Startups For the Rest of Us

Rob Walling:
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Have you ever looked at a schedule, say, of a recurring publication? Maybe it’s a launch deadline, a date that you have to submit a manuscript by or push your code to production, launch anything and realized, “I thought that was next week.” That’s actually tomorrow. Well, that’s the situation I found myself in late yesterday when I realized that I thought I recorded an extra week of Startups For the Rest of Us, but it turns out I owe an episode to my editor this week. 

I’m Rob Walling, the host of Startups For the Rest of Us, and this episode is being recorded with a handheld microphone. It’s the same microphone I use at home, but I threw it in my suitcase and hoped that it would work when plugged into my iPad, which is usually what I travel with. And I’m currently recording from a hotel room in San Diego, California at the TinySeed batch 14 kickoff. This is our kickoff for our America’s batch and things get started in just a few hours, but the show must go on. I ship an episode of Startups For the Rest of Us 52 weeks a year and have since 2010. 

Before we dive into the episode, I wanted to let you know that our MicroConf Mastermind program is open for applications. I’ve talked a lot on this podcast about how important masterminds have been to my entrepreneurial success. But finding the right founders to join up with can be hard. Over the past few years, our team has successfully hand matched over 1000 founders into mastermind groups by looking at your revenue, team size, strengths, goals, and a few other data points to make sure your peer group is the right fit. Once matched, you’ll also have access to our mentorship series, a three-month program where you can connect with some great minds in sales, business development, marketing, and more. If you’ve looking for accountability, honest feedback about your business, and the opportunity to make new friends that care about your success, you can learn more and apply today at microconfmasterminds.com. Applications are only open until June 12th, so make sure you sign up before then. Again that’s microconfmasterminds.com.

Today, I’m going to answer a few listener questions. I may get into a couple solo topics that I’ve been thinking about as well. My first question is from a listener who asked to remain anonymous, and the question to paraphrase was, “I’m thinking about acquiring a competitor. What should I expect and how should I transition the customers?” My first question was how many customers are there and how much revenue is there? Because the thing with acquisitions is there is a cognitive load. There is a legal load. There is a transitional load. There is an adoption and absorption load. There’s a lot of work into getting it done. So if you’re going to acquire a competitor doing a couple of thousand dollars a month, I’d really question if it’s worth it. Even if let’s say it was free and their competitor is going to shut down, and they literally were to say, “I’m just going to give you all the assets of this business,” I would still have to think about it. 

Now, it might be worth it. I would evaluate how many customers, where am I at, this and that, but the opportunity cost or the time investment to learn their systems, to talk to their customers, to transition them, that alone is a big deal. This is why you’ll sometimes see really large companies, they need to make big acquisitions in order for it to make a difference for them. And this is why you see really large companies, when they acquire really small companies, they just shut them down. They’re acquiring them for the talent, for the people, for the developers, for the product people, for the marketers, for the team itself. And trying to merge that tech into their business, it just isn’t worth it. You have to buy something at a massive scale when you are at massive scale. So that’s the first thing that I’d be asking myself in an acquisition like this. Is it even worth doing? 

Let’s say for the sake of argument that you are doing millions a year as a SaaS entrepreneur and you find someone who is doing low to mid six figures a year and they are willing to sell to you at a price that makes sense. Maybe it’s an all cash deal. Maybe there’s a seller note that you pay off over time. Maybe you pay them in some equity from your company. There are all types of creative ways to structure this, but let’s say it makes sense. There’s two questions this listener asks, what to expect and how to transition the customers. What to expect is that it’s going to be a ton of work and that you’re going to want the support of the seller to try to transition those customers. 

I’m assuming it’s implied in the question that you are not just going to run two separate applications, that your competitor has their own code base, their own app, their own interface, their own login, their own billing, and you have yours. So the first question is do you want to combine those or do you want to become a two-product company? Imagine if you acquired a competitor that did most of the same things that you do and you just ran both products. That would be quite a mess actually. There’d be a lot of effort managing its marketing, its sales, its support. You duplicate. You have all this duplicated effort. 

So at that point, I’d be thinking about, okay, how do I transition their customers into our product? I would really be looking for a recommendation from the seller on how to do that. I mean, I have my own ideas. Of course, you communicate with the existing customers and you say, “This product has been acquired and we have most of the same functionality. We’d like to migrate you over.” Now, as I’m saying this, I’m realizing that if you’re going to do a deal like this, you may want to make, if possible, parts of the sale price, part of the multiple in essence, contingent on how many folks migrate over, what percentage of customers. Because could we think of a range that’s 30% up to 80%? 

It’s a wide range, but there’s probably a bell curve of this of the most common percentages that will literally sign up for a new app, create a new login, get their team onboarded if they have multi-seat accounts. There’s all types of things to think about. Can I see it being low as a third of your customers, meaning that you lose two-third of the acquirer’s customers? Possibly. And can I see it being as high as, like I said, 70, 80% where you only lose 20%? Maybe. I mean, that feels very high, but it’s a pretty wide berth there. So that’s an interesting thought is there’s a pretty big range, and should you bank on it being 50% right in the middle? I don’t know. You could certainly run numbers at different, your best, worst, and in-between case to see what it might wind up. 

The other thing you could do is ask people to migrate, and even if they don’t, you keep the acquired app running. You don’t shut it down, but you don’t market it. You basically shut down signups, and the public marketing site, all that would redirect over to your application, the one that you have in the millions of ARR, and you just kind of let the revenue, the MRR of the old one, just churn out over time. Even with pretty low churn, you will get down to the point of only having that customer base be 20, 30, 40% of its original size within a couple of years. So that’s another way to think about it. Is it like a melting ice cube and you’re just trying to keep it from melting? You’re trying to take the revenue from those who don’t want to switch and you’re trying to take the customers who do want to switch and get them onboarded on your new application. 

But you can see, it’s pretty technical. It’s pretty complicated. It depends a lot on the apps, right? Let’s say it’s something relatively simple. I’ll put this in quotes, “simple,” and maybe not simple but an app that has low switching costs is probably a better way to think about it. Let’s think of an app like a scheduling link. Even if you have integrations set up, it’s not a ton of work, relatively speaking, to move from one scheduling app to another versus moving your CRM, if you have a team of five or 10 salespeople and you have all this data or moving marketing automation or email marketing platforms. Ton of work. You have workflows. You have subscribers. You have all that stuff. So there’s a bit of it depends in here, but I think what to expect is it’s going to be more work than you think, so make sure that it’s worth it. Make sure that it’s worth the effort, not only the money. Depending on the purchase price, the money can be secondary to the time and the opportunity costs that you have to invest in order to make a successful transition. 

My next question is about startups that require HIPAA and other compliance. This is from August of last year, so what are we looking at? Maybe nine months? That gives you an idea of how far back we are on text questions. Question comes from Paul Frieden and Paul asks, “Hey, rob, I’ve been watching your YouTube videos for a while. Thanks for the great content. I’ve been working on an idea and I have what I think is a pretty solid MVP. Unfortunately, the idea probably requires HIPAA compliance to sell to many or most of the potential customers. I’m afraid to even start trying to get customers on the MVP without compliance. Even getting an answer on if I can sell and to whom would require expensive legal advice. Any tips? I’m a solo developer, no business entity and totally pre-revenue.” 

I was on board with this question until that last sentence. Even getting an answer on if I can sell and to whom would require expensive legal advice, it’s an interesting phrasing. Is expensive a thousand dollars or $10,000 and do you have a thousand or $10,000? That’s really the question. I guess without knowing it, I have a tough time if I can sell. I have to talk to a lawyer before I know if I can sell this SaaS is just a puzzling statement to me, so I’m not sure that I can comment on that, other than how much is it going to cost and do you have that money because if you don’t, this is all a moot point. 

Now, to whom you can sell, I think is an interesting question for a lawyer. But really, the thing is if you think it needs a HIPAA, it probably requires HIPAA, then get it HIPAA-compliant. HIPAA compliance is not out of the realm of bootstrappers. Now, if you want SOC 2 compliance, that becomes pretty pricey pretty quick. HIPAA compliance is different. Of course, this is not legal nor HIPAA advice that I’m giving you, but I have known many bootstrappers, even folks who were on tight budgets who read the HIPAA guidelines and became compliant. It is something that one can do. So if I were to build an MVP and then be HIPAA-compliant, you can do it. Right? It’s possible. The thing to think about is if you’re HIPAA-compliant, you need to charge a lot of money for this. 

I’ve seen SaaS startups that are charging… Let’s make up some numbers. $20 for the cheapest plan, then a 50 and then a hundred dollar plan. And then the HIPAA-compliant plan is $500 a month or a thousand dollars a month. It means it’s that much more. Those are the price points minimum that I’d be thinking about. And frankly, if you’re going to be doing cold outreach, let’s talk a minimum of a thousand dollars a month or $2,000 a month. These are the numbers that I would be thinking about to make it worth it. The big question I have is not can I get HIPAA-compliant? The big question I have is, does anyone need this? Can I solve a problem people are willing to pay for and can I reach them at a scale and will they pay the price that I’m asking to make it worth my while? 

For more information on becoming HIPAA-compliant, sign up for MicroConf Connect. I’m sure there’s a compliance channel or there’s got to be a channel that focuses on something like this and just ask, who here is HIPAA-compliant and what process did you use? What documents did you use? Did you just Google Search? There are ways to find this. I mean, I would go to Google or ChatGPT. Even though ChatGPT hallucinates things, I would not use it as the final arbiter, but I would use it as a guideline to get me started to understand what I might need in place to accomplish this. Thanks for your question, Paul. I hope that was helpful. 

My next topic is not a question, but it’s something that I started thinking about when I heard someone else on a podcast talking about TAM, total addressable market. This is a term that venture capitalists throw around and they are concerned about having billion or decabillion dollar total addressable markets, meaning the entire market of what everyone is spending on the software in this category is billions or tens of billions. This is dangerous for bootstrappers to think about. I’m going to use a phrase and I want you to hear me, bottom up versus top down. TAM, total addressable market, is top down. It’s coming from the MBA at Harvard saying, “Well, we could capture 30, 50, 80% of an entire market, and then it’s worth decabillion dollars. That’s top down. When you are bootstrapping or mostly bootstrapping, I think in terms of bottom up, so I call that term, total reachable market, TRM. 

The reason I call it bottom up is you’re not looking at a huge survey from Gartner and doing math where you’re kind of just guessing the worldwide value of GDP of some small country. You are saying what is the search volume for this term each month, the total search volume? What do I think that I can reach if I owned most of the Google searches for these terms, realizing that you won’t own most of them from the start. But if I own most of the Google searches, if I rank number one in Capterra and G2, if I owned, so to speak, all of the answers on Quora or Stack Overflow or Reddit or wherever this is being talked about, what would the reachable market be assuming that I am going to be doing online marketing? If you’re going to be doing offline marketing, we have to get a little hand-wavy. Offline meaning are you going to in-person events? I don’t mean buying billboards and radio ads, but that’s what I would be thinking about. 

When I go through all the marketing purchase in The SaaS Playbook, I would be asking myself which one, two, or three of these do I think will work best or will I start with and what’s my guess? What’s my estimate of how many people are in these channels? Let’s say, I can own a chunk 40, 50% of each of these two or three channels over the next six months, what is the TRM of that? What is the reachable market that I can feasibly reach as a bootstrapped or mostly bootstrapped software company? It’s hand-wavy and it’s guesstimaty, but it’s something. It’s not TAM. TAM does you no good. I was actually asked this. 

I’m remembering now where this came from. I was asked this on a podcast and I was answering it and they were saying, how do you look at TAM of TinySeed companies? And I said, “We kind of do, but we kind of don’t because look, if a TinySeed company can get to $5 million ARR and they can sell for $30 million or $50 million, that’s a great win for us and it’s a home run for that founder. It’s life-changing.” So how big does the TAM have to be to get to 5 million in ARR? I mean, you could feasibly have a $10 million market and if you get to half of it, you’re $5 million, and with a $50 million market, you only need 10% of the entire market. So that’s where TAM just doesn’t translate to bootstrappers in the way that you might think. It’s not that it doesn’t impact it at all, but I feel like it’s an unhelpful number. It’s an unhelpful way to think about it. 

In addition to the ways I just talked about with the bottom up of trying to guesstimate how many people might be seeing different things, the other way to think about it is in terms of your category of the tool that you are building. So if you’re building scheduling links or email service provider or electronic signature app, what do you think is the switching volume and the new entrants that are coming into the space for this type of tool in a given month? The switching volume would be those switching from competitors and the new entrants would be people brand new. They need e-signature. It’s like, “Oh, it’s a brand new realtor just getting set up. It’s a brand new whatever, a psychologist or a new startup, and they need electronic signature,” versus how many people are switching away? What is the churn, if you think about it, from a bunch of your competitors? Right? 

Again, if they’re public competitors, you can take guesses at this. If they’re not, you can still take guesses at it. But I asked this from the MicroConf stage. I was giving an example of a very small market that TinySeed invested in, where there are a total of about 1500 total customers in the US, which is where this company focuses. And I asked the audience, I said, “How many people in a given month do you think are switching from an old existing tool or maybe our new entrants in the space?” And the funny part was the founder of that company was in the room and he held up three fingers. He said three. Approximately, he was giving me about the right number. Now, is it exactly three every month? Of course not, but you get the idea. In a market that small, it is literally a handful of people that are in that most aware category that are ready to buy. 

If we turn to let’s say email marketing software, could it be 3000 or 30,000? I don’t know, 30,000 feels high to me, but could it be 3000 or 5,000 in a given month? Sure. That are kind of poking around? 10,000? There’s some number. It’s not a million. There are not a million people or businesses in a given month that are looking for a new email service provider, either from switching or from starting a new company. Right? We won’t get within 10%, but we can get within a hundred percent. We can get within an order of magnitude of these things. 

That’s what I’m talking about with TRM is it’s this total reachable market. Just how many people in general are switching? And then let’s think about how we can get in front of them and that can give us an idea as founders and as marketers and as folks who are trying to add customers, it gives us some type of sanity check so that we’re not expecting, “Oh, I’m going to get a thousand new customers a month,” when there’s probably, in a lot of markets, only hundreds who are really ready to buy and switching from other tools in any given month. So TRM, not TAM folks. Should I get a shirt that says that? No, that would be a terrible idea. No one would get it, and even if you got it, you’d be like, “This is dumb.” So TRM not TAM, I will say it, but no T-shirts, please. 

My next question is from an anonymous asker who says, “Hey, Rob, I have the product idea and I know the market, but I’m not a developer. I came across your podcast and I’m really learning a lot, even though I only have a vague understanding of what you’re talking about at times. I see the opportunity to disrupt a multi-billion dollar industry. Where should I look for a developer who can help bring my product to life?” I have a couple thoughts here. I think if you’re looking for a developer to work just for equity, don’t do that. It just rarely, rarely works because developers have built up a skill set that allows them to charge a lot of money per hour, and having an idea and knowing the market isn’t enough. It’s just not that valuable. As weird as that says, the idea plus knowing the market is not that valuable. 

Now, if you have concrete marketing skills and sales skills and you know directly how to reach the market and you have 10 people lined up to consume the software, to buy the software, to try the MVP that you’re going to have built, that’s something. Still not a business, but at least it’s something. It’s some type of validation. If you have an email list with 500 or a thousand people who are super interested in this and you’ve been marketing and pounding the pavement and talking about this idea and the value prop, that’s something. It’s a lot more than having an idea and knowing a market. A lot of people have an idea and know a market. 

On the flip side though, if you are looking to pay a developer, this is a challenge actually because I can tell you to go to Lemon.io or DevSquad. These are sponsors of this podcast and they have developers that you can hire. The thing is most developers don’t know how to build products. They know how to write code, and much like if you were to go to build a house and all you hired was a carpenter, you’re not going to get a very good house because really, you need an electrician and you need an architect and you need a carpenter and you need someone to… There’s HVAC. There’s all these different trades that go together and collaborate to build a house. With a software product like SaaS, as complicated and as many moving parts as there are, in most cases, you need multiple people involved. 

It is very rare and we call them full-stack developers. I’ve also heard them called unicorns frequently because they kind of don’t exist. Of course, they exist. I’ve worked with them. Derrick Reimer is a full-stack developer, can build it soup to nuts, top to bottom, but you’re not going to be able to hire Derrick Reimer. That’s the thing. You’re not going to find it. Derrick Reimer is not on the open market. He has his own company. And back in the day when he was young and thinking about starting up, he was working with me and I brought him in as a co-founder of Drip. That’s the level of person that a full-stack developer… That’s what they can command. 

So it’s that thing of if you go to Lemon.io or DevSquad or Trustshoring or anyone where you go to hire developers, just getting a developer, they can write code. They can build screens. They can build web pages that do things. But who’s going to tell them how to build it? Because you can say, “I want to solve this particular problem,” but there’s a translation layer there in terms of the UX, the design, the product, how it functions, how it can be intuitive, and how the flow should work. What’s the onboarding like? What’s the login like? There’s all this stuff that is not taught in college when you get a CS degree, or if you read a book about programming, this stuff is not taught. Not only that, but it is just very hard to build a SaaS without a technical co-founder. 

I know that I have some quote, unquote, “rules or rules of thumb,” on this show where I talk about don’t do B2C, don’t do two-sided marketplaces, and I’m pretty serious about those. 98% of the time, you shouldn’t, 99%, almost a hundred percent. This thing I’m about to say is not in that camp. It’s not a 99%, but maybe it’s an 80% don’t do is don’t start a SaaS without a technical co-founder. The reason that I say that is most of the companies that I see, the bootstrapped and mostly bootstrapped companies, I’m specifically talking about bootstrapped and mostly bootstrapped. If you raised $5 million, you can totally hire a CTO level person or a director of product and engineering who can write code, hire people. You can build a staff out. 

But if you are the bootstrapped and mostly bootstrapped like I’m guessing you are if you listen to this podcast, the vast majority of folks I see trying to do this without a technical co-founder really struggle. The vast majority, I would say it’s 80 or 90%, struggle with the tech side, and their biggest headache the whole time is that they’re able to market and sell, and the product doesn’t keep up. The product doesn’t scale. They need to rewrite their code base every… I know of a technical co-founder who rewrote their code base three times. I know of others who’ve rewritten them twice. It’s just the constant struggle of that. This is across TinySeed, MicroConf, and just everybody I know who does it. I believe across TinySeed, the percentage of companies that we have funded that do not have a technical co-founder are… I think it’s around 15%. I know it’s between 10 and 20, but I think 15 is about where it stands. 

Again, I’m not saying don’t do it because that’s a pretty big number, and if we’re funding them at TinySeed, then they are obviously having some traction. But I will say several of the folks that we have funded there, they do definitely struggle with just the engineering side of things and the product and the scaling, and it sucks to not have a founder level person owning the fundamental part of your business. This is like me starting, I don’t know, a toy company and I don’t know anything about toys. I don’t know how to make toys. I don’t know how to design toys. I don’t know how to source or manufacture toys. I can start to learn it and I can ask people and I can hire people, but are they going to give me the best advice? 

Here’s the other thing. With SaaS, building software is like building a building a little bit, in that you get the foundation in and you start building rooms, and that (beep) is hard to change. Versus if I was starting a toy company, the advantage I would have is that if a manufacturer doesn’t work out, I could start over with a new one. It would be a restart, but switching cost is… It’s just the thing. With SaaS or with software, you have legacy code. You have code that nobody wants to spend the time to learn or fix, so they just want to rewrite it, or it doesn’t scale and everything’s buggy and every time we push a new thing, there’s bugs and that doesn’t go away. Right? That is really hard to fix once you’re in that spot. 

So I guess what I’m advising this question asker is, I mean, you kind of need enough resources in my opinion to find a co-founder who’d be willing to go in on it with you. And if you have a co-founder who is really up on the idea and you’re both willing to put time in nights and weekends, that’s one thing. But don’t send the co-founder off to build for six months nights and weekends while you don’t do anything. You should spend hour for hour. Whatever they are doing, you should be selling, marketing, learning the market, doing SEO, learning pay-per-click ads, doing outreach, building a launch list. I joke a little bit with the hour for hour, but that’s what it should be. 

Why should they go spend six months nights and then weekends while you’re waiting for the product to be done? Realistically, the best way to do this is to have funds. It’s to have the money to bring a co-founder level person on. Look, even if they only have 10 or 15 or 20% of the company and they’re called a founding engineer or they’re called a co-founder, with the expectation that they are in it to own the code base and to own the quality of that, but you have the funds to pay them a salary, to pay them what they’re worth, so to speak, that’s the way to get a sustainable relationship or to build a sustainable startup in these early days. 

The other way is to do it yourself, right? It’s to learn to code. That’s what so many of the folks who are bootstrapping, I say, on Twitter, in MicroConf for making it to TinySeed, so many of the folks do put in just sweat equity because they have that skill or they develop the skill or they do no code and they build stuff and scrap their way to making it work. But if you really do want a technical person and you’re not technical, that’s fine. It’s just know how you’re going to go about it because the bootstrap startups that I see crash and burn pretty hard. There’s a chunk of them that have this weird expectation that a developer who can bill $150 an hour consulting is going to work hundreds and hundreds of hours for free for you, for equity in something that is really unlikely to work. Right? 

Because most startups and even most bootstrap startups just don’t get to product market fit. So that’s a big risk that you’re putting on someone to basically say, “I want you to risk tens of thousands of dollars in in-person hours, in order to maybe build this thing that you might own 50% of.” So with all that said, I mean, if you’re looking for a developer, that’s what MicroConf is. It’s a community of developer entrepreneurs, and some of them are looking for marketing/sales co-founders, but you have to bring the thunder and you have to bring a skill set. And if you bring an idea and you know the market that you’re a subject matter expert, that’s not enough. Thanks for that question anonymous. I hope my thoughts were helpful. 

My last question of the day is from Jacob. The subject is SaaS app store spending. Jacob says, “I’m reading two of your books, Start Small, Stay Small and The SaaS Playbook.” Those are two good books to read, I think. Start Small, Stay Small, feels like it’s marketing for developers and it’s mindset stuff, and then some outdated advice on doing keyword research, but it really pushes market and marketing over product, which I think a lot of devs need to hear. And then The SaaS Playbook is much more modern take, all the knowledge that I have today about building, launching, and growing a bootstrap SaaS company. So thanks for reading those. Thanks for buying them. Jacob says, “One question comes to mind. Is there public information somewhere on revenue and spending on different app stores, as in which marketplace has users that are most likely to buy the non-free version?” 

As an example, it would be very useful when choosing to either make, for example, a Slack app or a Jira app. Good question, Jacob. The answer is no. There is no public data I know of. The only thing that you could potentially look at is if the company is public. I know that Shopify, for example, is public. I know that Atlassian who makes Jira is public. I know that Salesforce that owns Slack is public. So you can go to their public filings, S-1, I think is what it is, where they post revenue, where it comes from and all that stuff, and look for it. What I don’t know is if they break it out. Sometimes they just have an item that says other revenue and they bucket a bunch of stuff into it. There is certainly not going to be an easy Google-able Excel spreadsheet of all the app stores. 

We actually have a list of 71, I think, over on the MicroConf website, 70 or 71 of these app stores that I talk about. When you’re going to build a step one or a step two business, think about building it in an existing ecosystem, so that you don’t have to learn all the stuff at once. And then step three of course is building a standalone SaaS. But we have a list of those. I’m guessing, what? Five of them maybe are public. 10, 15? I mean, it’s not a huge number. I would go to their filings. Oh, another one is HubSpot. Right? HubSpot is public. Rackspace is public, and I think doesn’t Rackspace own Heroku? So you could look at the Heroku market space. 

Again, it’s going to be some research. There’s no magic formula. There’s no hrefs for organic search just like this cheat code, it’s a tool. There is no hrefs that I know of for this purpose, so I think you’re going to have to do some digging, and that’s okay because if you’re digging, it means other people aren’t and it means there may be a moat around the knowledge that you learn and establish. But no, there is no single source, easy source of the data that you’re looking for, but I do like the way that you’re thinking about it, so thanks for that question. I hope that was helpful. Thanks for joining me for this shotgun episode, a mix of text questions and solo adventure topics. Glad to be able to get it into your earbuds this week, coming to you from the sunny shores of San Diego, California. Thanks for joining me. This is Rob Walling, signing off from episode 714.

Rob Walling:
Can you believe it’s time for another episode of Startups For the Rest of Us. As always, I’m your host Rob Walling, and in this episode, Arvid Kahl joins me to talk about our five key takeaways from MicroConf US 2024 that happened just a couple days ago as of this recording in Atlanta, Georgia. It was a great event and I don’t just say that as someone who ran and organized it. The feedback, the positivity, the energy, I tell you, it brought me back raring to go, ready to get stuff done. 

My guess is as you listen to this conversation between Arvid and I, that you will feel some serious FOMO and you probably should because the event was, it was that good. If you know me, you know that I have a tough time talking up the things that I do too much, but this really, really was a special event, so you don’t want to miss future events. Head to microconf.com, sign up for the email list. We have another flagship event happening in Dubrovnik here in October of ’24, and then next spring, probably April we will have another US event and you won’t want to miss it. And with that, let’s dive into our key takeaways from MicroConf 2024. 

Arvid, thanks for coming back on Startups For the Rest of Us.  

Arvid Kahl:
An absolute pleasure now that I’m awake.  

Rob Walling:
I am trucked. Punch drunk was the expression I use. So we are two over-caffeinated, very tired geeks home from MicroConf Atlanta.  

Arvid Kahl:
That’s right.  

Rob Walling:
And I believe this was our… I was trying to figure out, I think this actually was our 10th US event. Because we started in 2011 and we skipped two for COVID. So I think that’s how it works out. I actually, I’m too tired to do the math right now and I think this is going to be a great episode y’all. I’m so punchy and then I think it’s our 24th if you include the Europe flagship events, which I do. So coming up on, I mean it’s a lot of events. There were 218 attendees from 15 different countries and the shocking stat was, I think, it was like, what, 75% had revenue, but that 28% of the attendees had more than a 100K of MRR. That was really-  

Arvid Kahl:
That is crazy.  

Rob Walling:
Yeah.  

Arvid Kahl:
You just look to your left, you look to your right and statistically one of these people is just making millions a year just from their business. That is bizarre, but equally awesome. Where do you ever get that? That’s crazy.  

Rob Walling:
I know. It’s crazy and that’s why being in the MicroConf room is just unlike any other room I’m in throughout the year. It was a good crew this year. How many MicroConfs have you been to?  

Arvid Kahl:
This is my, or has been my third. The first one was in Dubrovnik, the European one just before the world changed forever. And then last year, Denver and this one, my third. I talked to so many people and asked them what their number was and anything above 12 was like, “I forget.” People were just there for 20 some and they just stopped counting because they didn’t care. It’s really great.  

Rob Walling:
Yep. Patrick McKenzie’s like that, he’s been to a lot of them. Mike Tabor, Brennan Dunn, he didn’t make it this year, but he is got to be approaching 20 MicroConfs. And I don’t know, that’s a testament to the specialness of that room, I think.  

Arvid Kahl:
For sure.  

Rob Walling:
So we are going to do our top five moments, our top five, it’s not takeaways necessarily, it’s just the top five things.  

Arvid Kahl:
That’s right. Even that is not specific. That’s too specific. Top five vibes, I don’t even know. There’s just something there.  

Rob Walling:
Five things we thought about before we jumped on the mic. So as the guest, do you want to kick us off with your first one?  

Arvid Kahl:
Oh, thanks so much. I’m going to do something slightly boring and pick a talk. But I’m not going to pick it because necessarily of the talk itself, but more like what it did to the room and that’s by Dr. Sherry Walling, your wife’s wonderful talk on motivation. I mean as somebody who really cares about mental health in entrepreneurship and all that stuff, I care about this. I talk to a lot of people about this and I read a lot about it and all that. That was my talk to begin with. I really wanted to be there for that. That’s kind of what I came for to hear just how we deal with things, where things come from. 

And, man, what this talk did, people in the room and we were seated around these little round tables, groups of four, groups of six just by default, which was great. You could just start talking to the neighbors on your table and stuff and it was so incredibly interesting when we talked about where our motivation is sourced from. Sherry kind of gave us these seven different archetypes of where motivation for founders comes from and once we talked about it, I realized that everybody has their own little story. I knew it before, but that kind of calcified it. 

It was like this guy really has to fight against people telling them they can’t do it right. This guy really has to make sure that they show their parents or they show their friends that entrepreneurship is something they can do. And here I’m sitting, I’ve always been super supported by everyone, so my motivation is something completely different. Turn to the next guy, they do it for the money next guy. They do it because they love building a product. It’s so crazy to think that we all are so differently motivated, yet we all have the same dream and we all are on the same path. That was such a cool both dividing and unifying thing that Sherry did by allowing us to explore this with each other. I really love this and you have to be there to experience this. I think you can kind of experience it probably from the recording of it, but in the room right there in that moment was like, okay, I’ve learned something here that I did not expect to learn and I did. It was really cool.  

Rob Walling:
It’s one of my favorite talks that she’s ever given, this one about motivation. I love how she broke down motivation into micro and macro. And micro is the day to day, hey, I’m going to cold plunge or I’m going to crank Eye of the Tiger. She threw me under the bus on that one and said-  

Arvid Kahl:
Yeah, she sure did.  

Rob Walling:
“I hear Eye of the Tiger playing in Rob’s office at times,” but Smells like Teen Spirit, whatever. There’s punk music. That’s the micro stuff of day to day, how you say mode about macro. She had, like you said, seven archetypes. And I loved that as she went through them, I remember she obviously showed me the talk before she gave it and I was like, “Oh, I’m those two.” It was just really obvious to me. And then she said, “And what were you 10 years ago?” And I was like, “Oh, I was these other two different,” it changed over time.  

Arvid Kahl:
That is really cool. We did that in our group as well and we all had a story attached to that change. For me, it was selling the business. Now all of a sudden money’s maybe not that important anymore. What came and replaced it, something I didn’t expect, was being a people person, that kind of stuff. It’s so cool to have terms to put it into just something that you can actually internalize instead of just having it wishy washy around it. It was really cool.  

Rob Walling:
And it’s concrete and the moment I saw the slides, I was like, this needs to be a chapter and whether we redo the Entrepreneur’s Guide to Keeping Your ShTogether and update it and add this, or if it goes in another book, there’s just no reason that framework should not be in a book. 

So my number one was the last talk of the event. It was from Steven Steers. His talk was about sales scripts and about how having a script when you’re doing demos and refining that over time not only helps you essentially build an SOP, a standard operating procedure, but it helps you yourself improve even if you’re going to do the sales for six months or a year. He had almost an entire script memorized. At the end, there was a Q&A of someone saying, “Well, how would you do this part of it?” And he just recited it and you could tell he just recited it. He had memorized it was super impressive.  

Arvid Kahl:
It was absolutely incredible. The Q&A was like, he had it ready. Every single thing you threw at him, he had a picture perfect eloquently phrased thing he gave you, for free, that you could then immediately use. That was so awesome. I really enjoyed it too. And the fact that he dropped off his book as well. You could just grab a book and read all of these things later at home. That was so, so cool. That was a great talk. It was very polished, let’s just say that. I think it was more than the talk. Again, I guess that maybe a theme. It wasn’t just the talk, it was way more than that.  

Rob Walling:
And he has a book that is either, I mean we had physical copies at the event, so that was great. But it’s called Superpower Storytelling: A Tactical Guide to Telling the Stories You Need to Lead, Sell and Inspire by Steven Steers. So that was definitely one of my highlights. Oftentimes the sales we usually have… We try to have a talk about sales. It is a very common thing in the MicroConf community, and usually those are, I’m not a salesperson and I tend to find co-founders who do sales or I build businesses that don’t need sales or whatever. But I was just really impressed with that talk and I think I liked Steven’s delivery and I liked the information that came with it.  

Arvid Kahl:
Yeah, there was a lot of sales-centric stuff that people really wanted to know more about. You could feel it from the audience, you could feel when people ask questions, they had things just queued up for an expert to help them with. People they have to sell and I mean, I don’t want to generalize it, but I don’t like it either. I have to because everybody has to. So you have these issues that are always kind at the forefront of just your mind at this point. So having somebody on stage, both with him and the attendee talk that was just couple hours prior to that, was also about sales conversations. So it was a pretty strong theme during the conference just to be open and talk about sales, which was nice because you kind of have to.  

Rob Walling:
How about you? What’s your number two?  

Arvid Kahl:
My number two was something that happened on stage as kind of a life event as well. It was the life valuation of a business by the folks over at Quiet Light. It’s really cool to see people who deal with M&A all day, all week, just really tear into in the best way possible a business and the numbers that it presents. It was really fun. The founder went on stage. They had prior given all of their, I guess stripe metrics or something to the Quiet Light folks and they just looked into the numbers, they asked questions about the business, the market and all that. It was super interesting because you could feel how in your own mind as a founder, even just listening to a question coming from an M&A professional make you think about, hmm, this is something I don’t know. Or this is something that I should really optimize because if that’s something they ask, I should have an answer and I should have a good one. 

So it was really cool and I talked to the founder that was on stage after the conference when we had our last reception there, and I asked him, “Well, do you want to sell now? Do you want to keep it? What do you think about it?” And that started another conversation just really about, well, how much work goes into this business? Is this something that I have to sell to get where I want to go next? Or is this something that I actually have to keep to get where I want to go next? So it was just such an interesting thing to do this live and then have access to everybody involved that also made it very, very special event. It wasn’t rehearsed or anything, it just happened and you could really see how the founder was thinking about stuff, how he made logical connections between things. And I think this is something, it’s just an example of something super helpful for MicroConf because everybody has their own questions, but they all are going in the same direction. That was really cool. Really love that.  

Rob Walling:
This is the second time we’ve done that. And I was, dubious is not the right word, but I was like, is this going to be entertaining? Is this going to be engaging? And I always think about that if we’re going to put someone either in a workshop or on the main stage. Both times, it’s been both of those things I just named where I’m like, oh, this is fascinating. And every business is different. And you hear the thought process. Like the one MicroConf Europe in Lisbon, I believe it was country specific, their SaaS was. And so it was in Danish for example. And so he’s like, “Here’s how that’s going to count against you.” And it’s like, oh, of course. I kind of thought about that. But he actually was able to almost put a number to that of this is going to probably lower your multiple a little bit, blah, blah, blah. Here’s all the factors. 

And at the end he’s like, “I think you’ll get between,” whatever the number was, “four and six X or five and whatever X. Therefore your valuation is about this. And if I would’ve really peg it, I would list it at this price.” And I was like, “That is so cool.” And they’re experts. They’re just such experts.  

Arvid Kahl:
And you can feel that the kind of tacit knowledge that they have that they probably can’t even codify because it’s tacit, because it’s something really internal that is implied that comes out. It comes out in these little moments and then you get it that you get to be there in the moment when it happens, when it comes up, when it clicks for them and for you at the same time. That’s just life and workshop. That is where this comes from. I think you can’t do this if you’re not doing it in front of an audience. It’s really fun.  

Rob Walling:
So my number two were the micro excursions. And here’s the thing, I didn’t even go on the micro excursions. I actually took the time to kind of decompress and just have an hour or two to myself. But the reason that I like that we started doing these is because it really does follow this through line of MicroConf slightly pivoting away from, oh, it’s a bunch of education, it’s nine talks in two days, eight talks in two days. To where it’s like there’s four or five main stage talks, there’s some attendee talks, there’s workshops, blah. 

But it’s really about relationships. It’s about the founders being able to connect with one another. And that’s what the micro excursions, they’re just an excuse to go do adult big wheeling with each other, to bake biscuits, to do graffiti. I mean, fowling was the other one where you take a football and you throw it at bowling pins. It’s not the activities, it’s that you’re doing it with founders. You’re like, “Oh, hey, I kind of know you. I recognize you from Twitter.” Let’s have a conversation while we’re throwing a ball at some random thing of bowling pins.  

Arvid Kahl:
Yeah, that’s what I did the fowling. And it was really funny because in the beginning you could see all these founders, they weren’t really sure, do we want to play this? Do we just want to chat? Do we want to have a beer? But then people started playing that. People started playing ping pong. It was billiards. People just hung out outside in the sun because it was a beautiful day in Atlanta, so it was probably the best day for this of all the days that we had. And you could see little groups of people were just chatting about something, other groups were just enjoying the game. It was so flexible in particular, and you could have a nice drink with it. It was a really cool atmosphere, I got to say. And that just opens up communication as well. You’re not stuck in some meeting room or something, you’re in a place with beer. So it’s not the alcohol that does it, but it’s the atmosphere of the place. That was pretty cool.  

Rob Walling:
For sure. What’s your number three?  

Arvid Kahl:
It kind of is very much related to this, and I think all of these are obviously related the same event. But to me it’s the hallway track outside the venue and that includes the excursions, but it’s so much more. The excursion is kind of the organized, getting people together and having them do stuff with each other, which is really nice. But it happened organically through Slack, through the MicroConf Connect Slack and through private messages on Twitter and all that stuff, people were going for coffee in the morning before the conference started. We literally did a 15 minute walk or something to a coffee shop that was supposedly very good and then turned out to be actually quite good. We were having dinners with each other. Almost everybody went out with a group of people for dinners and had a chat late into the night, which is not necessarily smart, but it was a lot of fun. 

People did morning runs, they just gathered to run. They did bible readings in the morning. There was so much going on where people just organically and intentionally willingly congregated and just kind of let their lives intersect beyond just a professional thing. Just be together, talk about whatever they wanted to talk about. And that created a very diversity of people, people at different stages of their journey, people with very diverse, different backgrounds. I personally met my customers there. I met listeners of the podcast there. I met my heroes there. I met my peers. I met so many different kinds of people from all walks of life. The conference, what you said, the educational stuff that is really cerebrally, interesting. But emotionally, relationally interesting is everything else. And it never stops. You get on the elevator, some other MicroConf person is in there and you start chatting, you cannot stop. It’s really, really cool. It’s quite exhausting, but it’s awesome.  

Rob Walling:
So my number three is basically the same. Mine is nothing beats being in a room, which is what you’re saying, it’s the hallway track. It’s being in a room with other individuals to where you can just have these lingering conversations and then some person floats into it and someone floats out and so the conversation changes. You learn about their business. To your point of people getting together for coffee and dinner, I saw a comment on Twitter, I fly in tomorrow, meaning Sunday, which is the event starts Sunday evening with the reception. And he said, “I didn’t realize so many people would be getting there on Saturday.” And it’s like, I don’t know. I don’t know if it was the majority, but it was a lot of people. I mean a lot of people got into on purpose.  

Arvid Kahl:
Yeah, that’s right.  

Rob Walling:
To get in there. How many conferences do you show up a full 24 hours, 36 hours before? Not many. But you know that the MicroConfers are going to be there and that you can do the coffee and you can do the dinner. The other thing, I just want to tack onto this while we’re on it, I loved the FOMO that I was hearing of people who have been to MicroConfs and they’re like, “I’m not going to go this year.” I mean the FOMO was deep. It was both on Twitter, it was in the TinySeed Slack. And I could see people like, “I so regret not going.” And I’m like, “Here’s the law. If you don’t go to a MicroConf, there’s going to be FOMO. You’re going to regret it.” So just don’t not go to MicroConfs. That’s the deal.  

Arvid Kahl:
Yeah, I think this year in particular, but I think it’s just getting better and better over time. Not just the conference, but also the communication around it. It just a very organic, honest sharing of what people enjoy. You don’t force it. I mean obviously on stage you tell people, “Here’s our hashtag if you want to use it and all that.” But that’s more like a cosmetic thing than anything else. People just take photos of their friends, like selfies with the people they like and they share it. They talk about the things they learned. It becoming just a normal thing to talk about it. And obviously that induces FOMO in people who would’ve kind of maybe come at this point. It’s nice, I really enjoyed it. 

Also, one thing I noticed now that you said it coming on Saturday, I arrived on Saturday as well like so many others and didn’t even make it to the hotel counter before somebody talked to me. I didn’t even check in the hotel before I had my first MicroConf related chat. This is how present people were at that point.  

Rob Walling:
Yeah, something similar happened to me. And as you said, every time I got on an elevator, I’d be like, all right, now I’m going to chill. “Oh, hey, you have a MicroConf badge on. We haven’t met yet.” It was cool. We didn’t quite take over the hotel, but it felt like a little bit. 

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So with that, what’s year number four?  

Arvid Kahl:
Well, it also, again, related. And I’m going to start with a little story here I guess because the elevator is where this happened. I was just taking the elevator down. It was on the 21st floor down to the lobby because it was the middle of the day or whatever. And there was a woman that was not there for MicroConf for something else, and she was like, “Hey, so what is MicroConf? Because I’ve been seeing so many people and they’re all so nice, they’re all so friendly, they’re all so happy. What are you guys doing?” It was like some professional, some surgeon or something, and she was like, “What cool conference is this where people are so much enjoying their presence and then being together?” 

So I explained it to her and she’s like, “Oh yeah, I guess it’s a very tight-knit community of very friendly people.” And that’s kind of what I think. It’s this flat hierarchy between people. I can talk to you, anybody can talk to you. Somebody who’s done it four years is super successful and you just treat them like a peer, because they are. Everybody is a peer and we treat each other just like that. There’s no hierarchy. There’s no kings and queens in here. If you walk up to somebody, you have a chat. No matter if they make millions or nothing, it really doesn’t matter. That is so liberating. Because you can just have a chat. You don’t need to queue up or hope for a good introduction or whatever. Nobody is really pitching their stuff on you. Nobody is trying to recruit you or anything. It’s just people who are there for the same purpose. 

And that is the flat hierarchy is something that I have never, anywhere else, seen to this degree. In other conferences, you have a lot of stars and then they run away. Here, the speakers actually stay for the conference. Asia was around the whole time and she was just commenting on stuff and just talking to people whenever there was a coffee break. Where do you get this? MicroConf.  

Rob Walling:
That is dead on and it’s something that we did by accident the first year in 2011. And everybody stayed because we had Heaton Shaw, we had Andrew Warner, we had Ramit Sethi, we had a bunch of people and they did just that. They mingled. There was only a hundred of us. It was a small event and everyone was commenting on that. And so we said, “Oh, from now on, let’s invite…” We don’t force our speakers, but we invite them. “Hey, it would be great if you could be around, interact.” And for the most part, most of them do. There’s certain folks I think we’ll get to on our number five who zipped in and out, but he has a lot going on, you might say. Yeah. That’s always been a hallmark, I think, of MicroConf and something I really enjoy about it. 

On the MicroConf team, we actually had a new team member start just like three or four weeks ago. And so this was her first opportunity to, aside from being in Connect to meet MicroConf people, MicroConf community members in the flesh. And the first day she said, “Wow, everyone’s so nice and supportive and they want to help each other genuinely, and they’re offering advice and they’re asking for it.” And I was like, “Yeah, what did you expect?” And she’s like, “Well, some business events you go to, everyone’s grumpy and everyone’s kind of mean to each other. Or they’re trying to sell each other or they’re trying to put the other down or show how they’re better or whatever.” And she’s like, “That’s just not happening here.” 

And I guess I take it for granted, it was surprising to me. I was like, “Well, what is the other option?” And it’s like, oh, I guess that people are mean to each other. That just wouldn’t… Look, I wouldn’t run the event if that was… I run MicroConf because it’s an event that I want to attend and if people are going to be mean, I don’t want to attend that event. 

All right, so my number four is Liana Patch’s talk. It was about her copywriting swipe file, and she went through a bunch of very specific examples of how you can make subtle changes to copy, whether it’s the we-we problem, you don’t say we on your website, you should say a lot of you and talk about your customer. There were just a bunch of really tactful, helpful rules that could be applied pretty much to any website, anyone, whether you’re selling SaaS or whether it’s our MicroConf TinySeed website. I started thinking, oh, how often do we make these mistakes? So very highly rated talk. And of course Liana Patch is amazing. She’s funny and smart and a great copywriter. She’s written a bunch of copy for us. And I did a show of hands in the room, who here has hired Liana to write copy? And a lot of hands went up. So I really enjoyed her talk.  

Arvid Kahl:
So that was great. And again, it’s examples. This is a workshop. It was effectively a workshop disguised as a talk and also disguised as a comedy routine. So all of this together is just so amazing. Yeah. I hope one day to be one of the people raising their hands as well. It feels like she just has it figured out. So it was very noticeable how helpful this was to people and I really enjoyed it too.  

Rob Walling:
Here we get to our number five. We almost should do five down to one because this for me is my number one, the moment for me of the event. And I think we share it. So why don’t you lead into it?  

Arvid Kahl:
I mean, it is hard to lead into something that you have been working on for a good decade or so, but the fact that Ben Chestnut finally graced the community with his presence on stage and immediately was the most likable person in the room. That was incredible. I have many words to describe the moment, anywhere from awesome to adorable. I know. But he had such a presence and he was one of us that was so unexpected from somebody who sells a business for billions. You don’t necessarily expect that he is just like everybody else in this room. But within seconds he had people’s attention and trust and it was a wonderful conversation to see you have with him as is kind of finally, finally this happened after so many years. Please do explain the story of this and the history of that.  

Rob Walling:
So Ben Chestnut is the co-founder of MailChimp, and they started it in 2000, 2001, and they sold it in 2021, so just about two decades. And they sold it for $12 billion. It’s considered by all measures, the most successful bootstrap startup of all time by both revenue and exit. So I started emailing Ben back in, I was trying to remember the year. I bet it was 2012 to get him to come to the second MicroConf. I don’t know that I thought about it in 2011. I guess I could just search email. And he was always very gracious. 

And here’s the thing, the first time I emailed him, I’m like, “Hey Ben, you probably don’t know who I am, but I run this event for self-funded startups, bootstrap startups.” And he’s like, “Oh yeah. Hey Rob, you blog at softwarebyrob.com. I used to read your blog and a couple other bootstraps.” And it just showed me how small the community was in the early days. He read it. He was saying from like ’05 to 2010 or whatever, which I stopped blogging after that. But it was really neat that he responded every year that I asked him and very gracious. And sometimes it was like, “Oh, I might be able to make it pencil me in, but don’t announce me.” And then, “I forgot it’s my birthday that weekend or something’s come up with MailChimp.” He’s running this company that by 2021 is 1,200 employees and sending, I believe it was sending a billion emails a day. What an incredible business. 

Anyways, I continued to email him every year and he would politely decline or whatever. And then eventually we did do a MicroConf local and we brought it to Atlanta because that’s where he lives. And I said, “I want to get you on the MicroConf stage,” the locals, there was like 30, 40 people, but let’s just have a chat. And the first time I met him, I was like, “Oh, you’re one of us?” A lot of us are kind of accidental entrepreneurs. We want to be entrepreneurs. But he and his co-founder just built a thing and then people started paying him and then they’re like, “Well, we’re getting too many checks, so let’s try to figure out how to charge credit cards, and then should we charge a subscription for this?” Because there was no SaaS, this is ’01. And he was engaging and he was respectful of everybody in the audience. He had been in the shoes of all of us. And that’s the thing is, as you’re saying, he’s a billionaire several times over, but you didn’t feel that on stage.  

Arvid Kahl:
Yeah, I do wonder about this because you got to interview him. Did you feel like starstruck in a way? Like a little bit.  

Rob Walling:
Yes. But I try to get that out of the way before I interview them. So he and I have had a couple conversations to where I’m like, “Oh my gosh, I need to act super professional here because I run Micro…” But I’m also like, “Oh boy, this is a big deal that I’m talking to him.” Same thing happened. I talked to Jason Fried on stage. I talked to Patrick Collison and John Collison. And as I said at MicroConf, those four make up my Mount Rushmore of, I’ll say, bootstrappers. Obviously the Collison brothers with Stripe raised money, but really their ethos is that it’s that practical, pragmatic charge for things and be that way. 

So yes, I always feel a little starstruck, but I frankly feel that way even with some of my friends now. They’re friends that I respect so much that I’m like, you execute. So yeah, when we were up on stage, that wasn’t on my mind. It was more like, how do I make this interview amazing? And here’s the thing, you could ask the same questions that I asked of 10 entrepreneurs and nine of them would’ve just had so-so answers and just every one of Ben’s answers were intelligent, funny. We’re going to have a video of it. I assume we’re selling the videos after the event, but it’s for sure one of my highlights of the entire conference.  

Arvid Kahl:
I did not expect to have something so relatable in that conversation, but it was on every single level. And it was really, really cool. And I also liked you were a competitor to him. That was a fun part when you talked about how Drip, you asked if it was even on their radar at all, and even that sparked a really, really gracious and kind exchange.  

Rob Walling:
The one where he called me a bastard for starting a competitor to him? He’s like, “This bastard, I thought we were friends. This bastard…” Like that. And people just ate it up. I was like, yeah. Those are facts. What you’re saying is a complete fact. I was like, were we a nat or a rounding error? I was going to get to the point of did you spend more on toilet paper than Drip’s entire ARR? But I didn’t want to derail the conversation.  

Arvid Kahl:
Yeah. You got to keep it on a professional level. I get it. It was a lot of fun. Yeah, that was great. That was a wonderful moment. And hey, for somebody who’s never, ever anywhere, even just gracing us with an hour or so of his time, that was great for the community and it was great for everybody who was there and who gets to watch it, so it’s perfect.  

Rob Walling:
Yeah, I was very grateful because as you said, he just doesn’t necessarily like the limelight. He doesn’t really do podcast interviews. He’s done a hand… Not even a handful over the years. And he doesn’t travel really for interviews. Because he doesn’t need to, he can do what he wants. So that… Yeah, it really [inaudible 00:29:37].  

Arvid Kahl:
Isn’t that a lifestyle business?  

Rob Walling:
For real. Talk about the ultimate lifestyle business, where for the rest of my life and my kids’ lives and their kids’ lives, we could do what they want. Pretty amazing.  

Arvid Kahl:
It was a great conference, man. You’re doing a great job at hosting these and making these happen. I really appreciate it. Always fun. I cannot see myself skipping any one of them anymore, so there you go.  

Rob Walling:
Thanks, man. It means a lot. I really appreciate you coming back each year and for spreading the word. Like you spread the word on Twitter on your podcast, and 100% that helps. Because we can’t, with MicroConf, I can’t go run Facebook ads and Instagram ads and sell tickets to it because you have to know. You have to know. Why would I spend a thousand, $1,200 whatever tickets for? Why would you spend that much money on an event? Because you have to know it’s really, really good, and people trust you and other attendees when they say it is unlike any other event that you will attend,  

Arvid Kahl:
Well, thank you. And then they come to the event and then they notice that they’re actually supposed to be there. That was something, and you said this, and I think Rand Fishkin said it too, the people in this room, they belong here. The people that come to MicroConf, they are founders, and even if you’re just an wantrepreneur or whatever you want to call it, the fact that you’re making the leap to go into this community to learn from people, you don’t need to raise VC. You don’t need to do whatever other people tell you to do. Just be around the people that are aligned with you and you will learn from them and you belong in that room. You made that absolutely clear. 

And I talked to people after you said this and after the whole event, and they felt like this was the right choice, like coming here, I’ve put this off for years. I thought I wasn’t ready. But then they came there, talked to two guys and half of or one of them would say, “I’m also not ready, but I’m still here.” So it’s really taking the step is the step you need to take in that regard.  

Rob Walling:
That’s right. I’m glad you brought that part up because I’ve been starting to become pretty deliberate about it because I realize the amount of imposter syndrome that I think a lot of us feel. And if you’re in the room at MicroConf, you belong in the room at MicroConf. That’s the tautology.  

Arvid Kahl:
It’s a good one.  

Rob Walling:
That was fun. I tell you, if you’re listening to this, if you saw the tweets, if you experienced FOMO while we were doing it, don’t miss out on the next one. There’s one in October in Dubrovnik, and then one next probably April ish again, back here in the States, we haven’t signed final document, so I don’t want to announce a location, but show up. I have never had someone tell me they regretted attending a MicroConf. And I’ve never even, whether in surveys or whether anonymously, maybe someone wouldn’t tell me to my face. But it’s just something that, and I’ve never regretted, which sounds weird. It’s like, well, aren’t you the host? You’re running it. You have to attend. It’s like technically, I guess, but I go because it’s the event that I want to attend every six months.  

Arvid Kahl:
Yeah, if you do something for 10 years straight or 12, I guess, and you still love it, that’s kind of an indicator.  

Rob Walling:
It’s like this podcast and MicroConf I did as a hobby on the side while I was doing everything else. So that tells you something. I didn’t have to do any of the either of those things. The podcast and the event.  

Arvid Kahl:
That’s right.  

Rob Walling:
Arvid Kahl, you are a scholar and a gentleman. Thanks so much for waking up. It’s not even that early, it’s just we’re conferenced out. It’s the extrovert hangover.  

Arvid Kahl:
That’s right.  

Rob Walling:
If folks want to keep up with you. You are @ArvidKahl on Twitter, you are the Bootstrappedfounder.com, and what do you doing these days? You have your Zero to Sold book folks can check out. Anything else that you’re… Oh, Podscan.fm. Of course, I am a paying customer of Podscan.fm. How can I forget? So you want to tell folks just elevator pitch, what does Podscan do?  

Arvid Kahl:
So as a media monitoring, alerting, it’s Google alerts for podcasts. You have a key phrase or a word or a name or whatever you want to see, if people mention it, that’s what Podscan does, sends you notification. Also exists as an API. So if you’re a founder who wants to get every podcast out there and get all the transcripts, because I transcribed millions of these behind the scenes and you want to use it for your own products, API exists as well. But thanks for mentioning it. I met customers of Podscan. I met people who are interested in Podscan at the conference as well. Didn’t pitch, didn’t have to. People just came up to me and talked about it and it was so much fun. Yeah, MicroConf has all the layers. It was so cool.  

Rob Walling:
Thanks again for joining me, sir.  

Arvid Kahl:
Pleasure.  

Rob Walling:
Thanks so much to Arvid for taking the time to join me again on Startups For the Rest of Us. And thank you for listening this week and every week. If you keep listening, I’ll keep recording. This is Rob Walling signing off from episode 713.

Rob Walling:
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Welcome back to another episode of Startups of the Rest of Us. I’m Rob Walling. Today, I’m going to look at a couple of the predictions that I made three or four months ago. Just revisit them because I feel like we’re a third of the way through the year and I had a few thoughts on them. And I also want to give you an update on my situation. I’ve talked over the past really nine months, maybe a year, about how I was experiencing some burnout last spring, and then it hit me really hard in the fall. I want to revisit that and also give you a general update on the inside baseball of my world, Startups for the Rest of Us, MicroConf, TinySeed, maybe my books, SaaS Playbook, and the new ones I’m working on if there’s time. 

So this is definitely an inside baseball episode. I know some folks love these and other folks skip them, and that’s okay. I like to have a variety of topics and guests and formats on the show to keep you interested, but everything is focused on helping bootstrapped and mostly bootstrap SaaS founders get to where they want to go faster. And if in each episode I can have some type of nugget or wisdom to help multiply the world’s population of independent self-sustaining startups, then my work is complete. 

So I want to kick it off by looking at maybe two of the predictions. I think I had seven predictions for SaaS Bootstrappers in 2024. This is episode 697, released in mid-January, and there are a couple of them that I have additional thoughts on because we’re now four months past. The first one is that there is opportunity in vertical SaaS, and obviously horizontal is where you cater to all industries. Vertical is where you focus on a specific industry or niche. And in a YouTube video I released about a month ago, I coined the term orthogonal SaaS, which is something that it was on my radar in the back of my mind, but I didn’t have a good name for it when I recorded the podcast episode. But Orthogonal SaaS is this third type, it’s horizontal SaaS that is focused on a specific role or title within a company. 

So think of software that helps HR or people ops, recruiters obviously that can be used by almost any company around the world to help them find new people or onboard them. Think of an ATS applicant tracking system, but it’s focused on a very specific role or title. It’s not a true horizontal play, much like think of Savvy Cal, Signwell, and Castos, which can be used across industries. And if you think about those tools, you could have one of many titles using electronic signature or a scheduling link. So those are not orthogonal, they’re just horizontal and it’s not a better or worse situation. But what we’ve seen across the TinySeed companies we’ve invested in is that horizontal plays, true horizontal plays get really competitive and there’s often a big player that you’re fighting against, which is okay, but it can make marketing and sales more difficult if you don’t have that specific title to focus on. 

And so the nice part about going vertical is oftentimes you pick an industry, it’s accounting for hair salons or whatever. That’d be a terrible idea by the way, don’t do that. But accounting for whatever niche industry you want to pick, and you don’t have to be the best marketer in the world, you just have to be the best marketer in your space. Similar with orthogonal SaaS, you have this product and you know exactly who your end user is. So you can go to in-person events, you can target them with cold outreach, you can go where they hang out. Are they on Quora? Are they on SEC overflow? Are they in private Facebook groups or private Slack groups? It really lends an advantage if your ICP is actually categorized with a title or a role at a company. And I just wanted to add that on because in the episode, I talked about opportunity in vertical SaaS and I was pitting vertical versus horizontal as if it was a bimodal. 

But really there’s this third category of orthogonal. I want to tack that on here that some of the more successful companies we are seeing with TinySeed are vertical or orthogonal. So I’m excited to see what 2024 brings for those types of companies. The second prediction I want to touch on is I predicted that Twitter changes hands in 2024? 

And I don’t know about you, but does it feel like the writings on the wall that Twitter is going to be snapped up by someone at a deep discount? Obviously there’s rumors about this happening. There’s no updated news, but as the months go on, I’m more and more convinced, especially with recent Tesla decline. They just did a big round of layoffs. I can imagine that the lack of focus, Elon trying to run all these efforts could lead either him to sell it or someone to swoop in and want to acquire it. 

So I mean, there’s ridiculous rumors or even just people speculating on Twitter about Yahoo buying them or Microsoft, or it could be any one of a number of players, but I still think this is totally going to happen, and I double down. A lot of the predictions that I’ve made over the years haven’t happened for two, three or four years. So I would be off by a few years, but I have a feeling that the clock’s ticking on this one. 

All right, so now an update on me, what I’ve been up to, how I’ve been feeling. So about a year ago, I think it was April or May of last year, I started talking about how I was experiencing pre-burnout. I started feeling like just a lack of desire to go to work every day. And that’s weird for me because I love what I do on a day-to-day basis. 

And over the summer it had decreased and in the fall it came back with a vengeance. We did, I don’t remember how many, but it was… I think I took seven business trips in 12 weeks or something. It was crazy. Some of it was MicroConf, some of it was TinySeed, and some of them were speaking engagements around my book, the Sass Playbook. And what I realized as I hit the end of the year was I was pretty deep into burnout. I stopped being able to show up and be present when… I was shipping YouTube videos and shipping podcast episodes to the best of my ability. But there was just no spark there, no desire to get up and do it. It was purely because the show had to go on. So what I did, I talked about this four months ago. What I did was I was able to back off from some day-to-day responsibilities just for a few weeks. 

It was probably about two weeks that I took almost completely off. I still recorded YouTube and podcast episodes because I had to, and I did some thinking and a little bit of writing. But really I didn’t go to any meetings. I didn’t show up day-to-day for work. People could reach out to me and I handled it, but I was “off work” for about two weeks. And then the week before that was Christmas and I went to Cancun with my family and the week before that was the week before Christmas, which is always pretty slow. So I wound up having a month of relative downtime in quotes. And I also made the decision that I just cannot travel this year nearly as much as I did last year. And so talked to the team and everyone else felt the same way. That was the good news. 

So there are some TinySeed events that I’ve gone to in the past that I won’t be going to this year, and we decided to shelve the MicroConf Locals for now. So MicroConf Locals are where we swoop in for a three-hour event and we bring MicroConf to you. And the toll that it was taking on not just me, but my whole team and the level of effort and cost and time for a relatively modest turnout, it just wasn’t worth it. It wasn’t moving the needle in the way that so many of our other efforts do. And when you’re doing, we have six or seven major efforts in MicroConf. If you think about it, TinySeed is one. State of independent SaaS. There’s the YouTube channel, there’s this podcast, there’s Mastermind Matching, there’s MicroConf Connect, our subscription community. There are in-person events, there are remote events. We do a lot with MicroConf and some of them are beloved and amazingly successful. 

And obviously so, and some of them you get a kind of lukewarm reception. And so when we would fly to Miami and there’d be 30 people, 35 people in a room, producer Xander who flew in from Hawaii and me from Minneapolis, we were kind of asking ourselves, is this worth it? If we can get 75, 90 people in a room, that feels good. But when 30, 40 people show up, it started to be like, is this the best use of our time? And so we’re shoving those for now. What that means is I’ve only had one work trip in the past three, three and a half months. And with MicroConf, we’re only doing two in-person events this year. It is our flagship event in Atlanta, which happens probably as this is going live. Actually, I believe it happened last week based on the publication day, but MicroConf flagship in Atlanta and then MicroConf Europe, which looks to be in Croatia in early October. 

And that’s it. And that’s great. It feels good. It’s kind of like getting back to how we used to do it a little bit. I mean, we certainly experimented and I don’t regret doing that. I mean, we had planned to do Locals 2020 and then COVID happened and we did some in 2021. I think we did three or four at the end of the year, and then we did eight in 2022 and between six and eight in 2023. And it feels like an amazing accomplishment that we pulled those off. But at a certain point, as an entrepreneur, you have to make the decision of where do we put our focus and our efforts. As I’m recording this, of course, a couple days before MicroConf in Atlanta, and I’m stoked. I hope I am able to see several of you there. The event last year in Denver was just a smashing success in terms of engagement and ticket sales and all the folks who showed up. 

So I hope to see you there. On less happy news, you may have heard that producer Xander, who has produced MicroConf for 10 years is moving on to his next adventure. And for the first five years he worked with me on MicroConf. He was a contractor that just ran the two flagship events. And then about five years ago, we decided to really double down. This is when MicroConf went from a hobby to a full-time project for me. And Producer Xander came on full-time and had been running the team for the past five years and doing an amazing job of it. And if you’ve been to any event, you know how good he is at what he does, and MicroConf would not be the same without him. So it’s obviously bittersweet to have him move on, but 10 years is a long time to work on a project. And obviously I wish him nothing but the best, and I hope that you are able to give him warm wishes on his way to his next adventure. 

Update on this podcast. The numbers continue to grow slowly over time. That’s what podcasts do. It’s not like YouTube where everything goes up into the right so quickly. The April Fool’s episode was a ridiculous hit. I had no idea how many comments and how much feedback I would get on it. And no, that does not make me want to do another one next year. I think part of the reason it worked is because we’ve done two or three in the history of this show, 14 years, 711 episodes, and this was the third time, and I think it’d been six or seven years since the last one. So I am just happy that folks got a kick out of it. 

I’m sure there’s someone out there who’s disgruntled about it because they’re a grump and don’t like April Fool’s, and that’s fine. But I personally don’t like April Fool’s either, and that’s why I don’t do April Fool’s episodes very often, but I really did. I cringed as I recorded that episode. It was fun to push live and it’s so fun to see the responses. I’m still getting them. It shows you the delays of podcasts. It’s two, three weeks later and I’m still getting emails. I’m getting comments on Spotify. I’m getting comments on the YouTube channel. I don’t know if you knew this, but there’s a little known YouTube channel that we don’t promote that is just the startups for the rest OS feed. It is audio only with a logo because producing video is just expensive enough that we push the audio only, but a lot of engagement on all the platforms and it’s always striking the things that resonate with people are the things that get people’s attention. 

And I guess on April Fool’s episode and going back on things that I’ve been saying for a decade was surprising enough that folks wanted to weigh in. So I appreciate it if you reached out to me about it. Oh, I realized I tangented off of burnout and just how I’m feeling when MicroConf started for the rest of us, but it totally recharged me, taking that time off and just looking ahead at the next year, meaning 2024, re-energized me on my mission and for the team and for just everything we’re doing. It made me so excited and I came back all guns blazing and the excitement to record this podcast, the excitement to work on a new book, which I’ll talk about in a minute, returned. Just everything clicked for me. And by mid-January, I was through it and it hasn’t come back. 

And I am very thankful for that because I’ve been in burnout before where it’s just off and on for months and months and months and it sucks. And I’m glad I was able to get ahead of it this time. Glad I was able to notice it and glad I had the luxury to be able to step back, that the timing kind of worked. I will admit I was going to take time off in February or March, and I eventually just said, I’m going to take whatever time I can off now and just try to get it done. And so I’m feeling so much better overall about how things are going. And when your outlook is positive and ambitious and optimistic, it changes everything. It changes every day, it changes every effort that you make. 2024 has already been a pretty amazing year, aside from obviously Xander moving on. 

There’s just been a lot of stuff that continues to work. TinySeed, the funding arm of MicroConf and the startup accelerator that I run with my good pal, Interval Set. So we have just made all of our offers for, I believe it’s 13 and 14, we’ve actually lost count, puts us just over 170 companies that we will have invested in all B2B SaaS, and it puts my total to a low 190, so almost 200 companies overall. That continues to be a relatively unique vantage point in the world. I don’t know how many people have insight into that many startups, much less SaaS startups. It’s not thousands, I think it’s hundreds if I were to say. And so as a result, it allows me to see patterns across many companies, to see trends and not just wonder is it an anomaly? If I’m looking at one company or five companies, the N is very small, but approaching 200 starts to become pretty… I mean, I would say it became pretty statistically significant even in around a hundred, 150. 

But so much of what I’m seeing becomes fuel for content on this podcast or fuel for the SaaS Playbook. A lot of that came out of TinySeed experience or fuel for my next books that I will talk about in just a minute. So I continue to feel like I’m kind of serving my highest calling by doing MicroConf TinySeed in this podcast. And TinySeed feeds my entrepreneurial desires and drives in a way that I hoped it would, but I wasn’t sure. That was one thing when I said I’m not going to start a SaaS app again, which my wife, Dr. Sherry Welling told me that’s bullshit, but I have not started another one. It’s been eight years. And one reason for that is that Microconf and TinySeed keep me in the game, so to speak. They keep my head in the entrepreneurial game because I’m around founders. I’m giving advice to founders, I’m thinking through founder level problems pretty much every day. 

And so it feeds that part of me, the desire to accomplish. And I live a little bit vicariously through the founders that I’m invested in and advising. And it’s the desire to just be in the game, and I still feel like I’m there. So that’s good because I know when I first started TinySeed, what was this? October of 2018, so going on six years now, someone said to me, it was an acquaintance, but he said, “How long are you going to do this? You’ve never stuck with anything more than three years or whatever.” Drip was three and a half years from start to sale and then another almost two years. So about five and a half years of working on it. But he was kind of trying to call me to the carpet, but also pointing out a factor that I do tend to bounce from one thing to the next. 

And obviously that was on my mind of if I start TinySeed, how long do I have to do it if it gets to the point where I don’t enjoy it? Because if I do it for a year and then bail, that’s going to suck because we have this fund, we’re investing and all that. And I realized that that hasn’t happened, and it’s probably the first job I’ve ever had in my life that I haven’t gotten really tired of and wanted to move on from. I just haven’t really had that desire. Aside from when I was burned out, I was like, I don’t want to do anything. But I knew that that was temporary and it wasn’t TinySeed. It wasn’t MicroConf. It wasn’t the job. It was, I just didn’t want to do any work. And that’s what, of course, burnout can do to your mind. So I’m very happy to be past that. 

One other big win on the TinySeed front and then I’ll move on to my books is that we ran our first annual Tiny Fest. While we didn’t know it was going to be annual, it was an experiment. It was an event that was for TinySeed founders only. It was in Cancun in January, and it was the first work thing I did after coming off of my few weeks of vacation. And it was a great time. It was awesome to get founders together from different batches and different years that had seen each other in our Slack but had never met in person. So my hats off to Tracy Osborne and Alex Mccuaid, part of the TinySeed team for pulling that together. And we are already talking about having another one later this year. So if you’re curious to learn more about that, actually it was a super fun event and you can search for Tiny Fest and they did a write-up with photos on the TinySeed blog. 

Oh, one other update before I get to my book. Some folks have asked me about TinySeed Tails and whether that is continuing. Yes. So season five of TinySeed Tales, which appears on this feed is in the works, the Founder that I’m interviewing had to completely reboot, basically do a massive pivot. And so it’s almost a restarting. And so as a result, there isn’t really a season story arc to put out. We’d kind of be leaving it dangling if we published what we have now. So I am slowing down the recording pace. Usually it’s every four to six weeks, but now it’s about every two, two and a half months as the founder is making progress. I’m doing the same documentary style recording that we have done in the past where I talked to a founder over the course of a year. In this case it’s going to be maybe 18 months. 

And then we compress that into seven to 10 episodes to show their whole journey and has voiceovers and music and all that. So that is in the works. We’ve also ran into some issues with editors and producers, and so we are working to get that resolved, but hope to have season five of TinySeed Tales here in maybe the fall of 2024. All right, last update for today is on my books. So the SaaS Playbook has continued to sell really well, and I don’t know if I should be surprised, but it is quickly going to outpace Start Small, Stay Small, I believe Start Small, Stay Small, my closest estimates have it selling around 30,000 copies, just over 30,000. And for a self-published book published by a guy with a quite small audience 14 years ago, that’s good. It has had a life much longer than I originally anticipated, as you can tell by some of the examples are a little bit dated and many of the links don’t work. 

But the Gestalt, someone read it the other day for the first time and said, oh, 80% of what’s in here is mindset and it’s still as valuable as the date was written, so I really appreciated that sentiment. But just over 30,000 with Start Small, Stay Small over 14 years. The SaaS Playbook is almost at 24,000 and it’s been out less than a year, and it continues to sell over a thousand copies a month between 1,000 and 1,200 copies, I believe. And I guess that kind of makes sense, right? Start Small, Stay Small, it is a niche. It’s like that cult film that gets a following, but mainstream folks would never pick it up, partially because the cover’s so ugly and partially because it’s just very focused. What’s the subtitle? A Developer’s Guide to Building a Startup. So if you’re not a developer or you don’t consider yourself building a startup, you’re just not going to pick it up, versus the SaaS Playbook, build a multimillion-dollar startup without venture capital. 

I just think the appeal is so much broader and I’m really pleased to see that all the hard work. I mean, I put a lot of time and money and effort into writing the book, then having it edited, then having it designed, then having the cover design, then doing the Kickstarter and on and on and on. And it is very gratifying to see that into the hands of literally tens of thousands of people. And again, my mission is to multiply the world’s population of independent self-sustaining startups. And the SaaS Playbook is yet another way to do that and a way to do it relatively cheap. I enjoy giving stuff away for free. This podcast, the YouTube channel, and SaaS Playbook might be viewed as the next rung up the ladder. You can get it for $10 in PDF from SaaSplaybook.com or $10 in Kindle from Amazon. 

Or obviously you can get a paperback copy and Audible and all that. But it’s a nice way to be able to offer what I hope is a lot of value in a compact package for not a lot of money. And so it is very gratifying to have a lot of people reading it. And that leads me to my next two books. So my wife, Dr. Sherry Walling, is a psychologist and a founder and entrepreneur coach who runs a successful consulting firm at ZenFounder.com. So many of her clients have exited, are thinking about exiting, are agonizing over exiting, are in the middle of the exit process. And I, of course, having my own stories, but also secondhand stories of dozens of founders that I’ve talked with given advice to and just learned from the agony of it. So we are writing a book and I would say we have about half or three quarters of the content kind of outlined and in play, but it’s not actually written. 

So I would say book’s probably 20, 25% done, and we’re looking on… We’re hitting it hard over the summer, but it’s really focused. There’s a little bit of the mechanics of exiting and there’s a lot about the mindset about before, after, how to think about your team, about how to mentally prepare for it, about thinking through whether you should sell, about whether you’re going to have regrets, about just on and on and on. And the cool part is just everything’s taken from our experience of talking to founders who have done this, are doing it, are agonizing over it, got screwed, have regrets. Whatever it is, is going into this book. So I don’t want to say it’s the Psychology of Exits because that sounds a little academic, but it is definitely a different take on selling your company. It’s not necessarily focused on SaaS. 

Obviously there’s a lot of SaaS examples because of my network and the folks we’re interviewing around it, but Sherry’s clientele has some SaaS in it, but there’s a lot of just business owners that own brick and mortars or that own consulting firms or agencies or some variation of a business that sells. And so we hope that it has a little bit wider appeal than even say the SaaS Playbook, and we hope when it comes time that you will check it out. Last update is a book I’ve mentioned offhand a few times, but I’ve since decided on the title. 

It is called the SaaS Launchpad, and I just got a cover designed, the manuscript is complete, but I need to reread it and rewrite some pieces of it. It goes out of date so quickly, even if you try not to or really my thinking changes or I have better examples and better thoughts and better ideas around certain things as I create more content on this channel, more content on the YouTube channel, do thinking, speaking and writing. And I’ll revisit the book and be like, oh, I don’t necessarily fully agree with that anymore. Or there’s a better way to say that now is what happens a lot. 

So I started reading through it the other day and I was kind of like your software’s never finished, and frankly, books are never finished. You eventually just ship them and you give into the fact that a week later you’re going to look at something and say, ah, I wish I’d said that differently. I wish I’d added more. But I’m excited about the SaaS Launchpad because it is kind of like a prequel to the SaaS playbook. So the SaaS Playbook is about bootstrapping and mostly bootstrapping multimillion dollar SaaS companies. It starts, you have a product, you have some revenue, and you have what I call weak product market fit. You’re kind of figuring it out. You’re at an early stage. How do you strengthen product market fit is an early topic, pricing, marketing, building your team mindset, all that stuff. The SaaS Launchpad was almost a harder book to write because it is the earlier stages. 

It’s like, how do I come up with ideas? How should I think about competition? How do I validate ideas? Can I pre-validate ideas? How do I think about building a launch list? What does it look like to launch? How do I think all this through? The challenge is you can’t be as prescriptive because there is no blueprint for this early stage ideation stuff. There is kind of a blueprint. The SaaS playbook is pretty prescriptive about a lot of things because I do think there are best practices, rules of thumb that can guide you to get to the next level. Obviously, every company is different, every startup is different, but if you flip to the early stage, it’s a lot of wandering, but at best you have a compass. It’s not a map. And so at best it’s like directionally, this is kind of where you have to go. 

And so that’s what I was trying to do and hopefully have accomplished it in this SaaS Launchpad. And I don’t know when I will publish it because there’s a bunch of other stuff going on. I’m actually recording a video course for MicroConf right now, and you know how it is. It’s just priorities. I also don’t want to launch three books within 12 months of each other because I do think that it can become a little oversaturated. But that’s in the works. Obviously, if you’re interested in this book, keep listening to this podcast. You can go sign up. Oh, I should tell you StartupsForTheRestOfUs.com, the email list, if you sign up for that, obviously you’ll hear about my books, but you’ll also get an email every week with detailed show notes of each episode, and you will get two never before heard episodes. 

One is called Eight Things You Must Know When Launching Your SaaS, and the other is 10 Things You Should Know As You Scale Your SaaS. And not only do you get those episodes, but there are PDF guides that come with them. And in addition, there is a PDF we created of the 5:00 PM Idea Validation Framework that you’ll get if you sign up for that list. So a lot of bonuses there. Startupsfortherestofus.com, sign up for the email list and you’ll hear about my new books as well as all the stuff I just named. 

That’s all I have time for today. Thanks for sticking with me through this update. I hope this was interesting. Certainly feel free to weigh in if you have thoughts, cheers, advice, questions, anything like that. You can always email questions@StartupsForTheRestOfUs.com or head to StartupsForTheRestOfUs.com and look for the ask a question link in the top navigation. I’ll be back in your earbuds again next week. This is Rob Walling signing off from episode 712.

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

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

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

Ruben Gamez:
Thanks. Great to be here.  

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

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

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

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

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

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

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

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

Ruben Gamez:
Definitely.  

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

Ruben Gamez:
Yes.  

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

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

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

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

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

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

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

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

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

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

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

Rob Walling:
Can you out market them?  

Ruben Gamez:
Yeah.  

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

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

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

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

Ruben Gamez:
Oh. Yeah. That was fun.  

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

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

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

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

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

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

Ruben Gamez:
Exactly.  

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

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

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

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

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

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Next question is about no code, code export.  

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

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

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

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

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

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

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

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

Ruben Gamez:
No, no.  

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

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

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

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

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

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

Rob Walling:
I can go first if you want.  

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Ruben Gamez:
Joel. Yeah.  

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

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

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

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

Ruben Gamez:
Yeah, great example.  

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

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

Ruben Gamez:
We’re 10 and eight.  

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

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

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

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

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

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

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

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

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

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

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

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

Ruben Gamez:
Great being here. Thanks.  

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

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

Rob Walling:
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Welcome back to another episode of Startups For the Rest of Us. I’m Rob Walling, and today I go through listener questions and listener comments. I received several comments regarding episode 704 where someone had written in with the question, “I really like my day job. I don’t have a burning desire to be an entrepreneur, but I would like to be one. Do you have advice for me?” 

And I gave advice like, well, I had a burning desire and most of the entrepreneurs, actually all the entrepreneurs I know who’ve had success, had that burning need to do it. So if there’s a listener out there who is struggling with that motivation or who didn’t have a bunch of motivation and found success, please write in. I also said maybe just try some things and if you get lucky, great, and if not, it’s a win-win because you can keep the day job. So I have responses to that as well as a couple comments about the now infamous April Fools episode. And of course I’m going to answer listener questions. Stay tuned. 

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

So to kick us off, I received a response to that episode, 704, around do you need a burning desire in order to be successful? And this first one, I’m going to keep anonymous. He wrote a really well-written and well-thought-out lengthy email, so I’m going to summarize it. 

He says, “That caller’s question really resonated with me, and I kept pushing the rewind button on my walk and listening to that snippet over and over. It’s just one data point, but I believe I support your general experience with startup founders. I’m a previously bootstrapped founder with a successful exit through a strategic acquisition.” 

And in summary, he and a co-founder built an app that they sold for 10 times ARR. And it’s a life-changing amount of money, but it’s not enough money that he never has to work again. And so he said, “It’s been hard for me personally post exit, trying to find my place again. I’m consulting 20 hours a week making great money, so I’m fortunate, but I’m also kind of miserable because,” and I like this quote, in quotes, “my volume is turned down to a two like you mentioned.” 

So I must have … maybe I said that in the episode. I know that as an entrepreneur, the volume’s always at, what, 11? And then you go get a day job. I remember 15 years ago or whatever, I would be consulting or I’d be launching products and it was super exciting, but it was super frustrating and scary and uncertain. And then I would say, “I want to go back and get a day job.” And I would get a day job and I would be so bored and so frustrated. And so I think that perfectly encapsulates that my volume was turned down to a two. 

And so back to the email, “I have another bootstrapped product that I’m spinning up and I have multiple other opportunities, but I haven’t committed to any of them. I desperately miss shipping valuable products to users, that dopamine hit. I want to fly again and have that feeling of same day turnaround fixes for users, new features to solve real problems, et cetera. I’ve considered going back to a day job, but instead I think I’m going to use this time to hit it harder on my startup projects while I’m consulting part-time.” 

And then he wraps up with very kind sentiment, “I hope you get some level of satisfaction from how life-changing your podcast is on so many levels. For every person who writes you, there’s probably 20 others you don’t even know about.” That is actually very meaningful to me. So thanks, Anonymous, I really appreciate the insight. 

And he’s basically talking about without the motivation, it’s been really hard to get back in the game. And I think that can be a second-time entrepreneur, or if you have a great day job that you love, it can be hard to find the motivation to do the grind. So thanks so much for writing in. 

The next email is on the same topic and it’s from Paul. 

Paul: 
Hey Rob,  I’m a co-founder at WonderProxy, and a scatter-shot listener to Startups For the Rest of Us. WonderProxy has been around for over a decade now, we do over a million dollars a year in sales, full time staff beyond the founders. We’re doing okay. Back in episode 704 you had a question from someone with a comfortable job who wasn’t sure about making the leap. You talked a bunch about the burning desire or need, and wondered if it was a requisite for starting this sort of thing. I don’t think my co-founder or I ever really had a “burning desire”, neither of us is particularly passionate about the space. We help people test their website from around the world, we’re not curing cancer. I think we had two things going for us that let this work for us. First, we both loved building things: I’ve loved programming since childhood, my co-founder has loved working on servers since college. Working on the company was something we liked doing in our spare time. I was excited to come home from work and keep programming. Second, 0ur day jobs could give us the space to let the company grow at its own pace. We didn’t have a full time employee for the first five years. New customers let us expand the service, or pay ourselves some amount of money. So there wasn’t any passion or burning desire, but there also wasn’t any pressure. Our day jobs paid us well. The company grew slowly over a period of years until we made our first hires. Then, things accelerated and I eventually went full time, but was able to do so without risking my salary (which was handy, by that point I had a kid and a mortgage). My suggestion for your listener would be to find a problem out there they think they can solve by doing something they enjoy. Stick that solution out there, and invest just bits of money and time into it. In my view the super power that comes with this approach is that giving some change (like a new landing page, or ad copy, or whatever) a month or two to work is easy (You’re busy at work!). Where fully invested founders act like hampsters on speed, changing things daily, never giving their product enough time to actually see results. Hope this helps them, thanks, can’t wait for the next episode.

Rob Walling:
Ooh, see? I actually want to dive in here. I didn’t say a burning desire about the space, I said a burning desire for freedom, or a burning desire to be an entrepreneur or to start your own company or to own your own thing. That’s the burning desire I had. Many of the early products that I owned, I didn’t necessarily care about the space, but there were opportunities for me to make enough money to quit the day job. And I felt as long as I did that ethically in a way that provided value for what people were paying for that that was fine.  

So thanks for writing in. I think it’s an interesting take and I do think that it’s an example of folks who put it on autopilot. Now do I think you’re less likely to find success that way? I do. I think that if you’re driving day-to-day and you have this burning desire to get to some end result, he’s right, you are a hamster on speed, but that can be beneficial when you’re an entrepreneur and when you’re trying to get to an end goal. 

And do I think you flail a bit and you probably waste some cycles? Probably. But do I think that focusing on a product and … I did at nights and weekends. So I worked a 40 hour a week day job and then depending on the week, and it was before we had a kid. And then after we had a kid, it might be between eight and 20 hours of nights and weekends that I could put in. 

And of course that was not getting enough sleep and it was not working out. It was doing all the things that you don’t want to do. But that allowed me to start building up side-income to the point where I actually did back off to four days a week at my day job. And I think in the end I was working three days a week, so like 24 hours a week and building products on the side. And so I love the fact that folks wrote in with their experience and I really appreciate their thoughts. 

My next email is on the same episode, but it’s on the ideal or the right trademark tech stack. And Daniel writes in, “When I started working on Codelantis, which is a code review app, I chose a tech stack that I knew and that is reasonably scalable, front and back end in different languages. Only later I realized this wasn’t an ideal choice.” 

“The best choice for an early stage product like mine is one that lets you iterate quickly and easily. I’ve switched to a single language repository,” so for him it’s TypeScript and Node.js, “a couple months back and the difference in development pace is like night and day, which also means that I’m not only shipping faster, but that my motivation stays up too. And this is arguably even more important for a nights and weekends project.” 

“So my TL;DR is don’t worry about scalability, worry that you can’t iterate fast enough, lose motivation, and no one will be using your product.” So thanks for writing in with that, Daniel. I think you need to worry about both. I don’t think I agree you don’t have to worry about scalability. 

There’s this weird balance of back in the day when I was a contractor writing code for third parties, some of our developers on my team would, we call it gold plating, and it’s over-engineering everything. And they would say, “Well, it’s for this big bank and maybe they’ve got a kajillion users.” And we had to have a balance. We couldn’t fall over when there were five users, but we couldn’t plan for five million, and we had to have a reasonable, pragmatic approach to making these things work. 

And I think picking your tech stack is similar, have a reasonable pragmatic approach. Will it scale well enough and will you be able to iterate quickly? I know that there are tech stacks that can do both, and I already weighed in on this whole topic. I appreciate Daniel’s insights on choosing the right tech stack. 

All right, so the April Fool’s episode, I have received more tweets, DMs, and emails about that episode than perhaps any other episode in the history of the podcast, so I really appreciated it. I did not think it would get that kind of response. 

I will give you some inside baseball that I had a real difficult time recording that episode because if you know me, I tend to be what? Pragmatic, logical, I tend to tell the truth. I try to tell you how I actually feel about things. If I don’t know the answer, I try to say, “I don’t know.” If I’m pretty certain about something, I try to say, “90, 95% certain.” And to say something that is just not what I believe and to actually steel man the arguments was challenging for me. 

I don’t think I’ve ever done this before, but I came into my office, I didn’t hit record, and I just recorded the whole episode without recording it. I just did a monologue in my office to figure out am I capable of doing this episode with a straight face? I did the whole thing and I thought, “You know what? That wasn’t that bad.” So then I hit record and recorded it. I still struggled when I listened back. I can hear myself acting a little bit, but it’s so cool that it didn’t come across like that for most people. So people were shocked. 

What I really appreciated were folks who wrote in and said, “You had me until you said this.” And for some people I think like Derrick Reimer said, “The moment you said that, I’ve rethought my stances based on thoughtful conversations on Twitter and Hacker News, I knew this was bull (beep). And Ruben Gamez, who has been a many-time guest on the show said, “The moment you talked about lowering prices, I was like, ‘Ah, he’s making it up. And this is a special episode, it’s got to be April Fool’s.'” He knew it right away. 

Most people, it seemed to take five to seven minutes. I think the entire diatribe was about 11 minutes before I gave it away. So a lot of people made it halfway through. And one such listener, Jakob Ericsson wrote in and said, “At first I was all for it, ‘Hell yeah, finally Rob is seeing it my way with consumers being great evangelists for products, B2C is fun.’ Then I started thinking, ‘Hey, he’s really having second thoughts on a lot of things. I wonder what people will think about being told things in such a convinced tone when it’s really the opposite of previous talking points. Churn is a good thing now?’ That broke the illusion for me.” 

Yeah, it was either churn or two-sided marketplaces. There were certain points that just became kind of ridiculous. So I appreciate you being a good sport if you listened to the episode and liked it and reached out. I haven’t done an April Fool’s episode in I believe six or seven years, so I felt like it was time to do it. 

All right, now let’s dive into a listener question from Mike. Mike says, “I started a company last year to address a sell shovels dev tools problem for this AI wave. I’m getting a consistent message about the features users need for me to be a viable option. My only pre-existing competitor has begun building for this use case and a new VC-funded competitor has entered the race. Realistically, there will be more coming.” 

“I take the competition as a sign I identified a real need, but I have strong doubts I’m going to be able to compete given how the ecosystem is shaping up. It’s a challenging problem in a complex and ever-evolving space. Lacking funding, revenue, and co-founders, my options seem limited. How should I handle this situation?” 

Yeah, so this is the double-edged sword of entering a, quote, unquote, “hot” space is, it’s inevitable if you’re in a space with a lot of opportunities growing quickly that a bunch of venture dollars are going to get poured into it. That doesn’t mean you’re going to lose, it’s just going to make it harder. I talk a lot about this in Start Small, Stay Small and probably should have talked a little more about it in The SaaS Playbook to be honest. 

But in The SaaS Playbook, I talk about why niches and verticals are usually so much better for solopreneurs who want to lifestyle it. A big mistake I see folks making is thinking I can build a venture-scale business or I can build a business that will probably need a lot of funding, but I can just bootstrap it. Or I can build in a market where there’s going to be a ton of funding and probably just bootstrap it. And while it’s possible, the odds are stacked against you. 

And so if it’s your first time, you can either do the step one business or you can restart small, stay small and look for out-of-the-way niches where no venture money is going to enter it. And am I saying go somewhere where there’s no competition? Of course not because there probably doesn’t exist a market of any size at this point that you can launch a software product into. But this is the double-edged sword of oh, there’s opportunity and there’s a bunch of people talking about it, therefore there’s going to be a kajillion dollars brought into it. 

Now can you still win? Can you still beat venture-funded competitors? Of course. If you know what you’re doing and you’re experienced, I would compete against venture-funded competitors. In fact, I did. Drip was, what, the 300th email marketing application? 

And our competitors who, I think VentureBeat did a top 10 marketing automation providers, maybe it was top 15, and we were number, I honestly forget the number, 10 or 11, and everyone ahead of us had raised a minimum of $20 million. Some had raised hundreds of millions and yet there we were in a little closet in Fresno, California at the time with five employees just scrapping. 

So yes you can, but I was an experienced entrepreneur. I had put 150 to $200,000 of my own money from my other projects into building it. I knew what I was doing, I had a network, I had an audience, I had blah, blah, blah. I had all these unfair advantages and if you don’t have that, it really becomes an uphill battle. 

So back to Mike’s question, how should I handle this situation? There’s a bunch of things you could do. You could look to get acquired. You could throw your flag out. Now here’s the thing, you’re going to get acquihired. They’re going to want to hire you as an engineer, probably pay you a bunch in stock, but if you can get … 

I saw someone who had 70K ARR, maybe it was 75, and they got acquired for 10X ARR. So they got three quarters of a million dollars for a fairly early stage product. If you don’t have that kind of money in the bank and that is life-changing for you and you have to work for a year or two in order to get it, I don’t know, that’s something I would have done in my younger years. So in thinking about acquihire, often that can cut both ways. It can be a good deal or it can be a crappy deal. 

You mentioned you have no revenue, which I think that’s probably the biggest problem here, is if you’re going to build, if you’re going to bootstrap, please go towards revenue. Don’t do the free plan. And if you’re entering a space where everyone has a free plan and therefore you need it to compete, think twice about whether or not you want to bootstrap in that space. I feel like a lot of folks, I’m not saying Mike’s doing this, but I do see folks entering these hot spaces and not realizing that the competition is stacked against them if they don’t have revenue co-founders and funding. 

So anyways, back to my answer. You could look to get acquired, which is harder than it sounds because if you go out looking to get acquired, then you look desperate and people are going to want to not pay you very much. But build and get on the radars, and if they approach you, you say, “I’m not really looking to get acquired really early, but sure I’m open to talking about it.” You play coy and then you go along with it as it evolves. 

Another thing you could do is just walk away, do something else. You could take what you have and focus on a vertical where there isn’t necessarily VC dollars. I don’t know. Without knowing a bit more about your space, I don’t know if there’s a vertical or a way that you can position down and take a corner of the market that they are not going to go after, but that your tech can translate to really easily. So to make up an example, instead of building the AI CRM for everyone, you build the AI CRM for realtors or for freelancers or for salespeople at SaaS companies. You get the idea. 

Another option is to go raise funding, fight fire with fire. And either go to something like a TinySeed, go out and try to raise angel money, go try to raise venture. If venture’s going into the space, it’s not as hard as you think to be able to raise funding. And yes, gasp, Startups For the Rest of Us, Rob the bootstrapping podcaster talking about raising venture funding. Well, I’ve been saying that for 15 years. It’s just a tool and if you need that tool to succeed in your space, then of course I would consider raising it. 

You have a big decision to make, Mike. Obviously this is a tough choice with a lot of things at play, and of course it depends on the specifics. I can’t even say, usually I say in your shoes, here is what I’d do. And really without knowing all the details and just sitting down and talking about the ins and outs for 30 minutes, 45 minutes, I don’t know that I could even weigh in on what I would do in your situation. But I hope all the options I’ve laid out for you are helpful. Thanks for writing in. 

Our next question is from Reid Alexander, subject line is, “Is Learning to Code Dead?” Reid writes, “Hey, Rob. Thanks for putting in all the work making Startups For the Rest of Us a great show. My favorites are the listener question episodes, which is why I’m writing. I’m currently in the process of selling my small online business with the hopes of further exploring the ins and outs of software development after its sells. I’m extremely novice when it comes to programming, so I’ve been looking for the best ways to quickly learn what I need to know to develop software myself thinking of becoming a full stack developer.” 

“So I guess my question is in three parts. Number one, is learning to code still relevant?” Yes, it is still relevant. I view AI as augmentation, like a little bit of a co-pilot is a great example. Having a co-pilot, having something that does autopilot, you still need humans involved to fly an airplane. So is it still relevant? Yes. Do I believe it will still be relevant in 5, 10, 15 years? Yes, people will still be making software. 

Now we may not be making software in the way that we do today, much like if we flash back to the ’50s. Now, I think in the ’40s, you would program a computer by moving vacuum tubes. And then eventually we got the integrated circuit, which was what, the ’50s or the ’60s. You’ll have to forgive even though I have a degree in computer engineering, I do not remember my history of how computers evolved. But I think it was in the ’60s we had the integrated circuit and therefore programming became typing ones and zeros, literally binary. 

Then there was assembly language, which were these short, usually three letter instructions that would generate the binary. And at that time people said, “Well, it’s going to be slow. Well, you’re not going to need programmers anymore because everyone’s going to be able to do assembly language.” And if you’ve ever seen assembler, it is an absolute nightmare to work with. 

And then it goes on and it’s like, well, C is a higher level language. Well, now everybody’s going to be able to program. And then they build C++ and then they build Ruby on top of that, and then they build whatever else. They build no-code on top of that. It’s all code. And at every movement, at every big shift, when those new languages came out, people would say, “Well, now you can just type human English instructions into a computer and it’ll just do the thing, and so we’re not going to need developers.” 

I see AI as the same thing. It’s another abstraction layer, it’s another augmentation layer, but there are still going to be brilliant developers, brilliant makers, brilliant product people who are better than others at it. Do I think it makes it easier to get on board and easier to learn? Probably. Do I think it makes it easier to be a crappy developer and build things that are not going to scale and that are going to break and that are going to have bugs? Yeah, probably. So is learning to code still relevant? In my opinion, 100%, yes. It’s going to change, but it’s still relevant. 

“Number two, if it is still relevant, which I believe to be the case,” the OP is saying, “what’s the best way to go about learning to code in a shorter period of time? With all the new tools, like ChatGPT, Replit,” which I haven’t heard of, “et cetera, is learning the traditional way, a waste of time?” 

I don’t know what the traditional way is because coming up, I read books. I was eight years old, there was a book called How to Speak BASIC to My Apple. I read that, I learned how to speak BASIC to my Apple. So is that traditional? Is going to four years of university traditional? I certainly don’t think that’s the way to code by the way, much cheaper, much faster ways. Is going to an online coding boot camp traditional? Is going to an in-person coding school traditional? Probably not, those things are newer. And then there’s also sites like Boot.dev and Frontend Mentor, which is, Frontend Mentor’s a TinySeed company, Boot.dev, Lane, the founder, was on this podcast just, I don’t know, in the last six months. 

I would say, which way do you learn the best? Any of those ways can work. If you learn from books, which most people don’t. For some reason I did, and I don’t know why, but I guess it was because it was the only way I had. Imagine me, eight years old in the 1980s trying to learn to code. It’s like, what were my options? There was no internet, there were no online coding schools. And it was intriguing to me that you could type something and a computer would do it. And I was like, “Well, I’m the youngest of four kids and everyone orders me around. I want to order something around.” So I learned how to speak BASIC to my Apple to do it. 

And then as time went on, there were in-person schools, in essence there were trade schools. But then there were even just these in-person boot camps where you can go for six weeks or six months and learn the basics. Figure out what modality works for you. If you’re the person who needs to go somewhere and be sitting there to not be distracted, then look locally. 

If you can do it online, that’s probably cheaper and you can probably find a better school because you have the whole world now as your option. Or again, Boot.dev, Frontend Mentor, there are a kajillion of those online. I think those are two good ones that I know about, but there are probably at least 50 more sites that can help gamify it and help you learn how to do it. That’s how I would think about it. 

Tools like ChatGPT are just augmentation. ChatGPT in my opinion, is not going to teach me how to code. It’s not designed to do that. But can it help me as I go along? It’s like I remember at a certain point in either high school or college, they allowed us to start using calculators. And they just said, “Look, doing basic math isn’t the thing anymore.” 

But when you’re in fourth grade through eighth grade, it’s like, “Well, you have to learn to do the math so that you know it.” At a certain point, they were just like, “Take the calculator and use it to do the basic math because the hard part is figuring out the geometry or the equations or which equation to use or how to do something that’s a higher level function.” 

And that’s how I see ChatGPT, it’s like the calculator. It’s just a little assistant that can help you if you get stuck. It can write a bit of code for you and it may or may not work, and you need to know how to debug that and integrate it into a core application that’s actually going to make sense. 

“And the third part of the question is are there certain languages or specifics I should focus on learning to become a full-stack developer who can create my own software and web applications, hopefully utilizing LLM within my projects? Thanks for all the advice you give and have a great week, Reid.” 

So are there certain languages? I mean, we talked a little bit about this, right? A lot of people use Node. We just heard someone write in and say, “I want it to be all JavaScript, therefore I only have to learn one language and I use some type of JavaScript framework on the front with Node on the back.” People build startups out of that. 

If I were to start today, I would probably go with Ruby on Rails or Python Django. I know another really popular one is PHP Laravel and there are these amazing SaaS starter kits that, again, I talked about these a couple episodes ago. I don’t want to rehash all that, but that’s what I would do. And maybe go to Stack Overflow or to Reddit or Quora and just Google this exact question and look to see what people are saying and just make a call. 

The thing is learning one language allows you to then learn other languages a lot easier. And I know switching ecosystems, it can be a pain. But I was teaching myself Python three or four years ago just for fun on weekends because I had never coded in it. And I knew PHP and I had seen Ruby on Rails because it was what drove Drip, but I was never able to code in it. But I was like, “Python seems pretty elegant and I really liked the ideas behind Django and it seems like you could get something going pretty quick.” 

And I was going to start building just some basic web apps to do whatever crazy things and I wanted to get into a little bit … This is before the LLMs come around. But I liked the idea of semantic analysis and such, and I was like, “Who has the best libraries for semantic analysis?” It was Python. 

And so, literally in a weekend, now I have an advantage of course, because I used to be a developer so I could translate the paradigms. But that’s what I’m saying here is if you pick one that’s generally accepted and a bunch of web apps are built in and then later you realize, you know what? I really should have picked this other one, it’s like making that transition is a transition, but it’s not as painful as just getting started. So thanks so much for those questions, Reid. I hope that was helpful. 

I do not believe learning to code is dead. Let me just underline that. People say this for the sensational headline of it to get clicks and stuff. Will it change? Yes. Will driving change as self-driving cars come around? Yes. Did making garments change when the automated loom was invented? Yes. Did transportation change when cars were invented? Yes, but it’s like these are all advancements in technology that we can work with that make our lives better, make us more productive. 

And as long as we aren’t acting like an ostrich with our head in the sand imagining, “Oh, it isn’t coming, I’m not going to update my skills. No, I’m just going to be the same old developer I always have been.” Well, then I think you probably have a problem because there is a paradigm shift occurring right now. 

It’s like some of the developers in the early 2000s who I knew who were either desktop developers or they were still developing in COBOL and just older systems and didn’t want to learn even Perl or ASP or PHP stuff that was really evolving in the early 2000s. And I was like, “Look, that’s your choice, but realize there will be fewer and fewer jobs for you in the coming decades if you don’t update your skills.” 

My last question for today is from Patrick Bowman. Patrick asked about product protection, “When developing and researching a SaaS product, what is the risk of potential IP theft?” So the idea of someone stealing your intellectual property. “On a scale from 1 to 100, where would you rate this as a concern? Would you recommend an NDA or similar for the early adopters or testers who are testing a SaaS product? How would you recommend founders and developers protect their product if it is a substantial concern?” 

So here’s the thing, an idea for a product is not IP or it’s not something that you can protect against. Copyright protects the actual code. Trademark protects your mark that you’re using in trade, so your logo and the name. And patents can protect the specific way that you’re doing something. I’m looking at a patent law here. 

But realistically, if I come up with an idea for an app that does exactly some very specific AI thing for realtors and someone comes along and mostly replicates the exact same interface and tries to compete with me, unless I have deep pockets, you send them a cease and desist and they can ignore you. And what are you going to do, sue them? Again, unless you have deep pockets, IP protection is actually very, very hard. It’s a lot more complicated than people think. 

There’s difference between law and justice and when people have copied me, I’m always like, “(beep) this sucks.” It’s not just. But can I go after someone who recorded a YouTube video and basically used the same outline I did? Probably not. I mean, I could try, but is there any … Do I want to go to court and spend years and tens of thousands of dollars to try to get someone’s YouTube video taken down?” It’s just not worth it. 

And so what I thought this question was going to be about is people you hire to actually write the code for you, and of course you should have them sign an IP agreement they’re not going to steal your stuff. That’s just law. If they’re overseas, so you have a developer in the Philippines and they decide to steal it and try to compete with you, well, that sucks. Are you going to sue him in a Filipino court? It’s like there are risks you have to take I think with this kind of stuff. 

On a scale from 1 to 100, where would I rate this as a concern, especially with early adopters or testers who are testing a SaaS product? I don’t think I’ve ever thought about it. So it’s like if I say it’s a one, does that mean it never happens? Certainly it’s happened. It has to have happened, I just don’t hear about it. 

I talk to TinySeed companies, I talk to MicroConf companies, I talk to listeners of this podcast, see people at events. Every once in a while I’ll hear, “Oh, an employee took a piece of our code and went and did X, Y, Z and tried to compete with us.” It does happen now and again, but for me personally, it’s just not something I have ever been concerned about. 

I feel like if my customers are a bunch of indie makers or indie hackers who are really scraping looking for an idea, then yeah, maybe I’d have them sign an NDA. I am not sure how I would enforce that. But if my customers or early adopters or testers are realtors or lawyers, do I think that they’re going to go try to build a software product to compete with me? No. Could it happen? Yes. Is it likely to? I don’t think so. 

It’s just one of these things. It’s, as you’re saying, I like that you said 1 to 100 because it really is risk tolerance. It’s like at this point you have testers and early adopters. Do you also have general liability insurance or errors and omissions insurance at this point? Well, why not? Because isn’t there a risk that your software could do something, someone could sue you around the software? Of course, but the risk right now is astronomically low. So you’re not going to spend the time or the money worrying about it. 

I think similarly, do you have an LLC or a C corp set up so that you are not personally liable if anything happens to the software? You might, but a lot of people don’t. I didn’t have an LLC for the first five years of … I had all these products. This was from ’02 to ’07, 2007. I was a freelancer, I was a contractor and I was making money from software products, six figures from all this stuff. 

And I was still a sole proprietorship, meaning someone totally could have sued me personally for any of this. And for me it was just not worth the headache to get that corporate entity set up and to get all the stuff set up. And so am I saying everyone should follow my path? Well, of course not. But on a scale of 1 to 10 or 1 to 100, I guess as you said, it’s very low. It’s very low on my list to be honest. 

And the third part was how would you recommend founders and developers protect their product if it is a substantial concern? I guess not showing it to people that I was concerned about. I guess having them sign an NDA. That’s it. I mean, that’s what an NDA is for. You can’t take this and do anything with it. You can’t even tell people about it. That’s it. 

Yeah, I don’t know where else to go with it other than that’s what NDAs are designed for. And if people don’t sign NDAs, you’re going to let them check out your product? I guess that’ll be your choice if you think it’s a substantial concern. Typically, this is more of a concern that’s in people’s head than it is in reality. So thanks for that question, Patrick. I hope it was helpful. 

Thank you for joining me today. If you have a question for the show, you want to hear me or me and a guest answer it in a future episode, you can email questions@startupsfortherestofus.com and you can send a Dropbox link to an MP3 file or a video file, you can attach an audio file. Or you can go to startupsfortherestofus.com, click Ask a Question in the top nav, and then you can record right there on your phone or on your computer, send in video, audio. 

They always go to the top of the stack, except for … I say always. Most of the time they go to the top of the stack. Every once in a while I dig through the text questions because I still have a question from June of last year. So we are, what is that? 10 months. I’m starting to feel guilty a little bit, and I did go through several text questions today. But as a rule, the video and the audio are the ones that go to the top of the stack. 

One of the reasons for that, it’s just really cool to hear from people in the community and to know that there are other humans listening to this podcast. Because if you’re listening to it solo, do you know how many listeners there are? Are there five listeners? Are there 50,000 listeners? When you start hearing people writing in with their own concerns and you hear their voice and you hear the intonation of the question, there’s just so much more fidelity to that experience than it is sending a text question in and me reading it. 

Of course, still send text questions in if you want to. They still work out really well, as I think today’s show was hopefully helpful for you and certainly fun for me to record. And with that, I wish you an amazing week of productivity and progress on your entrepreneurial journey. This is Rob Walling signing off from episode 710.

Rob Walling:
Welcome back to another episode of Startup For the Rest of Us. I’m your host, Rob Walling, and every week on this show, I talk about building an incredible life through startups. Usually, it’s bootstrapping and mostly bootstrapping. Sometime, I have venture-funded startups come on and talk about their experience. But realistically, it’s all about founders, humans that are trying to make a difference in their lives and the lives of the folks around them. Entrepreneurship has been the number one force in my life that has changed it for the better. It brought me from making $4 and 50 cents an hour at my first job and $17 an hour in my first job out of college to where I am today, in a position where finances are no longer a major concern in my life. And that feels like a very weird thing to say based on where I came from. 

So in today’s episode, I’m going to talk about building wealth, and specifically, I’m going to talk a bit about my story, the story of Sherry and I building wealth over the past 20-something years. And I’m going to talk about the activities we’ve done in order that have brought us the most wealth in our lives. And I realize that talking about money can be a taboo subject. I’ve never been someone to share my MRR and act like I’m building in public when in fact, I’m actually bragging in public. But I do think that many of us who are out to find freedom, purpose, and relationships, we need to find a way to make enough money to quit the day job or to augment our day job or at a certain point, to make enough money that we never have to work again. Because as much as most of us will say, “I don’t actually care about the money, I care about the freedom,” the money is the means to that end, the money is the means to get to freedom. 

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

Let’s dive in to a lesson on how to build wealth. And look, I could say how to get rich. That’s the gauche way of saying it, but I feel like there a way to talk about this topic tactfully and to talk about it respectfully and to talk about it frankly, with grace and thanks because if nothing else, I have an incredible amount of gratitude for what entrepreneurship has done in my life and the life of my family, and that’s why I want to share this with you today. So last week, I was on Twitter and I saw a tweet from Christopher cgimmer and he said, “My two greatest investments, number one, starting a business, number two, buying Bitcoin.” And that tweet reminded me of an essay, really a half-form blog post that I wrote a year, maybe two years ago. 

I thought of turning it into a tweet thread. I thought of posting it on the blog and just never did. But it was a reflection on the life that Sherry and I have built. And I started thinking through what are the ways that we lifted ourselves up from, I’ll say, humble beginnings. I won’t go into it too far, but between Sherry’s family and my family, we have convicted felons, we have drug addicts, we have folks who have been on food stamps, some folks who are still on food stamps. We’ve had people in and out of jail, we have alcoholics, we have a lot of stuff. And I’m not saying this to play the politician role of, oh, look at the humble beginnings we came from. But in all honesty, where we are today is a far cry from where we started. And the number one reason for that is entrepreneurship. 

Now, obviously you could say, well, Sherry and I would’ve been okay even without entrepreneurship, and maybe we would have, we were working salary jobs before I started companies, and could we have built a great life, just the two of us working hard as salaried employees? Of course we could have. So I don’t want to sit here and act like entrepreneurship is the only reason that we’re alive today and the only reason we own a home or anything like that, because salary employment and investing in the stock market was the path that we were taking, and we were doing fine. We were certainly middle class and doing well. 

But as we look at this list of things that allowed us to build wealth, you’ll notice that entrepreneurship is number one, spoiler. But a bunch of the other ones came because entrepreneurship made enough money that then we could take several bets on different things that we wouldn’t have been able to if we didn’t have that money in the bank. I’m going to be honest, I was actually a bit surprised as I ran through this list. I’d never really thought about it before and to look at which activity contributed cash in what order was pretty fascinating to me. 

So in this episode, I’m going to walk through seven wealth creators, and this is not investment advice. Think of it more as a story. The story of Sherry and I coming out of college with 100, $200 in a bank account and building what I feel like is a pretty successful life that I’m very grateful for. And there was a ton of hard work, nights and weekends constantly for several years. I don’t do that anymore, but there’s probably six, seven years of basically clocking nights and weekends to start companies on the side as I was trying to figure it out. There was definitely some skill that Sheri and I built up through putting in the hours or through going to the library or through being on the internet and studying and learning. And obviously, there’s some luck involved as there always is. 

In addition, this is not investment advice. This is just the way that we think about allocating our money. And this may or may not work for you or even be relevant. So with that, first item on the list is selling companies. And for the most part it’s selling companies that we started from scratch. Sometimes it was selling companies that I acquired. So HitTail was a SaaS app that I bought in 2011 for $30,000, and by the time I sold it in 2015, the total revenue it generated plus the exit amount was just over $1 million. And one might say $1 million, Rob? That doesn’t sound like that much money. To us at that point in our lives, it was the first moment that we had life-changing money, “life-changing money,” not never have to work again, money, but it changed the way that we went about our day to day. It was the first time I ever saw $100,000 in a bank account, was working on HitTail. 

HitTail was highly profitable. It had a 90% gross. No, it had about an 85, maybe 90% net profit margin, net profit because it was just me and a couple contractors. And one might say, “Well, you had $30,000 to buy HitTail. I don’t have $30,000.” Guess what? Three years prior, I didn’t have $30,000 either, but I built businesses like .NET Invoice, I wrote Start Small Stay Small. I had a portfolio of small products and I saved the money from those as well as consulting that I was doing a few years prior to get that 30,000. So I truly stair-stepped my way up over the course of, depending on how you count, it was either six years or 11 years to get to that point where I could acquire a SaaS app and grow it. And I had built the skills to do that and I’d put in a lot of hard work along the way to be able to do it. 

Prior to that, I had, at any given time, I had around a dozen. It was like between nine and 12 small products doing hundreds to single digit thousands per month. And I cobbled those together to make a full-time living. And it was a great lifestyle. I worked 12 hours, 16 hours a week. We had young kids, but I was always worried that I wasn’t going to have revenue or income the next month or the next year. And I was constantly thinking about, am I going to have to go back and get a job? Am I going to have to go back to consulting? And once you taste the freedom of not doing those things, you really don’t want to go back. I became unemployable pretty quickly. Now, moving from that life-changing to sunset money where you can just ride off into the sunset. Some people call it FU money. You could say it’s never have to work again, money, but that of course was selling Drip. 

And one might say, “But Rob, you invested 150,000 or $200,000 into getting Drip built. So when you sold it for millions of dollars, I can’t do that because I don’t have 150 or $200,000.” Guess what? I didn’t either three years prior, but I bought HitTail for $30,000 and grew HitTail, which was doing, it was around $2,000 a month at the time. I grew it to 30,000 MRR and socked that money away in a bank account, put it away, put it away, put it away. So I had money in a business bank account to where I could pull that out and build Drip. This is why I get a little infuriated when I see comments, I’ll see them on the YouTube channel, for example, where I talk about if you have an unfair advantage, if you have an audience or if you have a network or if you have money, then use it. And someone will post a comment with, well, if I was lucky enough to have an audience like you, I didn’t build my audience because I was lucky. I built my audience because I’d put in almost 20 years of hard work. 

And I know people who build it a lot faster than that, but however many years you put in, it’s not luck, it’s about putting in hard work and reaping the rewards. And so I can imagine someone listening to this and say, “Well, I don’t have $150,000 to build Drip. I don’t have $30,000 to build HitTail. I don’t have $11,000 to buy .Net Invoice,” which is what I bought it for back in ’05, ’06. I didn’t either until I did freelance work on the side in addition to my day job and saved up enough money to buy .Net Invoice, and then parlayed .Net Invoice into money in the bank to buy HitTail and then parlayed that. You know what I mean? It’s like it took us a long time. 

If you think about it, the typical startup journey you hear about these days, “typical,” I’ll put in quotes, people say, “Oh, in three years I quit my job. In a year, I quit my job. In five years I became a millionaire.” I started building and trying to launch software products really around probably 2002, 2003, and I had my first thousand dollars revenue month in ’05, ’06. Think of how long that is. That’s a lot of nights and weekends, and it’s not what you see on Twitter today. It took us a long time because we had no backstop. We did not have parents who would bail us out if we went to zero, if we lost our apartment, if we didn’t have money to pay for it, we couldn’t move in with anybody. Not having a backstop makes it really scary and it can make you risk averse, which is what we were because we had to show up for our jobs every day and trade dollars for hours because we had to make a rent payment because we had no backstop. 

And so I did a talk several years back called 11 Years to Overnight Success, where I started the timer at 2005, which is around the time I acquired .Net Invoice and ended it in 2016, which is when we sold Drip. And that was the moment where I never had to work again. And it took us 11 years to get to that point. Why did it take so long? Because I stair-stepped, because I did it carefully and because we did it in a pretty risk-averse fashion such that we would never lose the house. We didn’t put a bunch of money on credit cards, we didn’t take out a second mortgage to invest in our business. You might be more risk-averse. In fact, you might have a backstop if you have rich parents, if you have $200,000 in the bank that you’ve earned and saved or that someone gave you, that’s amazing. Then you can take bigger risks and you can do it a lot faster than we did. 

But we took one step in front of the other and put in hard work, luck and skill over years. And frankly at this point, decades. When I say think in years not months, what I actually mean is think in decades, not years, but that would be too painful to tell people when they’re first starting out. So that was number one, selling companies. And I realized I included running HitTail, meaning taking profit off of it. So I muddied the waters a little bit. But realistically, the number one driver of wealth building for us has been exiting companies. And the beauty about selling is, at least in the US, the tax laws are so favorable because they give you long-term capital gains in your tax rate is far less than if you draw profits out of a business. 

In addition, depending on how you’re growing and what the multiples are, you can often sell for 10 years worth of net profit or 15 years worth of net profit. So you dramatically accelerate the amount of cash you get today, and that allows you to make other bets that may pay off for you as we did in 2016. 

You may not want to hear it, but number two on our list is cryptocurrency. And I know some people are cringing. I’m not a crypto bro, I’m not a crypto maximalist, but when I started hearing about crypto in let’s say 2014 or ’15, I was intrigued by it, but much like investing, I didn’t want to spend any time focusing on it because I was busy being an entrepreneur and I wanted to focus on growing a company. But after selling Drip in 2016, we obviously had a large sum of cash and I wanted that to last the rest of our lives. And a very interesting side effect of having a large amount of money is that you can make larger than sensible bets on very risky things. 

So prior to that, we had made a few angel investments, and of course, that’s lower here on the list, but we’d made some angel investments in startups. And I started thinking of crypto as an angel investment and I told Sherry, it’s either going to 100x or it’s going to go to zero. So let’s put an amount of money into crypto to where it goes to zero, it doesn’t matter to us. And here’s the thing, it comes back to entrepreneurship because if we hadn’t sold Drip, then could we have put $1,000 into crypto? Yeah, probably. And do I think putting 1% of your net worth or 2% or some very small amount into risky bets is a good thing? I do personally. 

In fact, we have done it with angel investments and with cryptocurrencies. Do I think everyone should do it? I don’t know, it depends on your risk tolerance, but to me, I saw what [inaudible 00:14:55] calls asymmetric upside, which is, if this can potentially 100x, could I put $1,000, $10,000, $50,000 into it? Well, it depends on how much you’re worth, right? If your entire net worth is $50,000, that would be foolish to put 50,000 in. But if you literally have millions and millions of dollars sitting in a bank account, is it foolish to put tens of thousands into something that could potentially be worth millions someday? Maybe. So is it super risky? Of course. But over the course of, I think it was seven months, eight months, we basically dollar cost averaged less than 1% of our net worth. So it was tens of thousands of dollars into several cryptocurrencies. This is ETH, it was Bitcoin, I think it was Litecoin at the time. I think I picked three or four. 

And again, it was either going to 100x or it was going to go to zero. And when I say dollar cost averaging, what that means is instead of buying a big chunk all at once, you buy a small amount every day, every week, every hour, whatever it is to get up to your target allocation. And I genuinely wrote it off, expected that money never to come back. Much like any angel investment check we write, I don’t include that in our net worth anymore. I consider that it’s zero until it’s not. And one could say, “Well, you got a little lucky.” Yeah, probably also could have bought two years later when it crashed. Also, could have bought a couple years after that when it crashed. 

But if you dollar cost average in and you don’t put any more in than you can lose. It just didn’t seem that risky. I’m pretty risk averse person. I’ve never had a backstop. And so for context, we started buying ETH around, I think it was somewhere between six and $10, and Bitcoin was at 600 or so. And obviously, as of this writing, they’re at 3300 and 66,000 respectively. Which just feels bizarre, right? Crypto to me was just a mechanism. It was just a thing that could go up. I have no desire to persuade you to purchase it, right? And I’ve gotten into discussions where people will ask the usual question, well, why is it valuable? Why not just buy gold, isn’t it a bubble? And it’s like, I don’t know. I just view it as an angel investment. It’s a lens of opportunity. And again, never could have done this without having the exit. 

And the interesting part about this is within months, it started going up, I think it was six or eight months, it started going up so quickly that actually, it scared me because it went from tens of thousands up literally into the single digit millions, and it became almost… It was like a fear of liability about the volatility. And so we started dollar cost averaging out as much as we could. Back then it was actually hard to sell crypto. There were all these limits on exiting, and that was a good thing because I think we would’ve sold more than probably would’ve been wise. We were held in by these limits, and those limits allowed us to leave more in, that then of course grew over the following five, six years. I just don’t think we would’ve kept it that long. 

So I’ve appreciated how those limits probably went against the scarcity mindset of, oh no, it’s going to go down and we’re going to “lose” a bunch of money even though we’re still playing with house money. So in the subsequent years, we have definitely sold seven figures, obviously playing with house money plus, plus, taking chips off the table, but still have enough that if it continues to go up, that we ride that wave as well. So what’s the learning there? Is it everyone should buy crypto? Is it everyone should dollar-cost average into risky assets? I think it’s that making money creates opportunity and allows you to make bets on things that otherwise you never could have. And again, this is where it comes back to entrepreneurship. 

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Number three on this list is running profitable companies or owning profitable products. Some software, some knowledge products. So think of things like running HitTail, running my product portfolio back in the day. Dr. Sherry Walling, my wife runs Zen Founder, which is a very successful executive and start-up founder coaching practice zenfounder.com if you want to check that out. I had a micro agency back in the day. And of course, book sales, since we publish our own books, you can actually make decent money if you sell 20,000 copies like the SaaS Playbook has sold. There are no big hits in this one. This one is really number three on the list by virtue of how many years we’ve done them. 

Sherry has run Zen founder, I think since, I don’t know, maybe 2013, 2014, so a decade. And I ran HitTail for five years. It was highly profitable. The product portfolio was six, seven, eight years. Sherry’s written two books. I’ve written four books. Each of these things, we just have done them for a lot of years, so none of them was a breakaway, mad influx of cash, but each of these was either additive to our day jobs or it was a nice steady income stream to keep us going long enough to have some of the other big hits. 

Number four on the list is angel investing. And for a while, I’ll be honest, this was number two on the list, and this is mostly due to an angel investment that I was able to make in WP Engine. There are also a few startups we’ve invested in that have returned, I’ll say single digit multiples. So let’s say a 3x, a 4x, a 5x, which they’re nice, but they’re not the return that the WP Engine did. And we also have a couple that kick off dividends that again, are nice to haves, although we pay income tax on them. 

But realistically, the power law plays out here through my investments. Sharon and I have 20 plus angel investments on our own in addition to the ones through TinySeed. And when WP Engine had what I think was considered a private equity growth round in 2018 or ’19, we got bought out and that was enough money that we could pay cash for our next house, which we had to do because I didn’t have a job. I couldn’t get a loan because I didn’t have a job. Think about the irony of that. This was after selling Drip, but after having all this, but angel investing is another one that is 100x or go to zero. And any money that we’ve written, we’ve basically written off the moment we write the check. 

And again, someone might say, “Well, I can’t angel invest.” And it’s like, well, you got to make money first, right? We only were able to do it by building companies and having enough revenue that we had money in the bank that we could potentially invest. In addition, who invested in WP engine? Well, it was a handpicked list. It was oversubscribed. And Jason Cohen approached me and said, “If you want to invest, I’ll save money in the round for you.” Why did he do that? Because he had read my blog and he had read Start Small Stay Small, and he said, “I think you could advise me on virtual assistance and potentially email marketing and potentially SEO. These were things that he saw that I was knowledgeable in. 

So did I “earn” that? I don’t know. It was a combination of hard work because I put two to 400 hours into my blog every year between 2005 and 2011. A lot of times during lunch hours at my day job. When other people went out to lunch, I would go and I would write. So there was some hard work there. Was there luck? Absolutely. And was there skill? Yeah, it’s debatable, but that was the first angel check we ever wrote. In fact, we were not accredited investors. And so there’s a bit of luck there that he was willing to do what’s called a friends and family type situation. So I’m super grateful for Angel investing. 

Now, if we had never done angel investment, would we still be fine? Would we still be well off? Would we still have wealth? We would, but it’s that nice to have thing that allowed us to level up our standard of living. And to be honest, it’s just pretty fun. I love being involved in startups, as you can imagine, as my life’s mission is to multiply the number of independent self-sustaining startups in the world, and therefore, angel investing being number four on this list is apropos. 

Number five is salaried employment. This is working for other people. Both Sherry and I had many W-2 jobs in our lives. It’s the default. It’s what you do when you’re starting out, most of us. I kind of wished I was just a contractor freelancer when I started, but I was too risk-averse, and I wanted a steady paycheck to pay for that apartment that we lived in in Sacramento, California, where the rent was $720 a month for a two-bedroom place back in 2000. Nothing wrong with salaried employment. I learned so much. I really learned how to code as a salaried employer. I learned how to hire. I learned how to interview. I learned how to manage. 

I think folks who don’t have a salary job before they go out on our own are at a bit of a disadvantage if you haven’t learned those skills. So would I say you should get a salary job before going out on your own? I wouldn’t say that. Some people naturally can just do those things, are better at management, are better at hiring. They have the confidence, somehow they just figure it out. I was not one of those. I was very inexperienced. I was very timid. I was scared to do things like interview other people. I didn’t know how. And I learned those on the job and it made me a better entrepreneur once I decided to strike out on my own. 

Number six of seven is investing in what I’ll call typical investments like stocks, bonds, REITs, and so on. The challenge that we saw there was you need money to make money. You can put money away every month, which we were doing. Oh, hey, I’ll put $400 a month away, or $1000 a month at a certain point, or even $2,000 a month. And so in a year you save 6,000, 12,000, 24,000. And when you think about how much you actually need in the bank or in investments to retire, that’s a lot of years. There’s a reason you might have to work 40 or 50 years to get there. And so I quickly saw that although Sherry and I were making money, and we could afford a home in California, I saw that we were not going to get rich by saving. And that is something I think in the early days, again, 20, 25 years ago, I thought we could penny pinch or save our way into wealth. 

And some people might do that, but I didn’t see it as a path for us. And that was one of the motivations for starting companies. One, I wanted freedom, but also, I wanted an opportunity to be more in control of my income. And the idea that I needed more money to make money was frustrating to me because no matter how much I saved, it just didn’t grow fast enough. And by the time we were starting to make money, like real money from HitTail or Drip, we had saved up, I think it was around $350,000 in investments. And we were what? In our early to mid-30s. And so that’s not terrible, but that’s a lot of years and a lot of working to not have enough money to be able to retire on. 

These days, we are almost more in the barbell strategy. You can Google that if you haven’t heard of it. But we have, I’ll say, a traditionally small amount of money in typical investments like stock bonds and REITs, and we have more money in highly risky assets like a crypto, collectibles, startups and other alternative assets. And then we have a bigger chunk in extremely safe assets like cash or these days in the high interest rate environment in savings accounts or an equivalent that paying four or 5% on cash makes sense to do that. So I’m still a proponent of stocks, bonds, REITs and et cetera. We still have money in there, but it’s definitely become more of a background thing I’ll say, or just something. It’s an infrastructure thing of we put this money in and it’s great to watch it grow in your index funds, but it is not a major driver of wealth. It’s more of a way to maintain wealth or to grow wealth, but not to actually make wealth. 

And the seventh and for the most part, final thing that gave us any type of noticeable amount of money, obviously there are things like savings account interest over the years. Have we made single digit thousands? I’m not going to include stuff like that, but this is the last one that I think has made us tens of thousands or hundreds of thousands in lifetime wealth. And this was investing in real estate and it was in the early ‘2000s. We since have not bought a bunch of real estate. As I said, I have money in other things, and I know there are folks out there screaming at the microphone talking about the amazing tax write-offs. And I know there are tons of advantages to it, but it’s not something that we are presently in. 

The thing I was looking for was an edge. And so in the early ‘2000s in Los Angeles, we were buying up units and houses with two on a lots. And so we at one point had like seven units. And you could do this through leverage, right? I think it was three or four properties and seven total units. Many of them unpermitted as they are in LA. And you could do this through leverage because you could buy a half a million dollar or a $300,000 property with 5% down or something. And that cut both ways because when the market plummeted, of course, then you are losing a ton of money. But what I realized was that we had no edge, in that we had money and other people had more money and other people had inside deals and other people knew more about real estate than we did. And as such, I felt like I was the retail investor who was getting taken advantage of. And even though we owned these homes and there was some equity in them, we were really at the whim of the real estate market in LA. 

And as it started to crash in, it got soft in ’06, it started going down in ’07 or flatlining, and then in ’08 it started plummeting. We sold all of that because I didn’t want to be in debt, hundreds of thousands of dollars to the banks or have my properties foreclosed on. And it was something that that was the moment. If you think about that timing, that ’06, ’07, ’08, that was the moment that I had the realization of what is my edge? Well, my edge is I’m a software developer, I know how to write code. Is there a way that I can monetize that? Because not everyone can do that. And that’s when I realized, oh, if I learn to market and I know how to code, almost no one does that. And so that turns you into a pretty incredible force because if you can write copy and you can position products and you can do SEO, you can run ads, you can build something that people want and are willing to pay for, there are very few people that can do that. And that is where I realized I had the edge. 

And so at that point, we did sell the real estate that we had, and it sounds like we were real estate moguls or something. It’s like we were leveraged to the gills. And if in total we made 100,000, $200,000 over, it was many years of nights and weekends, as I was also doing software products. I was that guy that was trying to figure out the hustle. How do I raise our lot in life? How do we get out of working dollars for hours and making $30,000 a year, $50,000 a year, and actually get to a point where we have enough money that we can “make a difference,” right? That we have enough money that we can now make money by investing in typical investments or by dollar cost averaging into crypto. And that of course, led me to entrepreneurship, to software entrepreneurship and also writing books and all that. I just can’t underscore how much that changed mine and Sherry’s life. 

So to recap, seven ways that Sherry and I made life-changing wealth in our life, number one is selling companies. Number two is investing in crypto. It sounds so weird to say. Number three, running profitable companies. Four, angel investing. Five, salaried employment. Six, investing in typical investments like stocks, bonds, and REITs. And seven, investing in real estate specifically in the early ‘2000s. 

Hope you enjoyed this. It’s a bit of a story walk down memory lane, but also trying to pull out some learnings that I hope can help you as you move forward. And thanks to Christopher Gimmer for posting that tweet and reminding me of this thought process that I had a year or two ago so that I could revisit it here on this show. It’s been great being with you here today. If you keep listening every week, I’ll keep recording. This is Rob Walling signing off from episode 709.

Rob Walling:
It’s another episode of Startups For the Rest of Us. I am your host, Rob Walling, in this episode of Hot Take Tuesday. Einar Vollset and Tracy Osborn join me to talk about once.com, to talk about how a company sold for half a billion dollars and the founders got nothing, at least according to this article. A developer who went from open source to a full-time income. Then we give some book recommendations and have a lightning round of reactions to controversial startup opinions. Before we dive into that, I want to let you know it’s your last chance to get tickets to MicroConf Atlanta. The event is April 21st through the 23rd. Speakers include Rand Fishkin from SparkToro, Asia Orangio from DemandMaven, Stephen Steers, myself, and Dr. Sherry Walling.
It’s going to be hosted and emceed by me and Lianna Patch of Punchline Copy. I’m also going to be doing a fireside chat with Ben Chestnut, the co-founder of Mailchimp. He does not do very many public appearances, and so I’m very excited to host him at MicroConf this year. Microconf.com/us, if you’re interested in grabbing tickets. Again, tickets are going to sell out soon, so if you’re thinking about joining me and about 225 of your closest bootstrap founder friends, head to microconf.com/us. And with that, let’s dive into Hot Take Tuesday. Tracy Makes back for another Hot Take Tuesday.

Tracy Osborn:
I’m ready to fight with Einar.

Rob Walling:
Yes, it’s going to be great. Einar Vollset, thanks so much for joining us.

Einar Vollset:
Thanks for having me.

Rob Walling:
We have some nice, fun, not at all spicy topics to jump into today. Kick us off. Once.com from 37signals. They’re basically saying, “It’s not software as a service, it’s just a software.” No subscription. You download the code, you set up your VM, your virtual machine or whatever it is. I’m sure they have, what is it, Docker containers and such. But is one-time software the best thing since Clippy, best thing since [inaudible 00:02:14] shooting first? Tracy, I want your opinion on this.

Tracy Osborn:
I think it’s good to have options, but I think there’s a reason why the world moved towards SaaS. And you’re looking at once.com and their first product, Campfire. For anyone who has a technical team who wants to dive in and do everything themselves, then this is a interesting idea to replace Slack. And for folks who just don’t want to go in that direction, again, having the technical teams to do this because Campfire says, “Free updates to any 1.x version.” So that means that updates are going to end at some point. And it says, “Bare bones support included.” So there might be support, but most stuff you’re going to have to figure on your own.
This is why, for most folks, a SaaS product makes more sense for them even if it does have that subscription model and that idea they’re going to be paying for it forever and dealing with price increases and all that. I have other things to say about the product itself, Campfire, but I’m glad to see there’s other options. I can see that this being intriguing to a lot of folks, but not the majority of folks, and that’s why people are paying out the butt for things like Slack.

Rob Walling:
Einar Vollset, are we pivoting TinySeed to invest in one time sale software?

Tracy Osborn:
Why are you asking him?

Einar Vollset:
No. No, we’re definitely not.

Tracy Osborn:
I have opinions about that too.

Rob Walling:
We’ll come back to it.

Einar Vollset:
I think part of this grows out with how after the Slack acquisition, we’re now basically on the Salesforce pricing type in the Salesforce pricing world. So that means just going to get more expensive more quickly as we’re finding out with MicroConf and TinySeed. People get shocked when I tell them what our Slack bill is just for TinySeed and clearly there’s space there for… I actually think Slack itself has sort of failed at, or maybe by choice, but certainly they don’t cater well to this type of community. Not really like a business and not completely volunteer, but this halfway house where you want some of the features, but it really doesn’t make any ton of sense to be spending 50 or a hundred grand just for Slack software. And something like ONCE comes along. And if it’s good enough and you pay $299 once or whatever the price is, then certainly that’s very attractive from a consumer standpoint.
I sort of echo most of the stuff that Tracy says. I think maybe the Basecamp guys are in a unique position, whether they realize quite how unique their sort of position with the fame and their whole… It feels to me their whole marketing approach has been contrarian takes as marketing. That’s sort of been Basecamp stick, so it doesn’t surprise me that a pricing effort like this comes from Basecamp. As much as I love them, I know that they probably get a lot of attention every time they say something unusual or different, so that fits in with that pattern more than anything else, I think. I don’t think it’s a winning formula for your average startup indie hacker, bootstrapper, TinySeed founder to be like, “Oh, screw it. Let’s not charge $250 a month or whatever. Let’s just do $300 once.” We’re already struggling hard enough to get founders to charge enough money of the value, like charge enough so that they capture some of the value that they create. If this becomes a, this is our standard, then that becomes even harder, I think.

Rob Walling:
Yeah. For me as both a founder and as a customer or consumer of software, I don’t want ONCE. And I get it, my opinion, I’m doing mere research instead of market research, but I used to own downloadable software that ran on a server, it was called .NET Invoice. And I will never go back because the headache of support was brutal. People would install it. And people would install it on their own server or on a GoDaddy shared hosting account and it wouldn’t work and it was their problem. They didn’t care it was their problem. They would flame me, they would charge back, they would ask for a refund, they would do whatever. Even though I was like, “Look, it’s your thing.” So then I’d spend an hour or two troubleshooting finally be like, “Oh, your server’s misconfigured here,” and they’re like, “Oh, sorry,” and then they’d fix it. And so two hours of my time for a $300 one time, although it was-

Einar Vollset:
Rob the IT consultants. That’s great. I’m sorry. You missed those days, don’t you?

Rob Walling:
Not at all. And it wasn’t recurring, right? It was 300 one time and then I got 20% annual maintenance, right, so $60 a year per. And I don’t want to do that ever again. I know this long slow SaaS ramp of death is a thing, but also it’s recurring and it’s my servers. And if there’s a problem, I’m responsible for it, but it’s my servers and I know that they’re configured. I know that ONCE says, “Minimal support,” but it’s like, yeah, but come on, people are still going to flame you. They’re still going to charge you back. They don’t give a [inaudible 00:07:10] when you say minimal because they’ll be convinced that it’s your bug. It’s your bug, and then guess what? It’s not, but they don’t care, right?

Einar Vollset:
Right.

Rob Walling:
Because people are idiots on the internet. And so I don’t want it as a entrepreneur, I also don’t want it as a consumer. I would prefer to just please just handle this. I don’t want to spend above, like I have enough trouble. We have a couple apps written in Python and I’m always like, “Where are those hosted, dude? Does anyone have access to those? What if they go down?” It’s like, enough that we’re be… Tracy [inaudible 00:07:38]. So, I don’t know. For me it’s like, as you said, I think it’s a contrarian thing. I think it’s an interesting experiment. I do not at all see that it’s where the market’s going.

Einar Vollset:
Basically, the way that I think about it, you’re basically building in a 100% monthly churn. I spent so much time thinking about how to reduce churn. The fact that you would design your software business model in a way that, “Hey, let’s have a 100% churn every month.”

Rob Walling:
And with .NET Invoice, the first of every month I had zero in revenue and I was like, “I got to start from nothing.” The only thing that worked was if I had ads running or SEO or some recurring traffic source, that was the only way to maintain. For me it was single digit thousands in revenue. Tracy, back to you.

Tracy Osborn:
It doesn’t make sense as a business model in our opinions, I guess for 37signals. It doesn’t make sense for large teams that are using Slack or Teams to switch to something like this because of the lack of supports. And I have some issues with the user experience. I’ve tried it out, I didn’t like it. So this product really only works for maybe small, very savvy tech teams that want to have control of their software and how many of those are out there and what’s going to stop those people from doing something else like Slack free or Discord or anything else? It just doesn’t seem like this is a problem where we’re like, “Okay, Slack is super expensive. It’s awful. People don’t like it, they want a solution for this,” but I don’t see this one being the thing that fixes that problem.

Rob Walling:
I heard Ian Landsman on a podcast, I forget what it was, but he was talking about the launch of this Campfire launch with ONCE. And I can’t find the source of this, but he said that they had sold 800 copies in the first week. 800 times $300 is a quarter million dollars. With 37signals reach, 800 copies just isn’t that much, and it’s not… Look, I know how one time sales go. The first week is the big week and then it goes down from there. It usually doesn’t go up, especially if it’s audience based. So it feels to me, I mean, $250,000 in revenue for them is a rounding error and it doesn’t feel like a success. That doesn’t feel like a success. It’s like, I don’t know. I would think they would need to move a lot more copies for them to be over the moon.

Einar Vollset:
You should get the Basecamp guys on here to ask them how it went.

Rob Walling:
Yeah.

Einar Vollset:
That should be, come on. Yeah, just invite them on and talk about it. Why not?

Rob Walling:
Yep, they’re TinySeed mentors and investors, so.

Tracy Osborn:
Yes, and we love them. We love them for that. I want a product like this to work, but it’s like when you really dig into the focus that would use it, the product itself, the way it’s sold, there’s a lot of issues they’re going to run into and they probably have our already run into at this point. Because I actually haven’t heard many people talk about it since it launched either.

Rob Walling:
No. For a second topic of the day, I go to fundablestartups.com. The headline is, Sell for Half a Billion & Get Nothing, and the summary is that FanDuel was acquired for 465 million in cash, but due to liquidation preferences, the FanDuel founders and most employees received nothing in the massive deal. And I’m going to kick it to you first on this one. Can you let our listeners know what liquidation preferences are and what happened in this deal?

Einar Vollset:
Yeah, I don’t know specifically what happened in this deal, but as a general concept, liquidation preferences are basically this notion that if an investor invests in your company, say they put a $100,000 in and they have a 1x liquidation preference, what that means is basically that when you sell, they get at least a $100,000 back if there is at least a $100,000 back if it’s a 1x liquidation preference. If there’s a 2x liquidation preference, then they get at least double their money back. And if it’s 3x liquidation preference, then they get three times their money back. And there are some nuances beyond that too in terms of like, is the liquidation preference participating or non-participating? So a non-participating 1x liquidation preference means the investor basically has to choose, do they want 1x their money back or do they want to participate in relation to how much they owe of the company?
So obviously, if the transaction is at less than the valuation, they’ll exercise their liquidation preference and get their money back. If it’s larger than that, then they will choose to participate alongside the investors and not get a liquidation preference back. If it’s participating, then they get both. So that means if it’s a 3x participating, liquidation preference means you get three times your money back as the investor and then you participate based on your pro-rata share of the equity. If you don’t know what you’re talking about, if you don’t know what you’re doing, then it can be to the point where sort of unintentionally you didn’t even realize that actually the investors are getting their share plus 3x and you didn’t know that, and that might materially impact the actual money that you put in your pocket at the end of the day.
With this one, I saw this come around for some reason it was back on Twitter the last couple of weeks and I was always like… The headline was this, “Here’s how you sell your business for a billion dollars and make zero.” And I was like, “There’s just no way on God’s green earth that’s actually accurate.” So usually what happens in these kinds of situations is you’re selling for less than the liquidation preference or your latest investors. But a lot of the time, most of the time, and also in this case you want the existing management team and team to stay on because if truly all the money does go directly to the investors, then what’s the point of keeping working there? You might as well just quit and then the company gets run into the ground.
So usually, there’s this notion of a founder or management carve out as part of the transaction. So if they’re selling for 500 million, they might carve out 50 million of that and say, “Okay, 450 goes to the investors and they’ll do whatever they need to do in terms of their liquidation preference or whatever, and then 50 gets carved out as retention bonuses or whatever for the executive team.” Now what seems to have happened here is that the people who truly got zero are the original founders, but those original founders were no longer with the company. And that I can believe, if you are a founder and you basically signed a deal like this and you brought in whatever money, I think it was 275,000 in their latest Series E round and then you walk away, then yeah, I can definitely see how with the 2x liquidation preference, which is high but not [inaudible 00:14:10] or anything like that. I can definitely see how you end up with nothing.
But I think what’s also been lost in that situation is there’s also no way that those founders didn’t get a bunch of money at that Series E. So the founders who walked away, I just do not believe that you get in a situation where you’re raising a 275 million Series E from private equity and family office money and you give up control. And so basically, you agree to 2x liquidation preference and drag along rights and then you take no money off the table as part of that transaction, that I don’t believe. I’m sure that the founders who are now suing already got paid a reasonable amount of money in 2015. I’d be shocked if not, and if not, then they are stupid and their advisors are even worse.

Rob Walling:
And so people listening might say, “Well, there should be no liquidation preferences. Those are predatory,” but they’re not, right? So when TinySeed invests, if we write you a check for $120,000, we have a 1x liquidation preference. And what that means is if tomorrow you were to sell your company for $200,000, we get our 120 back and then you get the rest. And it’s to protect us, because let’s say we invest that 120 for 12%, if we didn’t have a liquidation preference, you could sell it tomorrow for $200,000 and we’d only get 12%, we get 24,000 back, so you could just screw us. So that’s the case at least I know why they exist.

Einar Vollset:
Yeah, there’s a balance there, right? You have to have some level of investor protection, and different investors just have different rights and different approaches to things. We have zero liquidation preference in part because we invest in so many founders. So we have the full spectrum of personalities among our founders, and it just doesn’t make any sense for a professional investor not to have at least a 1x nonparticipating liquidation preference, which is what we have. But there are other investors who basically have 3x liquidation preferences. Yeah.

Rob Walling:
Tracy Makes, what are your thoughts on this?

Tracy Osborn:
I wish I had Einar on my team when I was back the day at my startup and I was joining a accelerator and trying to decide whether I was going to take outside money. I talked about this in MicroConf 2016 is how I met Rob because I started this startup and I bounced back and forth on raising, thinking I was like, “Oh, I’m going to raise money.” And then I was like, “No, I’m going to go back to bootstrapping.” And what actually happened is I raised money from this accelerator. A friend told me that this accelerator had, I want to say at least a 2x liquidation preference might’ve been three, and they were like, “FYI, this could cause trouble in the future.”
I was dumb back then. I was like, “Okay, I’ll sign this anyways,” deciding not to raise money and going to bootstrapping. When I wanted to shut down the business and ideally I would like to sell the business so that I can move on and do other things like join TinySeed. Because of those terms and liquidation preference, and because I hadn’t raised money and because the company was, I couldn’t just as a bootstrap business be like, “All right, cool, I’m sticking myself a $20,000 sale and have some money from that,” but no I had this liquidation preference, I had this investor on board, all these old terms. I would have to pay back two or three times what they invested in me before I would see anything.
So I just had to shut down the business at that point. I got so many emails from people being like, “Why can’t you just sell the business for peanuts and get a little bit of money?” And I was like, “Because I won’t because of this prior investor and the liquidation preference and all that stuff.” So it’s anecdotally, but it’s now I know more about terms and what to look out for when raising money. And hindsight being 2020, I wish that I heard for the great [inaudible 00:17:46], I could have negotiated that in some way, shape, or form, I didn’t do that. I just didn’t know back then. And now I understand how I got into that situation.

Einar Vollset:
Like a lot of founders they just look at the top line number, how much money am I getting in?

Tracy Osborn:
Yeah. Money.

Einar Vollset:
What’s the valuation and the story? And then they’re just like, “Whatever. Everything else will work out. We’ll just make a ton of money and then it doesn’t matter,” but it does matter. And really investor behavior and their terms particularly early on really matters. It can materially impact your ability to fundraise. It can materially impact your ability to sell the company. There’s lots of things with just making sure that the terms that you’re getting are reasonably balanced. It doesn’t have to be super founder-friendly because that 0x liquidation preference doesn’t make any sense either. But finding the right balance there I think is key.

Rob Walling:
And I could see an indie hacker posting this on Twitter and saying, “See? Funding, never raise funding. It’s the devil.” And it’s that’s not the lesson either, right? Funding is a tool. You don’t say that a hammer or a shovel is a tool, but understand when they work and when they don’t and understand what you’re getting into, understand which strings might be attached, educate yourself, hire a good lawyer and don’t just sign paper because funding can get you there faster. And we see this with TinySeed companies every day, so it’s not that it’s good or bad or indifferent, it is just a thing. And yes, there are predatory investors out there. There are really [inaudible 00:19:12] founders who try to screw their investors too. It cuts both ways. And so, that’s where liquidation preferences are a thing that’s part of the ecosystem.

Tracy Osborn:
I think it’s not just understanding the term, but also understanding different scenarios about what those mean. Because there are scenarios where a certain term could make sense and there’s scenarios where certain terms that don’t make sense and just being aware of where those are or will make the future less. Make it easier to plan for the future because you know what direction to go to based on the terms that you have. There is a book… Einar, don’t talk about books later, but I want to talk about, what was it, the book Venture Deals: Be Smarter than Your Lawyer and Venture Capitalist by Brad Feld, that was something I read post my investment in my prior startup that I wish I had read before I took that investment. Because people told me it was predatory. I thought I understood it, but that broke things down in a way where then I really understood what those scenarios meant for me.

Rob Walling:
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Our next story is titled, How I Turned My Open Source Project into a Business. It is the business of email engine. And for me, I mean, it’s an interesting story. Most people who started an open source project are not able to build a business around it. I believe it might even be supporting him full time, but the interesting part for me was he had the open source project and then it was under the AGPL license, which is extremely permissive. And then if you wanted an MIT license, then you had to pay him and it was €250 per year and basically he was making nothing. Like a year and a half, he made €750 in total revenue.
The big shift was basically saying, you need a valid license within 15 minutes after the app where it stops working. So he actually implemented what we would think of as a time-limited SaaS trial, and that instantly changed the whole game. He changed it from almost a donation model, right? It’s like, “Hey, can I have tips? To like, you need to pay to use the software?” Oh yeah, I guess he says at the end, the current MRR is €6,100 and growing steadily, which in Estonia where he lives allows him to pay himself a decent salary. So it is a full-time income. So Tracy, what’s your take on this story?

Tracy Osborn:
This is a fun topic because I have a lot of friends that are in the open source industry and I actually read this article and decided to ask a few friends, and I honestly don’t think that the licenses were the biggest factor here. It’s actually the founder or the creator of this service moving from a, “If I build it, they will come type,” of product to doing essentially sales. Because they talk about raising, they setting the price and they set a way for that they can get that money in and then they increase the pricing. And it’s all those kinds of things that we’ve talked about with founders just in general about, you can’t just build something and hope that people are going to send you money at some point. You have to be thoughtful about your pricing and how people are going to be using your product and do that sales stuff. That was the biggest difference. It wasn’t the changing of the licenses, it was the changing of how this person was selling and looking at the product through their own eyes.

Rob Walling:
Einar Vollset, what are your thoughts?

Einar Vollset:
My thought this is still probably vastly underpriced and he should probably 10X’s prices overnight. That’s what I think.

Rob Walling:
That’s what it feels like to me too.

Einar Vollset:
I mean, stuff [inaudible 00:23:35] around here. He already says it in the thing, 250 a year became 495, became 695, became 795, and finally 895. I’m like, “Brother, how about trying adding in a zero and see how that goes?”

Rob Walling:
There we go.

Einar Vollset:
Why not?

Tracy Osborn:
It’s [inaudible 00:23:47].

Einar Vollset:
What’s the worst that could happen?

Rob Walling:
Inspiring words from a man who knows SaaS pricing. Yep, that’s part of the TinySeed playbook, the not-so-secret part of raising prices. As we move towards wrapping up, I would like to get a book recommendation from each of you, and then we’re going to do a lightning round called Agree or Disagree, and it’s based on the Twitter thread that I started, which is what’s your most controversial opinion about building startups? I got 150 responses to that. I’m probably actually going to cover some of them in depth on a future podcast episode, but we’ll bounce through some of the spicy takes, controversial things, and I want to hear from each of you. Before we do that, Tracy Osborn, do you have a nonfiction book recommendation for folks?

Tracy Osborn:
All right, so in addition to Venture Deals, so if you ever want to raise money or you want to learn about these terms and things that go into taking a venture capital, definitely get Venture Deals by Brad Feld. But the other one I wanted to mention is a negotiation book by Chris Voss, Never Split the Difference. I have so much trouble with negotiation. I don’t like being in a position where I’m arguing against someone for my own benefit because my brain melts into a puddle and I get anxious and all that stuff. And I think this book really helps redefine how negotiation works in a way that really works for my brain, where a lot of it is taking that negotiation, having empathy for the person across the table, but then using that empathy to get what you want and that resonates with me.
So it’s not a fight back and forth when you’re negotiating. It’s seeing from their perspective, bringing up that perspective to that person as you’re going through the negotiation, finding that middle ground. It’s called Not Never Split the Difference, which I think is anti-middle ground, but it was a book that was really useful for me to understand a better way of negotiation.

Rob Walling:
And you also had a fiction book that you accidentally pasted in because you misread it. We might as well just throw that out as a bonus.

Tracy Osborn:
I read more fiction books than I do nonfiction because that was my way of turning off my brain from work, and I probably read about a book a week. Best book I’ve read fiction-wise recently is the Anomaly by French author Hervé Le Tellier. I hopefully I’m saying this correctly. If anyone wants a cool fiction book with beautiful writing, I would recommend just trusting my recommendation and don’t read the description of the book because it has a spoiler, and I think that the journey on that book is worth it to start completely scratch. Make sure you go through the first five chapters. It’s going to seem weird in the beginning, but I think it’s worth it. And I think it’s a good way to turn your brain off of business and read something fun and be transported to another world.

Rob Walling:
Einar Vollset, what’s your book recommendation?

Einar Vollset:
Oh, given that Tracy somehow managed to put three in there, I’m going to push with a combination of things. So, I really liked The Art of Learning by Josh Waitzkin, which is he was this chess wonder kid who also ended up becoming the world number two or world champion in some sort of an Asian fight sport thing that I don’t exactly recall now. He’s a very interesting guy. He’s this consultant to a high performers now and he talks about his approach to learning and how he coaches people on that. So I really like that one. And it is also just a good story. It’s pretty biographical about his growing up and him going through both the chess and the martial arts world.
That one’s good. And then I like a more philosophical book, which is David Deutsch’s, The Beginning of Infinity, which doesn’t really have any takeaways shape or form, particularly as it relates to B2B SaaS. It’s just an interesting way to think about the world that I think counters a lot of the… I think there’s an inherent negativity bias in the world in general. People are pretty convinced that finally, now here we are, it’s going to end very soon because we’re all [inaudible 00:27:30], versus this is the opposite and antidote to that, so I like that a fair bit.

Rob Walling:
Well, since you each gave a few recommendations, I won’t give one this week. People have heard enough from me. I had one, but I’ll table it for now. Now, I want a lightning round this, agree or disagree with these controversial opinions about building startups. We’ll start with Tracy. It’s from Dominic Mon, “Most developers get a better deal sitting it out in big tech.” Meaning instead of becoming a founder, sitting it out and working for FAANG or something, what do you think?

Tracy Osborn:
I mean, is money the only thing that matters or is working on something that’s interesting and challenging and having time freedom and all those other things? It’s like big tech works if you want to just make a whole bunch of money and then potentially be in a situation where you’re working on 09:00 to 05:00 and that’s it. But startups and they’re riskier, but it might be more challenging and more fun in different ways.

Rob Walling:
Einar, what do you think, “Most devs get a better deal sitting it out in big tech.”

Einar Vollset:
Yeah, financially speaking, most likely, yes. I think the expected financial outcome for the median one probably is probably higher, particularly if you get a job at the FAANG in Silicon Valley. Those US type salaries. Yeah, I think so. What you don’t get necessarily is the freedom to do your own thing and potential for a significantly higher outcome than you most likely to get in FAANG.

Rob Walling:
Next tweet is from our very own Interval Set, “Product led growth is where founders too scared to do sales, go to hide.” Tracy, what’s your lightning round take on this?

Tracy Osborn:
I mean, I’m drinking the TinySeed Kool-Aid at this point, so that comes straight from Ainar. I can’t disagree with him.

Rob Walling:
Yep. Ainar, you care to elaborate on this?

Einar Vollset:
I just agree with myself. I think it’s a very wise thing to say. I think in general, this Twitter account really truly is just quality after quality tweet nonstop.

Rob Walling:
Where’s the thumbs down? It is next to the heart, there should be a thumbs down. I want to dislike this tweet just because you said that.

Einar Vollset:
There’s a mute button, surely.

Tracy Osborn:
This relates to the open source stuff where there’s folks who want to build something and are like, “If I build it, people will come. Ooh, product-led growth. My product is going to be so amazing that people are going to be throwing themselves at me to pay me money.” As we’ve seen with many, many companies in TinySeed that marketing and sales is incredibly important.

Einar Vollset:
Yeah. I mean, to elaborate just a little bit more fundamentally what I’m trying to say here is I don’t think people realize that how consultancy sales really is, how you can’t just throw things up there and be like, “Hey, go use it whenever.” Probably the highest value SaaS businesses actually requires the sales, which almost looks like consulting. That’s what I think a lot of the time.

Rob Walling:
Our next take is from [inaudible 00:30:21] and Speaker James Kennedy. His take is, “It is not actually that hard.” Implying that building a startup is not actually that hard. Tracy, what’s your take?

Tracy Osborn:
It’s just the bold. I guess when you look at-

Rob Walling:
Bolds statement.

Tracy Osborn:
The bold statement, when you look at something again in hindsight, I’ll go back to looking at my startup and I look back at what I did with Wedding Lovely compressing those nine years altogether, I would agree that it wasn’t that hard, but the day-to-day stuff can feel like the worst thing in the world. You can go through those dips that it does feel like it’s harder than anything else that you’ve done because you’re having a bad day, things aren’t going well. So I think it’s long-term perspective, it can feel not as hard, but in the short term it’s really hard to tell people that.

Rob Walling:
Einar, what’s your take?

Einar Vollset:
I disagree with James here. I think it’s extremely hard. I think mentally more than anything else. I see that with founders and we support this question and TinySeed, it’s a mental rollercoaster in a way that just going to work and just the stress of it too, particularly once you start having employees that you feel like you’ve got to look after and all that stuff. Yeah, I think it’s hard.

Tracy Osborn:
It evolves. It’s hard to say that hard because you’re looking at everything, but getting from zero to one is a challenge and then scaling that is a challenge. Then working with employees is a challenge. Then jumping into enterprise sales can be the next challenge. Then having your mindset, right, so you can sell your company is also a challenge. All those things do add up.

Einar Vollset:
I think in general, people underestimate. I think a lot of the time people think like, “Oh, as soon as I get to a million in ARR,” or whatever number or there’s some hurdle, then it’ll just be coasting and just executing more versus that’s not the case. There’s always fresh things. Start again, add new things all the time in order to keep growth up.

Rob Walling:
So do two of you know the definition of a lightning round? You’re not supposed to go back and forth. You’re supposed to just-

Einar Vollset:
Yeah, yeah, yeah. Well, whatever.

Rob Walling:
… weigh in with a quick thought.

Tracy Osborn:
We like talk big.

Rob Walling:
I’m never doing-

Einar Vollset:
Whatever.

Rob Walling:
… a lightning round again with you two. I’m going to replace the-

Tracy Osborn:
I mean, to be fair, this is lightning round compared to our normal discussions.

Rob Walling:
Really, really? Yes.

Einar Vollset:
Yeah, I’m glad you just… Come on. This is superfast.

Tracy Osborn:
We like talking.

Rob Walling:
Our final lightning round is a tweet from Caesar Halmasian. “Startups are a trap. Businesses are way better.” Tracy, are startups a trap and lifestyle businesses way better?

Tracy Osborn:
I don’t like going first. If I’m going to be truly lightning round, I want to hear Einar go first.

Rob Walling:
Einar.

Einar Vollset:
No. You say, [inaudible 00:32:55]. No.

Rob Walling:
Care to elaborate or shall we just move on to…

Einar Vollset:
No. I mean, I think are startups are trapped? No. Lifestyle is way better. It depends what you’re optimizing for. If what you want to do is just futz around and start seven different an info product and some e-commerce drop shipping thing and a couple of SaaS’s and buy something and a newsletter that you monetize and just to start, if that’s what you’re happy doing, that’s great. But if what you’re wanting to do is something bigger, make most likely more money, then startups can definitely be the way. But there are different ways to do that too, right? There’s a difference between bootstrapping a SaaS business that you’re hoping to sell for 20 million bucks compared to starting Open AI where apparently you’re going to raise $7 trillion and build Silicon in the desert, right? They’re just different things. I don’t think anything is better. I think it’s a good thing that Elon Musk decides that he’s going to build Tesla and go to Mars or whatever. That’s fine. It just is what it is. For him, there’s no better or worse, I don’t think.

Rob Walling:
Yeah, I’ve done both, right? I’ve had great lifestyle businesses. I’ve had what I would consider startups. I mean, I would do consider TinySeeds a startup, MicroConf a startup, Drip certainly was, and I fall into the startup camp. Lifestyle business is great and it got a little boring and just working 10 hours a week for making my money was, I wanted something where I could be more ambitious about it and where I could really have a purpose around it. And that I think is what the startups that I’ve chosen to build have brought in addition to monetary rewards that were far beyond the lifestyle businesses. Lifestyle businesses in the short term, of course, you’re making income net profit on it. It’s taxed at income tax rates, and if you exit a startup, right, usually depending on where you live, you get that long-term cap gains and you accelerate, you get 10 years of net profit, 20 years of net profit if I’m talking SaaS. But it depends on multiples and such, but you can really accelerate that earning. Tracy closing thoughts on this tweet?

Tracy Osborn:
Ditto.

Rob Walling:
Nailed it.

Tracy Osborn:
Nice. I just wanted to go there. Boom.

Rob Walling:
Einar Vollset, folks want to keep up with you. Einar Vollset on Twitter, you work on TinySeed. You also are the principal of Discretion Capital. So someone’s listening to this and they have a SaaS company doing at least 2 million ARR and they’re thinking about selling. You’re a sell-side M&A advisory, and they should reach out to you. Einar@discretioncapital.com.

Einar Vollset:
[inaudible 00:35:23].

Rob Walling:
Tracey Makes, you are Tracey Makes on Twitter. So your name is Tracey Osborn. So everyone knows, but I call it your nickname as Tracey Makes, so that is-

Tracy Osborn:
Because I couldn’t get Tracey Osborn on Twitter, so I’m now Tracey Makes, yes.

Rob Walling:
Yes. Tracey Makes on Twitter, tinyseed.com. Anywhere else you want to send folks?

Tracy Osborn:
I’m probably more active on the TinySeed social media accounts than I am on my personal one. So if you’re ever talking with TinySeed [inaudible 00:35:46] on Twitter, that is me. I hesitate to mention this because then people are going to look at it, but I am also trying to get a TikTok account off the ground and I couldn’t get Tracy Makes for that one, so I’m [inaudible 00:35:58].

Rob Walling:
What?

Einar Vollset:
Just in time for it to be banned.

Tracy Osborn:
I know, right? I need to get better at doing videos.

Einar Vollset:
If you get banned right after you launched this, then I’m going to blame you. I’m going to say Tracy, you brought down TikTok with you.

Tracy Osborn:
Yeah. Yeah, my little startup talking about negotiation and other little videos I’m doing took it all down. But itstracymakes on TikTok because that is another place I did not get my preferred username.

Rob Walling:
Oh, so it’s I-T-S-

Tracy Osborn:
Tracy Makes.

Rob Walling:
So, itstracymakes-

Tracy Osborn:
Yep, on TikTok.

Rob Walling:
… on TikTok.

Tracy Osborn:
Yep.

Rob Walling:
Amazing. And if you’re not following me @robwalling on Twitter and saasplaybook.com these days is probably my most recent effort that you should check out. Tracy, thanks for joining me for this Hot Take Tuesday.

Tracy Osborn:
Always fun.

Rob Walling:
Einar, thanks for coming around, man.

Einar Vollset:
Thanks for having me.

Rob Walling:
Thanks again to Tracy and Einar for joining me on this week’s episode. And thank you for listening this week and every week. This is Rob Walling signing off from episode 707.

Rob Walling:
Welcome back to another episode of Startups For the Rest of Us. As always, I’m your host, Rob Walling, and in today’s very special episode, I’m going to be walking through some advice that I’ve been giving over the past 10 plus years on the show, in conference talks, even in some of my books that I’ve really started to rethink as new evidence has presented itself recently. The more conversations I get into on Hacker News and Twitter around these topics of being a founder and launching a startup, rules of thumb and things that I’ve made recommendations on where, look, I’m not the person who says always never. But I will admit with many of these, I’ve said 90%, 95%, 98% of the time, I believe that this advice is sound. And in today’s episode, I’m going to talk about how I’m rethinking that on a few key points. 

The first point that I’m rethinking and want to maybe offer different advice than I have in the past is around pricing. And you’ve heard me say that pricing is the biggest lever in SaaS, and I still believe that. And I know that if your annual contract value is $500 a year, you have maybe 5 or 6 B2B marketing approaches that you can do, and there’s a bunch you cannot because you just can’t afford to do them. And if you’re charging, I don’t know, it’s in the 5 to $7,500 a year, then you probably have 10 or 12 that you can do. And if you’re charging 30,000, 40,000 and up, then all 20 of the B2B SaaS marketing approaches that I talk about on the show and in my book, The SaaS Playbook, are available to you. And all that’s true and I stand by that. 

But what I’ve realized is I think myself and the rest of the MicroConf community have gotten a little too hung up on increasing prices and feeling like raising your prices, A, that it’s the solution to everything. But B, that it’s always good. And I’ve started to take the other side of that argument pretty seriously. Like, what would happen if you lowered prices? A lot of good can come out of that. Imagine that instead of having a product that you’re selling for 200, $300 a month, even $100 a month, you go down market and you charge $10 a month, $20 a month. So many benefits can come from doing that. Things like you’ll attract a lot more customers because how many people or businesses can afford to pay hundreds a month? Well, there’s obviously a lot more that can afford to pay 10 or $20 a month. And so this increases your potential market, your total addressable market, as the VCs would say. I always like to call it the term, the total reachable market because who cares if it’s a total market if you can’t reach them in the ways that you’re marketing. 

But as I’ve thought about it, I’ve realized there are so many benefits. It widens your market. I know that I’ve talked about lower prices increasing churn, and that is true, but realize that there’s a plus side to churn as well. It means that the people who don’t need your product will leave, and you don’t need to support them anymore, and you don’t need to provide them with whatever hard disk space respond to their emails. There are a lot of benefits for people churning out. And so what I’m saying is that 2024 for me is going to be the year of going down market, and that’s going to be my default advice for founders coming to me with issues in their startup. “Are you plateaued? Have you thought about lowering prices? Are you not finding enough customers? Have you thought about lowering prices? None of your marketing is working. Nobody wants to use your product. Have you thought about lowering prices?” 2024, the year of going down market. 

Speaking of down market and lowering prices, there’s another paradigm or piece of advice that I’ve been giving, it’s got to be 14 years, probably more than this, 15 years. And it’s that if you’re going to build software, whether it’s SaaS, downloadable, whatever, that you target businesses, that B2B is superior to B2C. And I’ve really started rethinking that based on evidence again, that I’ve seen Twitter, Hacker News and folks who are charging these $5, $10 downloads for sometimes they’re one time and sometimes it’s monthly. But think about the benefits of targeting consumers. There are a lot, and there’s a lot that I ignore and don’t talk about on this show, and I feel kind of bad about it, which is why I’m recording this episode and putting it out like this because I wanted to get it to you as soon as possible. But think about if your entire addressable market of businesses in your space is 20,000, 50,000, 200,000 businesses, if you shifted your focus and went after consumers, billions. Billions of potential customers. 

So why would you focus on a small market with tens of thousands or at best hundreds of thousands of potential customers when you can have billions of customers? And not only that, but B2C apps, they are just a lot more interesting than B2B apps. B2B apps are kind of boring. Who wants to build CRM software for realtors or the business operating system for gyms and fitness studios when you can build software that’s used by people like you and I, and my brother, and my uncle, and my parents? It’s a way to not only sell to customers, but also to get recognition from people who will finally understand what you do. 

Your mom will no longer say, “My son or my daughter who’s a startup founder, they fix computers.” She might actually be a user of your app. And think about how much cooler that would feel than trying to explain email marketing to someone who has no idea what you’re talking about. And then they basically summarize it by saying, “Oh, so you provide software for people to spam you” which is a response that I got when building Drip a little too often, especially at family reunions. 

But not only that, there’s one other thing that B2C apps have that B2B apps very, very rarely have, and it’s virality. And I have not leaned in nearly enough to that incredibly powerful marketing approach of going viral that B2C apps allow you where consumers just talk and they spread the word for you and you just build the product and you don’t have to market it. And what’s a better dream than building an app with billions of potential customers who market it for you and maybe even your mom or dad will understand what you do? So on this show, I am going to start embracing B2C. And look, I’m not saying it’s better than B2B, but it’s at least on the same level, and I’m going to see how my opinion shake out over the coming year. 

The third thing that’s been bugging me, and I finally was able to put my finger on it last week, is I’ve talked a lot about two-sided marketplaces and how bootstrapping them is difficult and how you shouldn’t do it. And on this episode, I’m taking that back. What I’ve realized is that a SaaS app is a one-sided not marketplace, and a SaaS app has to do a lot. The software is the value. The job to be done is whatever the software is doing. With a two-sided marketplace, not only do you have two sides and much like going B2B to B2C, you now have so many more options for customers. Going from a one-sided not marketplace to a two-sided marketplace gives you so many more options. You now have two audiences that you can market to and sell to. You now have two audiences that you can provide different value propositions to, and you now have two audiences that you can build your product for. So I’ve realized the error of my ways in thinking that just because something is simpler, I.E. a B2B SaaS app doesn’t make it better. 

In addition, the job to be done of a two-sided marketplace, it’s done just by connecting people. All you have to do is take an Uber driver, pair them up with a rider, and it’s done. You don’t need to build a bunch of software that’s really hard to build. You could almost do this with no code or a Google sheet. Imagine eBay and Upwork and how simple those would be to launch today in terms of the software you’d have to build. The value is in connecting the two sides, and that makes these much easier and in fact, much simpler businesses. And I want to apologize for leading you astray on that point for the past many years. 

The fourth and final point I want to cover today is again, something that I want to backtrack on that I’ve talked about. I no longer believe in the value of focus, and I no longer believe that you need to launch a product, solve a problem, find product market fit, and invest time and energy into an idea and iterate on it and get it to the point where you’re providing value. Some people call it product market fit. I call it building something people want and are willing to pay for. Instead, I think that we should all be launching a bunch of things to see what sticks. We’re makers. We should make. We’re builders. We should build. Since it’s all just luck anyway, why wouldn’t I make a bunch of apps and throw them out there and see which ones get traction? If I’m in Las Vegas and I’m playing blackjack and I know that it’s all just luck, why wouldn’t I just play 10 hands figuring one of these will win eventually. 

The best part is I’m now giving you permission as the builder, the coder, the developer, the maker to just go build. All you have to do is build and launch. That’s it. I’m not going to talk to you about selling, about talking to humans, about listening to people’s pain points about marketing. I mean, who wants to learn SEO, who wants to deal with ads and creating content and cold outreach and trying to figure out what to do next amid the pain of launching a startup? No one does. So don’t do it. Look inside and ask yourself, “What do I want to do? What fits my personality?” And I bet if you’re really honest, what fits your personality is to make stuff and launch it and not do any of the hard things. 

So 2024, along with being the year of going down market, B2C, and bootstrapping two-sided marketplaces is going to be the year of launching a bunch of things to see what sticks. Obviously, the show is going to change quite a bit, and I bet you’re super curious to hear what tomorrow’s episode is like in light of my recent revelations. But I do want to point one thing out to you in case you haven’t checked your calendar. Today’s date is April 1st of 2024, and in many countries, today is a April Fool’s Day. So I apologize in arrears and I can be held responsible for nothing I’ve said in this episode. 

The views expressed in this episode of Startups For the Rest of Us are neither the views of MicroConf, TinySeed nor of Rob Walling. They’re the views of April Fool’s Day, 2024. I was really trying to steel man those arguments though, trying to look at the bright sides until it just got a little crazy. I was going to go on. I have three more things. Shouldn’t you build a second product if your first stops growing? What about multi-language support? How about take investment in the launch of the products? What about defining a new category when you’re bootstrapping? No, there’s a lot, I realize. I think I’m taking the joke too far. So I appreciate you listening today. This does not preempt the normal episode of Startups For the Rest of Us this week, so we will be back tomorrow with your normally scheduled episode that will be on topic, super serious as always, not an April Fool’s joke. 

Appreciate you hanging with me today. If you thought this was funny or if I actually got you for even a bit, please hit me up on Twitter. You can send an email to questions@startupsfortherestofus.com. I’m curious at what point most people realized that this was a joke episode because I started getting a little crazy with some of the B2C stuff. And if this is your first episode, if you’re listening to this months down the line, I’m probably putting an introduction, a warning, a disclaimer if you will, not to listen to it, just to skip to the next episode. But if this is your first episode, you may want to go back and listen to the 2, 3, 4 prior to this to see what this show is actually about. If you liked this one, thought it was funny, hit me up on Twitter, and if you didn’t, don’t bother. I’ll be back again in your earbuds tomorrow for another regularly scheduled episode. This is Rob Walling signing off from episode 706.5.

Rob Walling:
MicroConf US in Atlanta is here in just a couple weeks, and this is your last call to buy tickets. We’ve sold more than 90% of the tickets, and we will sell this event out as we have for many years. The event is April 21st through the 23rd in Atlanta, Georgia at the amazing Starling Atlanta. It’s a vibrant, upscale escape for creative souls. It’s going to be a great event.
There are going to be 200-ish of your closest Bootstrap and mostly Bootstrap founder friends who are showing up to hear talks from folks like Rand Fishkin of SparkToro, Asia Orangio of DemandMaven. I’m giving a talk that has never appeared on this YouTube channel, and a talk by Dr. Sherry Walling on staying motivated as an entrepreneur.

We have a special guest MC, Leanna Patch, and a very special guest who has never appeared on the MicroConf stage before, Ben Chestnut, the co-founder of MailChimp. He really doesn’t do many in-person events, but he has agreed to come on and do a fireside chat with me, I’m really looking forward to it.

If you haven’t attended a MicroConf in a few years, we’ve changed the format. We used to have 9 or 10 speakers over two days, so it was a lot of content, a lot of sitting in seats, and we’ve completely reorganized it. We have about five talks, and the afternoons are reserved for interaction for workshops and for our excursions. We’ve done excursions like ax throwing, brewery tours, improv classes. I know we aren’t hosting all of those here in Atlanta, but those are the types of things we do to get you out of the building, a little bit out of your comfort zone, but to be around other founders and make friends because MicroConf is about relationships. And that’s the thing we have doubled down on over the past three or four years as we’ve re-engineered the event from focusing on content to focusing on the community and the relationships that are built between founders.

So if you’re thinking about attending, you want to head to microconf.com/us and buy your ticket.
Unfortunately, I’m going to be unable to help you out when we sell out and you email me asking if you can get a ticket, because once we’re done, we’re done. It’s Microconf.com/us, and if you want to meet up again with about 200-ish of your closest founder friends that from past MicroConfs, from MicroConf Remote, from MicroConf Connect, and of course the Bootstrap community on Twitter started around MicroConf. So many of those folks that you know are going to be attending. So you don’t want to miss out. Microcomp.com/us. Hope to see you there!