yep.

Rob Walling:
You plus another. So it designed to be able to just roll with that to basically implement quickly. As you said, you figured out your positioning, you figured out which you want to do, and it’s like, oh [censored 00:25:05], we got to go write some code to now make that possible. But you did and you were doing it in real time. And you essentially, I’ll call it a relaunch, you relaunched it. Was it last month?

Matt Wensing:
Yeah, I think that was the first week of, I want to say August, was that early August?

Rob Walling:
Okay, so almost two months, not quite two months ago. And how is that going? What signals do you have about whether it’s resonating, how it’s resonating and even love to hear an example or two of folks who have either built or embedded the calculator and promoted to their audience or just something, a use case or two.

Matt Wensing:
Yeah. I think what this ultimately did is it enabled us to say yes to people who wanted to use things but not build them. That was the purpose of it. And so the best stories to me are the ones where somebody comes in, they find one of our templates or they find an existing app, they change the labeling, they change the colors, a couple things and then they just take it and they put it into there. So one great story, and this is actually pinned to the top of my Twitter at least today, got this email out of the blue. This person runs a mastermind group, I guess there’s some membership software that they use to run it. And he found a calculator that illustrates sales payback. So if you hire a new salesperson, how long does it take to pay back on that hire? Because you got to think about commissions and contract values.
Like you said, it’s not just a simple nine plus nine calculator. He took it, embedded it on their member’s website. And he just sent me a message, this is the coolest app I’ve used in a very long time. And I knew he didn’t build that. I knew he customized it a tiny bit. I’m not even sure about that, but I knew he went and got the in embed code and he put it on his page and he was super excited. And he might say like, Well, what’s in it for us? The other thing that’s in it for us is we decided the two brand, all of the free embedded calculators as Summit. So now in his membership site or portal, there’s this really awesome calculator doing these complex things with charts and everything else. And then there’s a very clear at the top says sponsored link to get calculators like this, go to Summit.
So he’s happy, he actually has a paid option if he wants to do it, which is to get rid of that sponsorship link and he can pay to white label it. And so he have that model there and it’s just working as designed and none of that friction of him going, well yeah, I’d love to have a calculator that helped our mastermind members understand sales better, but I’m not going to build one and I don’t even want to learn your tool to build one. Even though you’re telling me it’s easier, I just don’t have the time for that.
So that’s an example of just super low friction adoption of the tool that we built. And that’s enough for us to grow this business because we can monetize that. I think that’s the other thing to say. We’re not just saying publish for free, embed for free. There is ways to monetize that, but it skipped the whole challenge of him having to learn how to become a developer. And I think there’s, for every maybe a hundred of him, maybe a thousand of him is probably only one of the other. So now this market size is just much, much bigger. So that’s one example.
We also have content creators that folks know of. So we’re talking to some pretty popular SaaS metrics providers, not surprisingly to say we at blog posts all the time where we’re trying to show people things about retention or acquisition. Can we put a calculator in our blog powered by you guys? And absolutely, here’s one, it’s already built, copy paste. The gears are moving now. And I keep telling the team that we’re building momentum now around this and we had our highest traffic week ever last week including launch weeks. So for founders, you know what I mean? It’s like sure you had that spike but then you’re down into that trough. Being able to look at your floor now as being above where you’ve been before is just things are moving in the right direction. So it’s been good.
And people are also reaching out and saying, I understand now why I might want to learn this and build these because look at this usage. And so that’s nice too. It’s like, oh, can I build these and share them with my audience? Of course, you can do that. So it’s working and the revenue is up. We had our best revenue growth month to date last month, which was awesome. Churn is about the same. So from just a revenue growth standpoint, to see that plateau get broken is another one of those things you look for as a founder because it means something good has changed, right?

Rob Walling:
And on this show I often say don’t bootstrap two-sided marketplaces unless you already have one of the sides. And there’s so many things that you’re not bootstrapping a two-sided marketplace. Number one, you’re not bootstrapping, you have raised funding. And so that gives you some leeway. Number two, you get value out of this. You, being Summit, make money whether there is two sides to the marketplace because right now you’re building calculators and if people want to pay for it. So you are essentially handling the supply side for now. And that’s a nice advantage. If you started Uber, you couldn’t drive all the black cars, you can’t handle all the supply side, you need to… versus now you just need to generate demand and build that supply side until there’s a compelling reason and there’s enough builders that they start to contribute to the supply side. So do you see the bulk of this business or if we group flash forward three years, five years, that the real cash generated in this business is more of a marketplace style or is it still the SaaS? Because right now, so folks know as of this recording, there’s a free trial and then if you want to build stuff, it’s 24 a month, 249 a year. And that’s also if you want to remove branding, I’m assuming off of my calculators that I share and then there’s enterprise beyond that.

Matt Wensing:
Yeah. I see the majority of it coming from the marketplace and the embedding and the sharing. And the reason I say that is I like what you pointed out about Uber, we talk about marketplaces and then we always want rules of thumb. So I agree with you. One of the things we had to wrestle with here before we made this move was what are the ratios, right? If this is Uber, then I need a certain number of drivers for what, couple of riders. It’s a very tough ratio and the other marketplaces might need one to one. Those are hard to cold start or bootstrap because you need almost as many of the hard part as you do of the other, and that’s very difficult to scale. So Uber was, what were they doing? They were subsidizing the heck out of driver earnings just to get drivers out on the road.
Well we realized with this was, wow, if Matt can build a calculator a day, which is the pace I was on a couple weeks ago, and those calculators can each be used by thousands and thousands, potentially hundreds of thousands of people, there’s no limit to the number of people that can use them, then that’s a very high leverage activity. That’s like one Uber driver being able to drive around the state of Florida. That’s absurd. But if that’s the case, then this is easier to cold start and it’s easier to build. And I think looking at those ratios is really important. So I think this ends up looking more like I’m a gamer, at least try to be when I’m relaxing. I think this has more of a gamer marketplace shape to it where for every handful of people who want to be a game developer, you have potentially millions of people who just want to play games. And that’s a lot easier to start then.
And if you’re the publisher, if you’re a Nintendo, you’re like, sure, we can charge a licensing fee to build Nintendo games. But ultimately, and that’s just sort of paying for the software, maybe the customer support and stuff. But ultimately it’s the game players who are going to foot the bill by paying for usage and by looking at ads or whatever the model is. That’s how we’re going to make our money is by selling a million copies of Mario Brothers. But for now, we’ll make Duck Hunt, we’ll make Mario Brothers, we’ll make Zelda, we’ll make the hits and eventually more developers will come online and realize, oh, I want to make something too. So that’s where I see it going. And so we’re focused right now on usage and traffic and the embeds and the sharing because I believe that’s part of the market is much, much, much bigger than I want to be a developer. We need those. But I think even if we had 20, 30, 50 dedicated developers, that’s a lot of the games, if you will, that are getting created monthly or weekly for any platform. Right?

Rob Walling:
And building the demand side is sounds like really what…

Matt Wensing:
Is actually the harder. Yeah, that’s actually the more important part is there’s plenty of talented developers in low code, especially, developers out there. What was important for us was to prove to them that if you build something using this platform, it’s going to get used. It’s like saying, hey come drive for us, they’ll be riders. You need that driver to say, prove it. Prove me that there’s going to be riders because I don’t want to just sit in an empty car and not making any money. So we really need to prove the demand, but I’m for now sort of the driver. We have a couple others, but that can work just given the dynamics.

Rob Walling:
Very cool. Sir, you are Matt Wensing on Twitter. If folks want to follow you and of course usesummit.com if they want to hear about what we’ve been chatting about today. Thanks for joining me.

Matt Wensing:
Thanks Rob, appreciate it.

Rob Walling:
Thanks again to Matt Wensing for joining me this week. And thank you for coming back this week and every week listening to Startups For the Rest of Us. It really means a lot. It means a lot that this audience is growing and it means a lot to me how many folks are mentioning Startups Pod on Twitter, mentioning this in Reddit, Hacker News, all the places. Thank you so much. This is Rob Walling signing off from episode 633.

Rob Walling: Welcome back to Startups for the Rest of Us. I’m your host, Rob Walling. This week we have a show format that I’ve adapted and renamed. Instead of the News Roundup, this is Hot Take Tuesday. Where Einar Vollset comes on the show, and he and I analyze and discuss the Figma exit. We talk about side project distractions, talk about no code and bootstrapping, and look at a tweet that calls them a bit dogmatic. Similar to our News Roundup episodes, normally it would be Tracy, Einar and myself, but Tracy is out of pocket this week. And of course I give people no notice on these things. It’s not like I book them two weeks out, so I literally, I think I Slacked them yesterday and said, “Can you do this at this time tomorrow?” So I really appreciate Einar taking the time out of his schedule to come on the show.
I hope you enjoy this format that we do every few months. But before we dive into the show, I want to let you know that Microconf Remote is next week and we are diving into early stage marketing. We’re going to be talking about marketing with Capterra through SEO, through conversions versus recessions and more. We have Amanda Natividad, who heads up marketing at SparkToro. We have the founder of Gymdesk who is just crushing it and doing really well with Capterra. We have Whitney Deterding from CoSchedule and Gia Laudi, one of the founders of Forget the Funnel. Dates are November 1st through the 3rd, so it’s next week. It’s 11.00 to 12.30 eastern time. So it’s three days, one and a half hours per day. If you buy a ticket, you get the videos, if you can’t make it. Tickets are at microconfremote.com, very inexpensive. This is the least expensive Microconf Remote we’ve ever done. So if you’re in doubt, check it out. I’ll be there live and I hope to see you there. And with that, let’s dive into the show.
Einar Vollset, welcome back to the show.

Einar Vollset:
Hello, thanks for having me.

Rob Walling:
Yeah, I’m excited to do a rebrand. So I used to call these The Bootstrapper News roundtable and then we started calling them News Roundups and you know what they are now?

Einar Vollset:
What?

Rob Walling:
It’s now called Hot Take Tuesday. You like that?

Einar Vollset:
Nice. Is that why Tracy’s not here? Because she’s like the considered opinion, that whole thing?

Rob Walling:
No, I want Tracy on. For the listeners, it’s normally Einar, Tracy and I that record these. Tracy happens to be at a place with bad wifi this week. And I basically gave y’all what, like 24 hours notice to record this. It’s not like I say, “Oh, in two weeks can you do these things?” I’m like panicked. Oh my gosh, I got to get an episode out. And so set you a time. So we’ll have Tracy back next time, but for now, Hot Take Tuesday.
And so today’s episode begins with you and I talking about Figma. Adobe acquired Figma for 20 billion dollars and I have a TechCrunch story that we’ll link to in the show notes. The TechCrunch headline says, “Taking out one of its biggest rivals in digital design.” So Einer Vollset, people, consumers, people who use Figma are shocked and surprised and angry and other befuddled emotions. This was, I would say potentially an expensive acquisition, question mark. I believe they were at just under 200 million ARR, 20 billion is about a hundred x multiple, so that’s high. So let’s hear it. You think it’s a good move for Figma? Good move for Adobe?

Einar Vollset:
Fantastic move for Adobe, I think. I mean, I’m not really in the Adobe space. My wife sort of uses those tools more than I do. But I think given Figma’s growth and the fact that being online first and collaboration first, I think that really they sort of had to do it. Basically, Adobe’s interesting in the sense that it’s not long ago that they used to be one time purchase and they made the move to more of a SaaS model with a recurring subscription model. But fundamentally, at least when they started, it was just like, “Oh yeah, now you can download the latest version but you got to pay us a subscription.” Which is very different to a product that’s like first design, online in a collaborative type environment. Yeah, I mean honestly I wouldn’t be very surprised if this doesn’t run up against some antitrust type issues, some competition issues.
I don’t think it’s a done deal by any stretch of the imagination, but I think for Adobe it was an expensive deal. Particularly when there’s like a hundred times ARR is one thing, which obviously it’s going to be crazy now you’d meet founders with a 500,000 ARR business thinking they can sell it for a hundred times. When you combine the fact that they, that’s the payment they did. But also on top of that, their stock price I think declined at about $20 billion as well on the announcement. So effectively it cost them double that. So yeah, I think expensive but potentially long-term value add for Adobe is sort of my view on it.

Rob Walling:
Yeah, the way I was looking at it was at this point with a company, an acquisition like this, multiples are, it’s after the fact, like that’s we’d back how, they didn’t go in and say, “We we want a hundred x for this company.” That’s not what happened. They basically said, “We don’t want to sell.” And Figma basically said, “There’s no one else to buy. We are the one.” So people know that I collect signatures and I collect comic books, right? Old silver age comic books and there will be a comic where there’s 50 graded at this level, but then at the highest level there’s only one. There’s like one in a 9.8. And you know what? That person can ask whatever they want for it, even if it’s a stupid price, if there’s demand for it. And that’s what it is. Figma’s one of a kind, there’s no competitor that’s close to them.

Einar Vollset:
We see that on the M&A side too. Basically if you’re not for sale, that’s the reason why you get super high valuations. People sometimes say, “Oh, we’ve gotten in the past, we’ve gotten offers that are sort of not a hundred x but in the 20 x ARR offers.” And sometimes I talk to founders who are like, “Yeah, we’d love to get that.” I’m like, “Yeah, but you’re not going to get that if you’re obviously for sale.” Get that if you’re not for sale and basically the buyer has to convince you that no, no, there will be a price. Everything has a price. And I think that’s pretty much what happened here.

Rob Walling:
And if there is a replacement, if there is a close second, if there is a slight commoditization, ‘Oh I can just buy this other company here and get 80% of the value.” You don’t get a hundred x. You have to have such a, and have a trajectory. I mean 200 million, I think they were going to double, almost double again next year in terms of revenue. They’re already on pace to do that.

Einar Vollset:
Yeah, one of the most interesting things about Figma actually is how slow they grew. Initially they were for years and years, they were doing the opposite of what you and me usually recommend people doing and start selling. They weren’t really charging anything. And then the first year, I don’t know if we have the growth chart up here in terms of how they grew, but it took them years to get anywhere near interesting. And then it just took off I guess. It just sort of compounded after the fact.

Rob Walling:
Yeah, they really did. They spent a couple years building and then they weren’t charging at all. I think they had a free plan. They had no paid plan for a while. And it’s interesting. Yeah, this is similar. WhatsApp sold for, wasn’t it WhatsApp that sold to Facebook for 20 billion?

Einar Vollset:
Was it that much?

Rob Walling:
Yeah, I think so. And then Instagram sold for a billion, which at the time they were like six employees, seven employees and then they had no revenue or barely any. These are shocking numbers until you realize, “No Instagram wasn’t going to eat Facebook.” It’s not like If Zuckerberg had not done that and they weren’t for sale and there was no repla…right. This is why you see this.

Einar Vollset:
Yeah, yeah.

Rob Walling:
The other thing is, the day it sold there was so many people upset on Twitter, is where I saw it like, “Oh no, Figma sold, Adobe’s going to ruin it.” And they may or may not. But what do you think? I tweeted they’ve raised two, three hundred million dollars from venture capitalists. What do you think is going to happen? You know what I mean? What is the outcome here?

Einar Vollset:
Yeah, no I think it’s an interesting take. It’s a little bit, the path for them was either to be acquired by someone like Adobe or go public and it’s, “Is the company fundamentally different in how it serves its customer because it’s public versus acquired by a larger competitor?” I don’t know. I don’t really think so.

Rob Walling:
Let’s jump to our second story. This is a tweet and obviously we’re going to link up everything we mention, all the tweets and everything will be in the show notes. You can go to startupsfortherestofus.com to check those out. Or if you want our show notes in your inbox every week, sign up for the email list. You get a couple free guides, you get the 5:00 PM framework that I introduced last week. Einar has been copiously taking notes on the 5:00 PM framework and using it to evaluate.

Einar Vollset:
You introduced the 5:00 PM what?

Rob Walling:
Exactly. So this next story. See people, do you see what I have to deal with? This guy he’s my co-founder, this is rough, wish me luck. All right, so Pierre de Wulf tweeted, Pierre de Wulf is the co-founder of ScrapingBee, a company that has been very public about their bootstrap growth. And last I heard they were talking about what 1.5 million ARR and continuing to grow. They are a TinySeed company so you and I know their revenue. But Pierre’s tweet says, “The energy and efforts to grow 5 products to $1k MRR are far greater than the ones needed to grow one product to $20-$30k MRR. Building new things is fun, but there’s a significant opportunity cost to that…”, and he puts it in bold, FUN, “…to that FUN. Just something to keep in mind.”
So Einar, indie hackers, I don’t just mean indie hackers on the website. I mean developers who go launch side projects, often they’ll do a side project a month and they’ll throw a lot of things at the wall to see what sticks. And there are even some models in this space, some folks you can follow that are balancing all these products and it sounds really exciting and interesting. But I personally I agree with Pierre, I’ve been in this situation and I can tell my story a little later. First I want to kick it to you. What are your thoughts on this? Do you think Pierre’s right and if you do think he’s right, why do people do it then if it’s not essentially the most efficient or smart way to do it?

Einar Vollset:
I think it’s right. I agree with Pierre. I definitely think there’s a cost there, but I think people do it because you get a bump kind of, when you launch a lot of the time to get something and it’s like, “Oh yeah, it’s, there’s a novelty factor.” Maybe you are excited about it as the founder, so you’re maybe pushing a little harder than you might do for something that’s been launched for a while. So you get a little bit of a bump and you get a little bit of that endorphin kick. And I think that’s what people chase a lot of the time. They come around, they’re like, “Yeah, it’s a great thing, now I’m making 500,000 bucks a month, 1500, something like that.” And the reality is post launch, they have to, usually they have to deal with the reality of figuring out whether they actually have product market fit and they’re staring down the barrel of, in some cases pretty significant churn because of your product market fit.
People might sign up for it because you have a big following on Twitter or whatever, try it out. But they’re not going to keep giving you money six months after you launched if they’re not using it, if that’s not something that you’d want. So I think a lot of the time with the launch you get kind of an artificial high when it comes from usage and income and I think people want to, they like that piece and they go after it. And really the hard part is sort of the trough of sorrow as it were where it’s like okay, “We have this product now and now you have this mountain of work to figure out in terms of what features to build, what marketing channels to experiment with, systems that you have to build.” You talk about the difference between building a product, building a business.
I feel like a lot of the people who are doing these multiple products, they just like building products and the newer the better and the shinier the better and they just churn them out. The second step becomes, “How do you build a repeatable sales channel? How do you build out a team? How do you do all that stuff?” And that’s not necessarily as sexy and certainly it’s not as easy to talk about and get kudos on Twitter about. I think that’s definitely true.
I do think there are players who do this well, but they tend to be bigger holding companies. So, our friends at Tiny Capital, they do this pretty well. But if you look at their approach, they very much, like they hire a CEO, incentivize them and let them run it completely. It’s not like Andrew Wilkinson is sitting around and making CEO level tactical decisions for every single business that Tiny holds, that doesn’t work. And I think that becomes the problem because you as an indie hacker or whatever, you don’t have the resources to hire someone for all your five or six or 10 or 12 products. You end up just scatterbraining across them.

Rob Walling:
That’s an interesting take and I like your insight. I hadn’t thought about the dopamine rush over the launch. It had occurred to me that building a product is different than building a business, is different than building a company. And the latter two for makers are a lot less fun, I would say. And so I think that as long as you know what you’re getting into, know the drawbacks to it. Don’t kid yourself that if you are launching a bunch of products and usually the justification I hear is, “Well it’s validated because I scratched my own itch,” or “I’m throwing a bunch of things at the wall and see what sticks.” It’s like nothing’s probably going to stick because you’re going to throw a bunch of things, unless you get really, really lucky. You need to put more into it than just building and launching on Product Hunt and Reddit and Hacker News.
But here’s the thing, it depends on what you’re optimizing for, right? Back in the day, let’s say 12, 13, 14 years ago, I was optimizing for lifestyle. I literally worked about a 10 to 12 hour work week. We had our youngest was little, newborn actually. I was not optimizing for growth, I was not optimizing for even money beyond what I, I was making 150K or something from products. And I lived in Fresno, California and it was totally doable and that was okay. And I actually owned several products. I didn’t build them all though, see I acquired a bunch of them for 12 to 18 months net profit, you know what I mean? I’d pay five grand for something and then invest SEO and I’d be doing three grand a month later. So I was doing a very mini, I was doing a tiny, tiny capital. A mini, tiny capital. But it was more about just optimizing for lifestyle.
And then what happened is I got really bored in all honesty I, working 12 hours a week just isn’t, it isn’t all it’s cracked up to be y’all? And that was when I was like, “I want to do something more ambitious.” I had already had SaaS experience but I wanted to double down on it. So I think the idea of working on a bunch of small things is fine, just know what that means. Know that you are very, very likely limiting your growth and if you are an ambitious bootstrapper and you do want to build that 20 to 30K thing a month or you want to build the hundred to 500K a month thing, you’re not going to do it by launching a bunch of small products.

Einar Vollset:
That’s true. If I’m play devil’s advocate a bit on the other side, it’s like there is value in knowing when to quit something that isn’t working. That is the other side of this. It’s like, “Yes, it’s important that you have some staying power I think, and that you can really give something a real go, but if something isn’t working, it isn’t working.” So that is the opposite side of it. It’s almost like you have two extremes. You have some people who are doggedly chasing this thing that just isn’t working for whatever reason. And then you have the people who are just like, “I’m just going to spin up a new thing once a month.” And I think both of those two are probably a mistake.

Rob Walling:
Right. I think that earlier stage entrepreneurs often miss the signals that they would need to pivot the opportunity. Oftentimes shutting it down completely is not the right call. I’ll bring up Drip is an example. We launched, I had a decent audience, I had people watching, signing up. I had 3,500 on an email launch list. I was marketing the hell out of it. And that thing straight plateaued, between about eight K, nine K, just plateaued. Churn was through the roof right. So it was a limited feature set, it was just email capture and email sequences that’s it. Didn’t send broadcast, was not an ASP and it didn’t have product market fit. So one could say, “Well we built something, it didn’t work, let’s shut it down.” And especially if you didn’t have my reach at the time, it would’ve plateaued at one or two K. The only reason it got to eight or 10 is, it was a bunch of people that were following me, that signed up for it and tried it out.
And so it was a challenging road and you can listen to it on startupstoriespodcast.com. It was grueling. That’s like a 90 minute audio documentary recorded over the course of nine months or a year or something. But it was a search for product market fit and it was like “Slight pivot, we’re going to add this, we’re going to figure out this, we’re going to try this.” And getting there was a hard road to your point earlier, it was not sexy, it was not fun. But then once we hit it, it was like, “Ah, that’s it. Right?” And then all the numbers go in the right direction.

Einar Vollset:
Just another point. I think that also applies more than people think. So I think of particularly bootstrappers, and think they have this view that like, “As long as once I get to that stage I’m golden. I figured out that thing. I’m out of that slump at 5, 2, 3, 4, 5,000. Now it’s just gravy train until IPO.” And we’re seeing that with TinySeed companies too. It’s like that’s just not the case. Very often you need to, not necessarily do a pivot, but you need to do something new or different in order to really take that next sort of step and really take the step up.
So because we often see not so much, it’s something in TinySeed but outside it too, is people get to 500,000 or a million or 2 million and then that’s sort of the limit of where they are with their current growth channels, their current product, their current pricing. It really needs to take that next step. And some founders just aren’t up to it. They’re just not able to, either they’re just so married to this thing that was working really super well and they’re sort of sticking their head in the sand about the fact that, okay now we need to do something else, we need to add another step up. Otherwise this is where we’re going to be stuck forever.

Rob Walling:
That’s right. I mean you hit that plateau, you either need another growth channel. If you need more top of funnel, you need another growth channel. If your churn is really high, you need to, well we don’t, part of going to fit with this segment so we need to add another element.

Einar Vollset:
Or maybe you’re serving SMBs and now you need to figure out, “How do we really sell this to enterprises at a much higher price point?” I think that’s part, ties back to the Figma story earlier. It took them a while to figure out, “How do we stop selling to individual creators and actually start selling to enterprises?” And they wouldn’t have gotten the 200 million ARR without doing that change. And I’m sure at the time that was tricky, but it wasn’t just more the same.

Rob Walling:
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Our next story is about Apple’s ad business and AdGuard.com posits that Apple’s ad business is set to boom on the back of its own anti tracking crackdown. So if you’ll recall, Apple basically has the do not track me between apps prompt now when you open apps, so when I opened a Facebook and it asked me I said, “No don’t track me.” I don’t want Facebook and Insta and all these places tracking me. And so it really limits the reach that the third parties like Facebook and Google and anybody else who makes a ton of money from their tracking pixel and their cookies. And now again AdGuard.com is positing that Apple is stepping in and they are essentially, that they are able to track you the whole time you’re on the phone because it’s their phone. And so I’m curious to you Einar, folks may not know, but you have a lot of background in the mobile and the iOS ecosystem going back more than a decade. And so what are your thoughts on this in terms of A, do you think this is true? Do you think this is fair? What’s happening here?

Einar Vollset:
Yes, I definitely think it’s true. I went through YC with an iPhone app basically, me and my co-founder did. So I have experience dealing with the Apple app store and their policies and how they think about things. There’s no doubt in my mind that Apple is working on some kind of ad play. They’ve been doing ads and I don’t know if you remember this and maybe if you weren’t an Apple developer at the time you were, they had I ad I think it was launched in 2000 early 2010, somewhere.

Rob Walling:
Old school, look at you with the deep cut.

Einar Vollset:
Yeah. And it was basically this, basically it was a program, it was like native ads before native ads were a thing. It was basically a programming element inside of native apps that you could build in and roll it out. I think they shut it down after four or five years because they couldn’t make it work. But it shows that they’ve been thinking about ads and how to differentiate and really they’ve been interested in that space for years and years. And I think it makes total sense. I mean knowing Apple, are they the kind of company that could totally decide to crap all over Facebook and Google’s ad revenues and then claim that, “Yeah this is for the good of the customer,” and then come up with some sort of their own version of this but somehow frame that as we’re doing it for the good of the consumer? We’d be basically creating a walled garden of ads that protects the customer, protects the consumer, but really does kind of the same thing inside their own walled garden. A hundred percent.
Definitely, that’s definitely what Apple could do for sure. If you just look at, I’m sure we’re going to link to the thing, you were saying about the sort of log on prompt, do not track you. I think it’s telling, actually looking at the differences between the two prompts. If you’re a third party app, you have to, otherwise your app won’t get approved. You have to pop up this prompt that says allow so and so app to track your activity across other companies, apps and websites. Your data will be used to deliver personalized ads to you, ask app not to track or allow versus their own prompt is personalized ads. Personalized ads in Apple apps such as the app store and Apple News, help you discover apps, products and services that are relevant to you. We protect your privacy by using device generated blah blah blah blah blah.
And they trump this, turn on personalized ads or turn off personalized ads. What would you like, sir, would you like us to turn on personalized ads for you? That just shows what they’re thinking, that and if you also look at it like, someone else said on Twitter, I think it was Zach Coelius. He was like, “I think Apple’s building basically A, a DSPs like a demand site platform, which is what they claim not to have done for years and years. And the biggest play too is going after TV ads.” And I think that’ll definitely happen. I use Apple TV along with Roku and all the other crap, but Apple TV to watch baseball basically most of the time. And the ads that I get for that are atrocious.
Compared to Google search ads, even just banners and stuff. The stuff that I’m getting obviously because it’s just blasted whatever, what audience watchers baseball. The ads I get are inevitably either political ads for local whatever things in San Francisco, even though I don’t get to vote in the city of San Francisco about the things that measures that they’re pushing for or it’s some sort of a horrible disease that I should call my doctor about, related to do you have heart disease and carpal tunnel? Then it’s this thing, call your doctor about provoke or invoke or something random.
So if you just think about how bad that experience is. Do I think Apple’s thinking about building something in that space inside their walled gardens? 110%, I’d be shocked, shocked if they don’t and they’re going to frame it as consumer protection. They’re going to for say, this is what they did. I mean this is what they do with the Apple store. How come there’s now multiple app stores? What an insane system to basically say, “Oh yeah, yeah Apple, you have to go through and we have to approve everything and you have to use our payment processor.” That tells you how Apple thinks about this stuff outside. A hundred percent they’re going to do, 110%. I guarantee it, guarantee it.

Rob Walling:
And I wonder if you think there’ll be antitrust suits that come out of it or, and not by the government per se, but by, I wonder if Facebook’s going to sue for anti competition at some point. Facebook and Google get together, right?

Einar Vollset:
Could be, if you think about it. When you and me were coming up, everybody was like, “Oh, Microsoft, they’re the big bad wolf,” and they got in all sorts of trouble about distributing Microsoft Excel with their operating system. But this is the same if nothing worse. So I’m expecting, depending on how the political winds are blowing, I think they’ll get some sort of a blowback on this at some point. But I still think they’ll do it because the money is too great.

Rob Walling:
Yeah. That’s the thing.

Einar Vollset:
Why not? Because if you think about it, I started using the iPhone just when it came out and it was like tiny, tiny market share. Apple, the iPhone’s Apple market share in the US is 50% now. Basically it’s not infeasible if Facebook keeps cratering and going after this VR dream, fever dream of Zuckerberg, that basically there are more people that are using Apple devices day to day than use Facebook. And so if that’s the case, then of course they’re going to try to capture the kind of income, the kind of revenue stream that Facebook are, have been monopolizing for so long. So yeah, I know I’m for a hundred percent sure. They’d be idiots not to, they’d do great.

Rob Walling:
It’s interesting to me because I’ve always thought of Facebook and Google as ad companies and therefore I share as little as I possibly can with them. And I’ve always thought of Apple as more of the, well we sell the devices, that’s how we make our money. You can be less concerned about it. It’s not like I’ve given them anything except for my credit card number and to buy things. But this will change my, once someone’s running ads, it changes my perception because I know.

Einar Vollset:
But they’re not ads, it’s just they’re personalized ads.

Rob Walling:
That’s the perfect way.

Einar Vollset:
We protect your privacy Rob.

Rob Walling:
To end this story.

Einar Vollset:
We will look after you. Don’t worry Rob.

Rob Walling:
Our next topic is a tweet from Hana Mohan. Hana spoke at MicroConf Europe a couple years ago, an accomplished entrepreneur who has both bootstrapped a company to exit and has now raised venture funding for her second company. This one’s about no code in bootstrapping. She says, “You don’t need to code in 2022, but you should at least try. The #nocode community has a problem with its rhetoric, like the bootstrapping community. I am not writing either of them off. I am grateful I bootstrapped early on. The ‘way of life’ dogma is a serious problem. Like bootstrapping, no-code is empowering. With it, a domain expert with a day job and no technical experience can build products, without having to hire a team of developers. For them, it’s the only game in town. For others, it’s better framed as a gateway drug. And then she goes on to say, “If you’re a young person in entrepreneurship, make your first dollar but then at least learn some coding.”
It’s a whole thread. People can go read it obviously we’ll link it up. I very much share this sentiment where I think no-code’s amazing and no-code is a tool. And much like a hammer and a screwdriver are tools, they are perfectly suitable for the thing that they get done, right. But I don’t reach for my hammer every time that I want to put a screw in or do something else. So before I weigh in Einar, bootstrapping no-code, are they a bit too religious? Oh that’s actually, there’s another tweet and it’s from Jovan. I can’t, I don’t know how to pronounce his last name. But his was interesting because it lines up with something that happened a couple months ago when Ruben founder of SignWell was on this podcast and we were talking about how no code is awesome and it’s really good for this, but there’s some brittleness issue, there’s some scaling issues and that you know, can’t build a full blown ESP with it, right. There limitations is what we were pointing out.
It was based on a listener question. And sure enough people jumped on it and on Twitter were just like, “No, that’s not true.” But then when I asked for examples of actual full blown SaaS apps like, “That’s not what it’s made for.” So Jovan’s tweet says, “No-code is a religion at this point. Look, I do software development for a living. I prefer to do things in the most convenient way possible, but not a single web app I built in the last two years could be built with no-code.” Why do people get angry when I tell them this? You know what I mean? It’s like, “Well yeah, you shouldn’t get mad.” It’s just.

Einar Vollset:
It’s religion? It just is religion. I’ve always felt that, and actually this funnily enough ties back to the whole Apple story because this is to me, feels like a rehash of some of the conversations we had early 2010s. But because people were going to do this similar thing, it wasn’t no-code, but it was cross platform. You don’t have to build any native apps. It was just put together using this framework and then it compiles down to iOS and Androids and Microsoft phone or whatever they call it. And it was going to be totally, it was going to be the nirvana. And inevitably ended up happening was that people would launch something, it be kind of like 70, 60, 70 percent of the way there and then they’d be like, Oh crap, yeah, we need to support this one native thing. And so they would add a little bit of native integration into this other cross platform thing and then they had to do keep two different code bases now because it’s now a cross platform but with compiled specific compiled things.
It quickly diverged into like, “Well, now you have two code bases again, it’s just that you feel good about the fact that it’s, 50% of it is written in HTML instead of Objective C or Java, whatever.” So I’m very much in the same way. The fact of the matter is for me is like no-code is just code. It’s just a paradigm to build apps. And are there environments, coding environments that are more or less visual? Yes. No-code is, to me is basically a visual programming tool mostly. But I feel like the religion that some people feel around this is completely misplaced, right? I’m like, “These are fine for prototyping tools, they’re fine for what they are.” But this notion that this is a revolution in programming, this doesn’t make any sense to me whatsoever.

Rob Walling:
And you know I’m a fan of bootstrapping. Anyone listening to this knows that. I bootstrapped all my software companies and I’m a fan of no-code within MicroConf and TinySeed, we have at least three and there might be four, full blown line of business apps built on Airtable. And I think we have one on Bubble now maybe. I’m all in on no-code. If we can write less code and it works, let’s do that. If I can have a producer, Ron, who is not a developer, go build an entire system to manage the production of our audio and video in three weeks, two weeks, three weeks and it works. And nobody has to write code and I don’t have to hire a developer and I don’t have to spin up a server. Oh my gosh. So I’m a fan of these things, but the dogma of them, it gets a little old.
I’m saying code or no-code, I am bootstrapping. I think I kind of want to wrap up my thoughts with this tweet that I sent out a couple days ago. It says, “Never raise funding is like saying never use a hammer. Funding is a tool, sometimes it’s the right tool and other times it’s not.” And that’s how I feel about no-code and about bootstrapping and about a lot, frankly about a lot of things in the tech world that folks, I think crypto and Web3 and blockchain are really interesting technologies, but they’re not everything. We’re not going to reinvent everything on them, but they are tools and they can be used for certain things that I think are useful.
Our last topic of the day also comes from Twitter. This is where Hot Take Tuesday’s kind of fun because it, what you notice is when we’re doing quote unquote news roundtables, one of the stories, two of the stories is news because so little news is fully relevant to this podcast audience in a way. I don’t want to cover Facebook’s antitrust, blah blah, blah. Who cares in terms of bootstrapping, in terms of mostly bootstrapping, growing SaaS versus is it feels like things that are on Twitter are so much more relevant.
Much like this last story, which I’ll admit is just a bit of a fun one. But basically Ruben Gamez, I mentioned him earlier, he was considering watching 2001 A Space Odyssey. I said I wouldn’t do it, watch a YouTube summary of it instead, it’s very slow. And then he said, “As slow as the new Blade Runner.” And I said, “I like the new Blade Runner.” But I’ll admit we watched it at 1.5 x speed and the torrent of comments lol. Ruben says, “Lol, wtf, are you doing watching movies at 1.5 x?” You chimed in with, “What?” People, there was a gif that Christoph Engelhardt put. [inaudible 00:32:10] It was just this boom. I took a lot of heat for that, a lot. So I want you to tell me what’s wrong?

Einar Vollset:
I think you’re a psychopath that’s what’s wrong.

Rob Walling:
With watching something slow?

Einar Vollset:
What the hell? It’s like a psychopath test.

Rob Walling:
The movie’s too slow. It’s a good movie but it’s too slow. So you speed it up and make it a good movie.

Einar Vollset:
I’m like one and a half through the conversation too to [inaudible 00:32:34] this other thing.

Rob Walling:
But that’s how I listen to all podcasts.

Einar Vollset:
Oh no Romeo, my Romeo, no. Doesn’t it sound really funny? One and a half X or are you so used to with podcasts listening to one and a half X, you think people don’t have this normal life.

Rob Walling:
Yeah. Haven’t you, have you never listened to an audiobook or a podcast at 1.5 x?

Einar Vollset:
No, never at 1.5 x. 1.2 yes. That’s a tall order.

Rob Walling:
1.2 holy.

Einar Vollset:
1.2

Rob Walling:
Sir, come on.

Einar Vollset:
1.5? It sounds like a cartoon when you get past one and a half. [inaudible 00:33:07]

Rob Walling:
Every audio book. The audio books I listen to, since they record them really slow, I listen between two and 2.5 x and podcasts because it’s natural speaking speed, usually 1.5. And so yeah, 1.5 sounds perfect to me. Sounds natural.

Einar Vollset:
No, sounds insane. You’re insane. Your brain is like.

Rob Walling:
Superior. I am homo superius?

Einar Vollset:
It would be great if you go through, in a conference setting and just speed people up.

Rob Walling:
That’d be so nice. I could talk to more people. That’d be amazing. Here’s the problem with my argument. I’m going to just fully mea culpa. Podcasts and audiobooks, they’re mostly informational, right. Versus a film that is art. Someone commented, “I can’t wait to meet Christopher Nolan and tell him I watched all, your movies are great. I watched them all at two x.” I was like, “Yeah, it’s like bringing A.1. to a really expensive steakhouse. Bringing your soy sauce to the $400 a plate Japanese sushi place.” I’m still going to do it.

Einar Vollset:
Oh my God. Yeah, no, honestly I was, it’s rare that a tweet genuinely shocks me.

Rob Walling:
Especially coming from me, huh?

Einar Vollset:
Yeah. I was like, “What?” Normally your tweets, my tweets as you know, is usually completely all over the place. That’s a disaster. But you always consider a tweet. I was like out of left field, he’s like, “Yeah, Blade Runner one and a half x.”

Rob Walling:
It was only 2049. Well here, and here’s the thing too, I’ll say because we’ll wrap this up soon, but I do not watch every movie or TV show at that. But there are some that are just filmed like I’m watching House of Dragon. It’s a Game of Thrones prequel. It’s a really good show. It is very slow, it’s very considered. There’s these long pauses and honestly.

Einar Vollset:
You should just do what everyone else does man. Don’t watch it at one and a half x. Just sit on your phone and scroll through Twitter while the video’s all in the back.

Rob Walling:
See I have stuff to do. I got things to go, people to see. Anyways, I’ll leave you all with that amazing drop of knowledge. Video speed controller in your Chrome browser if you want to do that. I went so far as to, my boys both want to, they wanted to watch Breaking Bad and I’m like, “I’m not sitting through five seasons of this show.” It’s a good show, but it’s a slow burn and I’ve already seen it and I don’t want to sit. So I said I’ll make you a deal.
The old one, older one is like me and loves watching things 1.5 to two x. Every YouTube video’s at two x, the younger one didn’t want to. And so we tried it at one and a half X and I have to literally, you can’t just, what do you call it, Aircast or air whatever, AirPlay. Because chrome blocks like Netflix and something blocks Netflix and all the services. So I literally have to get an HDMI cable, plug my laptop manually into the side of the computer. It just mirrors it and plug it into the TV. It’s a lot of work to be really weird.

Einar Vollset:
Poor children. That’s what they’re going to be talking to their their therapist about years from now. They’ll be like, “My dad. He [inaudible 00:35:59] all the time. This is why I talk so fast.”

Rob Walling:
My dad was terrible, so traumatizing. On that note, we’re going to wrap up this episode of Hot Take Tuesday. Would love to hear your feedback and input on it. If you are listening, you can tweet me @robwalling where I will be reading your tweets at 1.5 x speed and you can tweet @einarvollset and he will argue back about how the San Francisco giants are really good, even though they’re not doing so well, are they?

Einar Vollset:
Indeed. And thank you so much for having me on.

Rob Walling:
It’s great to have you, man. See you next time.

Einar Vollset:
Ciao.

Rob Walling:
Thanks again to Einar for joining me this week. Hope you enjoyed that show. Thanks for coming back week after week. This podcast audience is growing and it appears to be growing faster than it ever has been in the past, and I really appreciate your support. I see quite a few Reddit threads, Hacker News threads, online discussions where people are giving a shout out to this podcast and to the MicroConf YouTube channel and I really appreciate that because that is the best and easiest way for us to grow. I also appreciate anyone who has left us that five star rating or review. We crossed 1000 reviews. I’m not going to keep pound on this because we hit the goal and it’s just really amazing to have that support from you. So thank you for coming back and listening every week. This is Rob Walling signing off from episode 632.

Rob Walling:
So what I did is I emailed Einar Vollset, who, as many of you have heard on the show, has a lot of experience with in particular SaaS M&A, and his response to that question was, and I quote, “Ha ha ha ha ha ha ha ha ha. This is the dumbest (beep) thing I’ve ever heard in my entire (beep) life. Ha ha ha ha ha ha ha.”
Welcome back to Startups For the Rest of Us, I’m Rob Walling, and this week I was going to walk through some Rob solo adventure topics, but I realized that we have such a backlog of questions, and actually several of the questions are kind of Rob solo adventure type topics, asking questions about broader strategic things rather than just detailed tactics, so I am excited to answer several of those. There are many video questions and audio questions, and if you don’t catch the video snippet that we throw up on Twitter each week, you should follow @startupspod on Twitter, because oftentimes you can see the question asker and then see a bit of my response.
Before we dive in to listener questions, I really wanted to thank everyone who has posted a rating into iTunes, a five star rating or review. We passed 1000 ratings, and I’m stoked. 1024 as of a couple hours ago, and reviews ranging from, “Great content every week. Thanks, Rob, for putting out a great show.” To Toms Carb who used the phrase, “Startups For the Rest of Us is truly an MBA on my iPhone. Tuesday mornings are incomplete if I don’t listen to the latest episode.” And lastly, this one from Mark 79 I really like, he said, “Pretty much all the episodes are timeless, so even though a show might be a few years old, the information is still relevant.”
Thanks so much for helping me on this drive to get north of 1000 ratings. We have now joined a select few podcasts that have that many ratings and reviews in the iTunes Apple Podcast store. I know they keep changing the name. And for the record, we have 1024 worldwide ratings and 498 worldwide reviews. So I’m guessing within the next few weeks here we will also cross the 500 mark there. So thanks again for that.
As this episode airs, I am in Atlanta talking to Ben Chestnut at our MicroConf Local. We are going to be in Austin next month. If you’re interested in checking it out, head to microconf.com/locals. And with that, let’s dive into our listener questions.
This first question is anonymous and you’re going to have to forgive me as I think I will probably have uncontrollable laughter at a certain point during this one, and there are some swear words as well, and those will be bleeped per usual. But I received an anonymous question from a longtime listener with the subject line, “Rewriting Our Code Base for Possible Future Sale.” And the question reads, “We have a small dev team at the startup I work for. We have several million in funding and we are growing relatively quickly. Our web app and our tech get rave reviews from our demos and our users. We know it’s scalable and it’s built on one of the standard stacks.” He tells me which stack it is, but I will tell you it’s either Django with Python, Ruby on Rails, PHP Laravel, it’s one of the standard startup stacks that you would expect.
He continues, “Our new CEO is worried that being built on our current stack instead of something that’s more corporate, that our multiplier might be lower for a future exit.” And when he says something more corporate think .NET or Java, something that’s not as common in the startup space.
He continues, “He’s considering building version three of the software from scratch in a more corporate stack instead of continuing, developing, and adding features to our current product. We’ve talked to him about all the startups, deca billion dollar startups, that are literally built on our exact stack and how popular it is, how common it is, and how easy it is to find developers for the stack. Is there any validity that changing our stack in part or full will get us to a higher multiple at a future exit?”
When I received this question, my first response was, “I’ve never heard of that. That sounds very odd.” And I was almost upset by it, because it sounds like someone who maybe doesn’t know what they’re talking about or has a really unique frame of mind. Maybe they have not been in the startup space and they’ve only been in the Fortune 500 space, where perhaps tech would be weighted differently or something. But I was like, “Yeah, this seems like not a good idea.”
So what I did is I emailed Einar Vollset, who, as many of you have heard on the show, has a lot of experience with in particular SaaS M&A, and his response to that question was, and I quote, “Ha ha ha ha ha ha ha ha ha. This is the dumbest (beep) thing I’ve ever heard in my entire (beep) life. Ha ha ha ha ha ha ha.”
And then I was sitting there like, “Okay, so he has confirmed my thoughts on this and that’s good. It’s good to get a second opinion.” Four minutes later I receive another email from Einar that says, “Man, I’m still laughing.” And so then we went back and forth a bit about it. But the last thing, and the one caveat to it, is Einar said, “The only smidge of truth in this is if a particular acquirer already had a team that is qualified in a particular tech stack and your product is built in that tech stack. But really it doesn’t matter for the size deal this would probably be, and how the heck would you know what a specific acquirer is into years from now? Cargo Cult Management. I’d be worried about the CEO cratering the company to be honest.”
So obviously Einar has really strong opinions about it. I also had that inclination. I think he actually put it more eloquently than I did. But I wanted to bring this up because there’s two points to this. Number one, I think we should all be reminded that our frame of reference in the startup space, if we were to move into the Fortune 500 space can often be off for a bit. And this is actually why it’s hard to transition someone, let’s say a project manager or a marketing manager or even a developer at a huge company, 1000, 10,000, 50,000 person company, and pull them into a startup. Because it takes three months, six months, of just undoing what I’ll say are perhaps adaptive habits for being at a large company and really bad habits for being at a startup. Taking way too long to ship things, thinking about things too much, waiting for everybody’s permission, politicizing things. There’s all these things that happen at these big companies almost inevitably.
Vice versa, if you work at a startup and you get a job for a Fortune 500, Fortune 1000 company, it can be really challenging for you to try to fit in because the culture is so dramatically different and the pace and there’s a lot of differences there. So I think this is a good reminder of just how different companies function and how drastic the differences can be in the thinking between someone who maybe had run a half a billion dollar, billion dollar company, and who’s coming to run a handful of million dollar company.
But then the other point I want you to take away, of course, is, unless you’re written in a really odd stack that no one can find developers for, no one’s heard of, usually an exit is not going to depend on your tech stack. Again, if you’re using one of the standard tech stacks, it’s not going to be a big deal.
Now, I will say that when I acquired HitTail back in 2011, it was written in classic ASP, which essentially was a deprecated language and it was very hard to find developers for, and I did rewrite that in Ruby on Rails. And I think I would’ve had a very hard time selling that because it was such an old stack. It was old, it was crufty, it had a lot of issues, so rewriting it in Rails was a decision. Now, I didn’t rewrite it in Rails to fix technical glitches or the code is crufty or anything like that. If it had been Rails, I would’ve left it in Ruby. But the fact that ASP classic, which had, what, come out in ’99 or ’98 or something, and really had been superseded by .NET in 2001/2, I mean at that point it was a decade deprecated language and it would’ve been even worse when I went to later sell it in 2015. So those are some thoughts on rewriting your code base for a potential future sale.
The second topic is one that I saw some folks chattering about on Twitter, and it’s around founder salaries. And there was a comparison between companies that had raised a lot of funding and bootstrap companies. And there were companies that had raised, let’s say, 10 million, 30 million, 40 million, and the founder/CEO was making several hundred thousand, two, three, $400,000, and then someone had bootstrapped a company to a million or two million and they said that they were taking home more money than that founder. Which is probably true. I mean, this is no secret. We know that if you solo bootstrap or do a highly efficient SaaS company and you get it to a million, million and a half, in annual recurring revenue, there’s a ton of profit to be pulled off that and that’s an amazing business.
But the thing that it got me thinking about as folks were discussing it is this balance between near term and future earnings. And Derrick Reimer and I talked about this a few episodes ago where I asked him, “How do you think about this? Because you could take a pretty substantial salary out of your company.” In fact, he’s a TinySeed back company. He could take a quarter million dollars a year without paying TinySeed to anything, because that’s our salary cap. Anything above that, then he would pay us our prorata share of dividends. But I said, “You could take a quarter million out a year. I know that you are not. Why not? Why not just take that out?” In fact, he could take out more than the CEO who raised $50 million and then be happy that he had done that this year and next year. And his response was, “But I can use that money to grow my company and I’d rather grow it faster.”
And it comes back to that multiple of, if I add 1K MRR, that is 12K ARR. And if you think about an exit multiple, if you ever sell, and I’ll just say again, everyone sells, then take an exit multiple of say five times ARR and you’re looking at $60,000 for every 1K of MRR that you add, and usually more money if you’re smart and you’re executing well and you’re a knowledgeable founder and you have that hard work, luck, and skill, usually more money in your bank account means you can grow faster, or you can at least attempt to grow faster. And so the less money you take out, the faster that growth, and so you are actually thinking ahead.
I think of it like Warren Buffett used to say, and I’m paraphrasing, “I’m not cheap, but when I look at a dollar today, I know that I can turn that into 50 or 100 dollars a decade or two from now.” Because I know compound interest and I know compound returns specifically of investing in the stocks in the companies he buys.
And I’ll admit, I think about SaaS the same way. I think about startups the same way. That taking a dollar out of your company today is potentially reducing the growth, and it’s potentially taking an extra five, 10, $15,000 out of your company today, let’s say you could turn that into 1K, MRR. And I know there could be a whole conversation around, well, can you? And is it repeatable? Blah blah, blah. Let’s just say some dollar amount, 20, 30, $40,000, it’s another hire. Do we think they can add 1K of monthly recurring revenue if you hire a marketing person or a sales person or another developer or whatever it is, and instead of taking that out, you invest into that. Well that 1K, again, is 60K to your net worth, but it takes a few years to get there and it takes an exit and it takes other things to happen.
Now, there’s a balance here, because you can also be too far on the side of I’m basically going to live in poverty. I’m going to make 30K a year trying to live in San Francisco because I want to reinvest everything. That’s not healthy either. And so I think paying yourself a salary where you are totally comfortable and where you can pay those bills and you feel fine about it. But having that balance of, again, I’ve had lifestyle businesses where I just maximized the cash I pulled out of them. I would pull out 80% of the revenue as net profit. And it was amazing. These businesses were great and they were great cashflow businesses. But I didn’t mistake them for the longterm play that was eventually going to have my goal, which was to have enough money in the bank that I could work on anything I wanted to anytime and beholden to no one, including Google rankings and all the things that even when you have a profitable startup can get in your way of maintaining its profitability.

Bhavesh:
Hey Rob, quick question regarding stair step approach. If part of the marketing strategy that I’ve got includes writing blogs, I’ve figured out that I could potentially use these content to create a course to my target audience. Would that be a stair step approach or product that I could start using while doing the marketing? Or would that be something well off tangent that I shouldn’t be looking at? Really appreciate it if you could answer this question. Thank you.

Rob Walling:
Thanks for the question, Bhavesh. This is a really good one. The answer is, absolutely. And in fact, in the original version of the stair step that I presented at the Dynamite Circle’s BKK event in Bangkok back in 2014, it was a live presentation, step one, it included eBooks, courses, it included software, like downloadable software and AppSource software and simple things that you could use to get a foothold and learn how to make money on the side and then stack that up for step two.
And then step three was recurring revenue. This was not SaaS focused because, see, the Dynamite Circle is a mix of folks doing eCommerce, there’s Amazon FBA, there’s content sites, there’s productized services, there’s consulting freelancing, and there’s software and SaaS as well. And so when I presented it, I generalized it to that audience and info courses, as you’re saying, were on step one.
And then if you go to look at kind of what’s the seminal blog post for this now, when I actually wrote it up, it does focus on software and then stepping up to SaaS, because that’s really how I think about the world. That’s my more specific view of it. But I have been noodling for a while on taking the stair step method of bootstrapping and basically translating it to the stair step method of entrepreneurship. And it’s a little different, entrepreneurship’s higher level, and that would include this type of thing. And I also think that would include freelancing, maybe productized services, kind of stepping up there. So it’s a great question and the answer in my experience is unequivocally yes. I’ve done this myself, where I had my first book, Start Small, Stay Small, I had a couple online courses, I had a membership website, that was all happening as I had these other step one software products. And then I used those to lever up into SaaS, and from there the rest is history, so to speak.
And I’ve seen other folks doing this, so I think it’s a good skillset, and I think it builds exactly what the stair step is intended to do, which it brings you some revenue, brings you some experience, it brings you some skills, it brings you some confidence, it brings you maybe a bit of an audience and a bit of a network. And all of these things make it so much easier to then launch that subsequent product. So thanks for the question, Bhavesh. I hope that was helpful.
Our next question is also from Bhavesh sent just a couple weeks later.

Bhavesh:
Hey, Rob. I’ve just got a question regarding your stair step approach. Looking at the current situation, do you think from your experience that I can sell a Zapier type connection between several products to produce my value proposition to my market? Because at the moment, the potential users, or future users, are connecting several products together manually using Excel, or without anything, or using Zapier, because that’s what we are currently doing in our business. And my MVP is going to be just an API integration between several applications such as Zero.

Rob Walling:
The recording had a bit of an issue towards the end of his voicemail, so we did have to chop it off, unfortunately, almost mid sentence. But I think we got the gist of the question.
This is a good question. And the idea is creating a Zapier type connection, which is really just integration. It’s integration points between several different tools. And his question really is, can he sell a Zapier type connection between multiple apps? And this is just selling an integration, and the answer is absolutely. How many apps in maybe the Shopify app store, the Zero app store, the Salesforce app store, the insert name of platform here app store are really just piping data from the app itself into other platforms? And maybe it’s only into one, or maybe it’s into multiple, they’re just connectors, and those things sell for either a monthly subscription, sometimes a one time fee.
I think this is an interesting idea if you’re building it specifically for a specific niche, perhaps one that you’re familiar with, or maybe you’re working in that space yourself and you’ve seen this need, because if I go to the same app store, I’m not going to see the need if I don’t have the day to day operational need for this type of thing. And so Bhavesh mentioned a couple tools that he’s trying to tie together, and it was… What was it? Like Zero, which is accounting software and then time tracking and something else I actually forgot already. But you can get the idea that maybe Zapier integrations don’t exist between those three. Or maybe Zapier integrations can be a little finicky and a little brittle, and having basically a first class integration that hits the APIs and is just a single click to enable in my Zero or my project management app, and would I pay $15, $50 a month for something like this if it was a desperate need and I needed it to be super reliable? I would.
And as a result, this becomes a pretty interesting step one business, that if you recall the stair step, the step one businesses are usually smaller. Usually you don’t need to do a ton of marketing, because they already have the traffic and the lead flow coming in from the app store rankings. And these are apps that have platform risk and they are pretty much impossible, virtually impossible, to scale into the millions in revenue. But that’s not what a step one business is for. A step one business is for you to learn that experience and get the skills and all that that I mentioned earlier.
So yeah, I think this is super interesting. And I think the neat part about something like this is you could feasibly try to wire it up in Zapier initially, and the MVP could almost be a no code MVP. But if you are a developer, tying a few APIs together isn’t that hard. It’s not having to build the UX and build all that in. Basically just being able to roll some code around and deploy it and test it out yourself and then start charging people is pretty intriguing. So, thanks again for the question. Bhavesh. I hope that was helpful.
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Justin:
Hey, Rob, this is Justin from Fort Worth, Texas. Longtime listener. I had a quick question regarding the tension that can sometimes arise between your founder mindset and your engineer mindset. As a technical founder, we’re both responsible for the business side and the product, but also for building the technical infrastructure that’s going to support that product and the future growth of that product.
I initially built my SaaS app in Python and Django and specifically did that for the productivity gains that I get out of a language like Python. But as we are moving from proof of concept and beta into the actual product release and we’re getting paying customers on board, my initial thoughts start turning from product to scalability. How do I make it faster? How do I make it more scalable? And I’m constantly having to weigh these thoughts on prioritizing product important features and things that are going to move the product forward versus tech debt that’s on the backend that needs to be fixed. I’ve even thought about rewriting the app in something more performant.
I tend to push those aside, but I’m curious if you ever dealt with that as you were building out your products and how you fought against that to make sure that you’re making the right decisions at the right time. Tech debt’s always going to stack up, we’re always going to deal with it, but oftentimes there’s product things that might be more important. So I’m curious if you ever had to deal with that and what the process was to work through what are the right decisions to make at the right time. Awesome. Well, I appreciate your time and hope you have a great week. See you.

Rob Walling:
All right, Justin, thanks for that. This is absolutely a question every SaaS founder, every software founder, has to answer, and it’s one that I dealt with many times over the years. And pretty much almost without exception, every SaaS founder I talk to, whether I’m investing, advising, or just giving one off advice to, one of the biggest pain points of their job as founder is not enough time. “I can’t do everything. How do I know what to spend time working on? Should I market, should I sell, should I develop?” And I do have this framework around leaning into uncertainty that is like, “What should I be working on in general across the business?” And it’s that you should work on the uncertain things as the founder until you figure them out, and then you should hire folks to do the things that are more certain.
I’ve talked about that on the podcast in the past, I actually wrote a section of my book that is actually getting, I don’t want to say close to being done, because let’s be honest, you finish a book and then like five months later you have all the stuff to actually print the book. You got to get layout and designs and all this other stuff.
But all that said, that’s not really the question that you’re asking. You’re not asking me, “Which parts of the business should I work on,” you’re just asking about playing engineering versus everything else, I think. There’s engineering, which is fixing technical debt, improving performance scalability, then there’s engineering that is building new features, and then there’s everything else. There’s doing sales and marketing and support and all that.
Usually support and customer success tend to be easier because you get a support email, you respond to it. And if you have someone to onboard, you do it. The harder ones are like, “Should I switch over to marketing today or should I work on the product or should I fix tech debt?” And it’s always a tough balance and that’s why being especially a solo founder is pretty tough. And that’s why especially being a solo founder without funding to hire your co-founder, in essence, or to hire someone who can do this other stuff, is even harder. And again, this is why the stair step is such a popular framework, because if you do that, you eliminate a huge piece of your decision making, because at that point you’re either building or supporting.
I mean, that’s kind of it. You build a Shopify plugin, you’re not out marketing that thing, not unless you want it to get past a certain point, but usually it’s in the app store and you’re just getting that traffic coming in. Same with wordpress.org, it’s much less of a going concern than once you have a full blown SaaS app. So a single founder, bootstrapped, first time SaaS founder, is really hard. Nights and weekends especially add to that really, really, really hard.
And this is why I would advise, again, Justin, I know you’re already working on something, so keep doing that, you’re in the middle of a product, but the idea of the stair step and of the step one and step two is to eliminate part of this really difficult time. And that’s also the idea behind raising some funding. And you know that I have not been anti-funding and I’ve not been pro-funding, I just view funding… It’s like saying, “Rob, are you anti-hammers?” And it’s like, “Well, no. When I need a hammer to do a job, I go grab my hammer and I pound in the nail. But I also don’t use it to screw in a screw, because it’s not made for that.”
Funding is a tool, that’s it, so why would I be anti or pro? Know what you’re getting into, use the right tool for the right job, know the trade offs that you have to make with it. But that is why indie funding, TinySeed type funding sources, have become so much more popular for bootstrappers, because you are at a point where it’s really hard and there’s just no two ways about that. And in that situation, it’s a lot of hard decisions with incomplete information, as I like to say.
But to answer your question more specifically, what I’ve seen as folks start to scale and they’re trying to balance, let’s just say, technical debt versus feature building, I will often see either if they’re using sprint models, then one out of every four, one out of every eight sprints is dedicated purely to technical debt and cleanup, or it’s 20%, or some number that you feel comfortable with, of the time is spent cleaning up technical debt as you go forward. So if you’re not doing sprints, it’s one day a week or if you have four developers, five developers, one of them rotates around and just does all technical debt stuff.
80/20 is a reasonable thing to think about. Some teams want to get rid of more technical debt and some don’t care as much about it. So that’s more on the engineering side. If, as a single founder, I was weighing engineering versus marketing, I mean, I think as engineers we want to lean into the stuff we’re comfortable with and we love doing, and of course that’s building product. That’s why we start startups is to build product, and so I think you need to really resist that urge. I think you need to be very mindful that marketing and sales are going to be something that your psyche naturally pulls you away from. Your lizard brain is going to constantly say more code, more code, more code, code works, code makes the business successful. And that’s not necessarily true. It can be, but for the most part, driving more leads, optimizing those funnels, talking to people, making sales and onboarding are what’s going to actually grow the business, and the code is the product that allows the business to exist.
Don’t get me wrong, it provides tons of value to your customer. Obviously, as a product person myself, I don’t minimize the value of the product itself or of the code, but it is just the common trope, and I see it over and over with folks who are just overbuilding and spending way too much perfecting, and they redesigned their homepage and they rewrite their copy and then they have another redesign, and then they redesign in the app because they didn’t like it. And you know what, I’m just going to scrap this in rewrite the whole code base, and then I’m a year and a half later it’s like, why haven’t you just sold? Why haven’t you just sold? Just marketed? Get more people into the app and start growing your MRR. I appreciate the question Justin, it’s a fun one to think through and I hope that was helpful.
So that’s it for today. I hope you enjoyed as I ran through these listener questions. We have a pretty decent backlog, although several of these, since they were video or audio, jumped straight to the top of the stack. It looks like there’s about a dozen text questions and about two or three video questions right now. If you want to ask a question, go to startupsfortherestofus.com and click the link at the top of the page that says ask a question and you could submit one in any format there. Or you can email straight to questions@startupsfortherestofus.com.
This is Rob Walling signing off from episode 631. Thanks so much for joining me this week.