Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike revisit their predictions from 2017 and score how they did. They also make new predictions for 2018.
Items mentioned in this episode:
Welcome to Startups For the Rest of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing software products, whether you’ve built your first product or you’re just thinking about it. I’m Mike.
Rob: And, I’m Rob.
Mike: We’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s going on this week, Rob?
Rob: I was reflecting on the past couple of months and I feel like I’m coming out of kind of a rough patch. If you go over and listen to Zen Founder which I believe came out last Friday, Sherrie and I talked through some personal stuff that is going on, you already know about this, I talked a little bit about it at MicroConf Europe.
I realized that kind of stuff like, you can become the frog in a pot of boiling water, where just slowly you descend into stress and chaos and, as I’ve come out of that, I was just looking back and thinking how thankful I am for so many things right now, and how, I guess, thankful I am that I am not where I was a month ago. Coming out of dark times, it was both personal stuff and even at work — I don’t know.
You hit a certain point, some months, some weeks are just hard and it’s hard to wanna show up everyday, and it’s hard to deal with whatever it is. The cues haven’t backed up for a while but there’s just stress building a software company, and running a big team, and hiring people. I don’t know. Other than that, that’s what’s been going on with me. I was just thinking about it today I’m like I really feel positive and excited and I’m like really happy right now and it’s such a contrast to what I was feeling even three or four short weeks ago, and part of that was getting away. Was going to Europe, even running MicroConf Europe wasn’t stressful. It was super. I had a great time there, I was there with my kids, and Sherrie joined us. When I came back, the reentry week was tough. But aside from that, I feel like things are on the upswing. Hopefully, heading into the end of the year and beginning the next, it can continue to feel that way.
Mike: I have to laugh at myself every time I hear that analogy of the frog and the pot of boiling water because I’ve used it myself but if you look into it, that’s actually not true. If you put a frog in a pot of hot water and you slowly turn up the temperature, it will jump out. It’s not that it doesn’t realize it, but it’s a great analogy because it makes sense to everybody.
I think that’s kind of, I’ll say, par for the course, like everybody goes through that on occasion. It sucks to be there. The contrast between where you hopefully end up eventually is quite striking I’ll say. It’s nice to be able to kind of move past that.
Rob: I think move past it and then be better equipped to recognize it early and deal with it as best you can because these are always going to happen. Whether it’s one week every couple of months, whether it’s one month every couple of quarters. You’re just gonna have these down times. If it’s high-stress time, like you’re negotiating the sale of your company, or you’re in a super high growth, or there’s a competitor that’s pissing you off and trolling you, this can be constant for months. It’s trying to figure out how do I go on this journey and deal with hard things and not let it poison the rest of my life, or negatively impact the rest of my relationships, and just go and have fun?
Mike: That can be hard, especially if your income is tied so much to your business and your business is the cause of your stress. There’s almost no getting away from it at that point. It’s not like its a 9:00 to 5:00 job where you can just go and clock in and at the end of the day you can just walk away and all the problems are not yours to deal with it. It intrudes on your life to some extent.
Rob: Absolutely. This relates back to the listener question we had last week, where he says, “My emotions are tied to my business. How do I get away from that?” And our answer was kinda like, “Well, you do the best you can but it’ll probably always will be.” That’s my short answer to that. How about you, what’s going on?
Mike: My oldest is playing basketball right now and they had to do a fundraiser. It was interesting because as part of the fundraiser, they’re basically just standing outside the store and asking people for donations. I took him aside at one point, after he kind of gotten the hang of it and basically asking people for money, and I was like, “Here, let me teach you the art of the upsell here.” Kind of worked with him for a couple of minutes and I was, unfortunately, not paying attention because I was working with one of the other kids at the time when he actually did it but he upsold some woman on a hug to get some extra money for a donation.
Rob: That’s cool. That’s awesome. Bravo!
Mike: I was told by the coach, she’s like, “He did it flawlessly.” Perfect execution and everything. He listened. Followed all the advice and everything, and he only did it three times. It wasn’t like we were there for an hour and a half, and he didn’t do it all the time. He only did it three times but everytime it worked. It was really good.
Rob: Like father, like son. I’ve seen you.
Mike: I sold lots of hugs…
Rob: I know you did. “Buy this software product and I will give you a hug.” Cool.
For me, I also had this interesting experience in the past week, I often talk about we’re always hiring because the app is growing quickly so the team’s growing slowly which is good, that’s how we like to do it. We found a candidate who came highly recommended and we met with him and he was the right fit, good personality and everything. But as we move forward in the actual kind of hiring and negotiation process, it quickly became apparent that yellow flags started creeping out and there were little things. He’s asking for more money than he should get because he was transitioning careers, transitioning from this role to that role. He’s asking for the same salary that he had at this other thing that had five years of experience in and is basically coming entry-level junior for us.
Then, he wanted a title that was actually quite a bit above, that implied he had years of experience and he actually has three months or something. That’s a really interesting one. Then there were two more things but it just kept unfolding. He went from being this amazing candidate to being, I use the word I’m disenchanted as these things keep coming. To his credit, he has two other companies that are interested in him so he’s probably gonna wind up getting everything he asked for and that’s great. But it showed me, there was particularly the specific way he handled a few things showed me that he was, it wasn’t just a negotiation, there was a bit of high-maintenance, demanding or entitlement I think is probably the right word. It struck me that that alone is a deal breaker, even though he checked all the other boxes. He’s either a “hell yes” or he’s “no.” He quickly became not a “hell yes” as these things unfolded.
Mike: Yeah, that’s kind of disappointing. I guess I’d say the process isn’t complete yet or I don’t know fully whether you kind of went through and offered him the job or passed that point. It’s easier or better to find those things out in advance as opposed to after they’ve started working or even a week or two down the road. Sometimes, you don’t find out for six months but those problems can come up at any time.
I remember somebody who I had interviewed at Pedestal Software and there was another team that had actually interviewed him and they’re like, “We think he knows his stuff but we’re not sure. Can you come help us out?” I went in and basically grilled him on all this UNIX stuff because the other team didn’t have as much experience with it. I grilled him, I remember going back to the management team and I was just like he knows his stuff but he is kind of a jerk. you don’t want to hire him. That was the bottom line and they’re like, “Okay, let’s hire him.” I’m like, “Wait a second, he’s gonna be a pain the in ass to work with.” And he was, it sucked.
Rob: I’ve had that happen before. At high growth startups where they’re like, “Does he have technical chops?” “Yes, but I don’t want to work with him” “That’s okay, we can manage that.” They didn’t put me with him but the engineers who worked with him didn’t like it at all. I was like, “This is interesting.” This is 14 years ago. I remember being like, “I don’t think this whole funded thing is for me,” because if that’s what we’re doing, I’m not gonna like my job here.
Mike: Right.
Rob: In my opinion, you need to like the people who you work with because you spend too much of your life at your job so whether you’re hiring them yourself or they’re just people, if you work at a big company and other people are hiring, if you don’t like your coworkers, I think you need to get out of there.
What are we talking about today?
Mike: Today, we are gonna be going through our predictions for 2018. To kick us off, we probably should take a look back at our 2017 predictions and see how we did before we start making other wild ass guesses.
Rob: Indeed. And that’s just what these are, wild ass guesses. Every December, and we’ve done this for many years, I’d say five or six at this point, I went back and listened to a few of our old predictions and it’s pretty funny. Pretty funny how the world changes. Keep in mind that when we can, we make predictions in the startups space or in the tech space but these are not limited to just startups. We like to have fun with this episode. It’s more about entertainment than it is about these are areas to start a business in.
Next week or in the next couple weeks, we’re gonna be doing our goals episode where it is truly your and my goals that we set for 2017. We’ll review those and then we’ll look ahead at our goals for 2018. Those will be obviously, there’s some personal ones but there’s also startup business specific ones. But, for these, you know, again, there are some tech related and then others that are just kind of fun ones to think about, talk about.
Mike: With that in mind, let’s dive right in. My first prediction for 2017 was that health insurance rates are going to become a much bigger issue for self funded companies and I would say, what are we doing with our scale of like is it 1-100 or 0-1 or 50/50?
Rob: One to five?
Mike: One to five, I guess.
Rob: Yeah. Five is like “nailed it” and then one is “completely missed.”
Mike: Alright, one to five then. I would say on this one, I got a five.
Rob: In the US, specifically.
Mike: Right.
Rob: Because the US’ healthcare system is so messed-up, especially for small companies. Well, just for everybody, it’s messed up.
Mike: Yup. I’ve been hearing people over the past three or four months where at the beginning of the year it wasn’t so bad, I don’t think, and then as the year has kind of progressed, as people start to renew their insurance, I’m hearing people say that in some cases it’s double or triple what the rates were previously, the previous year. It’s kind of gotten out of control. I don’t know what people are doing about it. I’m glad that I renewed back in April, but at the same time, I’m going to have to renew next April and I’m kind of afraid of what is going to end up happening.
Rob: Yeah, I agree. I’m happy. It sounds weird to say I’m happy that I’m working for someone else, that I don’t have to deal with this. Essentially, Drip/Leadpages handles this for me now. I don’t have to administer it. They, like a typical employer with good funds, they cover most of the expense. I know it’s gotta be super expensive for them to maintain that. My first prediction for 2017 was there will be another high-profile acquisition in the bootstrapped space. My idea was that it wasn’t going to be someone that sold their app for 3-4X multiple of net profit but that it was gonna be another kind of Drip-esque acquisition where someone that we know in the MicroConf spaces that acquired by a big startup.
Mike: How did you do?
Rob: As far as I know, this is a one. I don’t know of an… Do you know of anybody in our space that got acquired?
Mike: I know of some but nothing at that level.
Rob: Yeah. Maybe a two or something. I was on the lower end of being right. I had the impression that, or I was thinking that there would be a kind of a bare acquisition in that but it really did not happen.
Mike: If I remember correctly, you did say on the episode last year that you didn’t have any inside knowledge, it’s just what you thought was going to happen.
Rob: Yep, that’s right.
Mike: My second prediction was that the SaaS bar is going to continue to be hard to reach which is obviously very generic but I kind of couched it by saying that startups are gonna start offering a service as a first base approach followed by implementing the SaaS once they figure out the process in order to be able to offer those services at scale.
Rob: It’s the product as consulting first and then turning into SaaS. I think when you said this prediction, I said, “Isn’t this already happening?” This was Brian Casel’s talk in October of 2106, was about productize service moving to SaaS.
Mike: Craig Hewitt went on this road with Castos as well. The idea there is to really make it easier for people to host their own podcast and they do a lot of this stuff internally with PodcastMotor where they do all the editing and everything else but they basically turned that productized service into more of a SaaS product and offer additional things which is more of a self serve model then the productized services which is done for you. I would say those two are the things that I would say come to mind, but I don’t see too many others. I probably have to give myself a two, possibly a three, but I wouldn’t say that this was as accurate as I thought it would have been.
Rob: I’m sure more people are doing it. I know Brain Casel has his productized course and I’m sure he knows other people doing it through that but you and I just haven’t necessarily heard about them or been around them.
My second prediction for 2017 was that start up crowdfunding will fizzle out. Lower end startups will use it but the best startups will continue to use their networks, AngelList, and that kind of stuff. I’m going to give myself a four on this because I don’t know if it fizzled out as much, it just has not really taken hold very well. It just hasn’t had the impact that I thought it would of people being able to buy small chunks of equity on accredited investor, non-accredited investors being able to buy small chunks of equity. I thought that it would have this big kick early on and then like I sad fizzle out. It kind of didn’t. I think that there have been several platforms that have launched to facilitate it. It’s kinda shoulder-shrug right now, like wait and see. Mostly if I removed the fizzle out, I was probably a five. “Crowdfunding won’t really do much,” if I had phrased it that way, it would be much more accurate. Was that your sense as well or you think I’m misreading it?
Mike: I feel like that there was an initial inclination that was going to happen, that people were going to do it a lot. Non-accredited investors were gonna be able to throw money in and start funding these companies. I don’t think that the types of businesses that were maybe brought before them were attractive enough for them to say, “Yes, I’m gonna throw my money in.”
Rob: Cool. That makes sense.
Mike: My third prediction was that more small scale entrepreneurial meetups are going to be starting around the world, and that the entrepreneurship for small-scale businesses is going to pick up steam. I probably don’t have a lot of data to back this up. I would say that I’d give myself a four out of five on this. I heard recently that FemtoConf over in Germany just recently sold out. Congratulations to those guys.
Rob: Wait, what?
Mike: Did you not hear that?
Rob: Oh, sold out. That was interesting. I took sold out as not selling all their tickets but selling the conference to someone else. I was like, “What?!”
Mike: Oh, no. No.
Rob: Did you hear that shock in my voice? Okay, sorry. Keep going.
Mike: No. Sold out as in sold all of their tickets. I feel like that’s going to become not really the model but more prevalent over time as people, like start these really small meetups and then grow it. I think last year’s FemtoConf was only about 10 or 15 people and then they went from 10 or 15 to I think around 30 this year. I just think that there’s gonna be a trend in that where you get these really small meetups that start out tiny and then they start to grow just because of the audience that they build and they’re growing off their success as opposed to trying to build something where they get like 100, 200, or 500 people to it the very first year that they start. It’s really just stair stepping their way up.
Rob: Congrats to you guys. My third prediction for 2017 was that there would be a 20% or more correction in the US stock market. On a scale of one to five, I give myself a zero. Have you heard this expression, “I’ve predicted five of the last two bear markets.” That’s essentially what I’ve done here. I think like all of us, things seem overvalued, but everyone’s been saying this. I know someone who pulled all their money out of the stock market in 2013 or 2014 and they have missed tremendous amounts of gains. Timing the market is so, so hard. We all think we can and it’s always a little bit later, you can’t quite outlast the market in terms of the irrationality of it going up or going down. I would probably say this will happen in 2018 but I’m not going to cheat and use that prediction again. I was dead wrong.
Mike: I thought you were going to say the 20% market correction was going to be upwards instead of downwards. I thought you were gonna…
Rob: I should have. It corrected from it’s low. It corrected upwards. My fourth and final prediction for 2017 was that the first consumer purchase package would be legally delivered with a man drone somewhere in the world and I believe, if I recall, that I made this prediction it was late November, early December, and it was within a couple of weeks that this happened. It was even before 2017. Is that your memory?
Mike: I think that’s correct. I think that happened before the year started. I think we were debating about whether or not you got credit for it because it was not in 2017.
Rob: I would give myself a five on this one even though maybe technically it should have happened two weeks later for it to be in 2017. We should call this our predictions from between right now and the end of the following year.
Mike: You’re just trying to get credit for that one.
Rob: Alright, let’s dive into our predictions between now and the end of 2018.
Mike: What’s your first prediction, Rob?
Rob: Hey, wait! I didn’t even type this one. Let me read this one. Rob will buy a bunker in the Swiss Alps, establish a micronation with his 11-year old son as the benevolent dictator. How did this show up in our outline, Mike?
Mike: I don’t know, I have no idea.
Rob: I think that’s a really good prediction.
Mike: Must have been the elves.
Rob: Messing with my predictions. That was a joke prediction. Please don’t hold me to it. What’s your first one?
Mike: Mine is there’s going to be an economic downturn. I think that it’s probably going to be, I don’t wanna say that it’s gonna be major. But I think that it’s gonna be substantial enough that people will notice. It’s not gonna be like 2008 where the entire economy crashed but I do think that there is going to be that, you kind of called it for last year, the 20% stock market correction, I feel like that’s gonna be this year. I think that it’s going to be driven kind of by a lot of the factors around healthcare, at least in the United States, and various policies that are kind of going into effect. I don’t see like a sustained economy is going to be moving forward this coming year. There is bad stuff on the horizon.
Rob: I want to get more specific with this because when I think of the phrase “economic downturn,” I think of the economy as multiple factors. You could say is that a stock market correction, is that a recession which implies a lack of growth of businesses which don’t necessarily, it often causes a stock market correction, but the two can be non-correlated. That typically also leads to unemployment. And then there’s the housing market which I see as a separate thing.
There’s three or four different things; unemployment, GEP growth, stock market, and housing. In 2008-2009, they all plummeted, but in 2000, the housing market took a little hit but it wasn’t that bad. What do you mean when you say economic downturn? Let’s define it and then let’s update, so we know next year, whether you are accurate. If it’s any one of those four, it’s a pretty broad prediction. But if you’re saying its like three out of four or something…
Mike: I think it’s going to be a couple of them. One, I think there’s going to be a lot of small services businesses that end up going out of business partly because of regulation but partly because they’re just not going to be able to make ends meet. They’ve got other things to adhere to in terms of tax laws, health insurance, and things like that. I think that’s going to have a pretty big impact on them, along with all the legislation tied to the healthcare industry. I think that’s going to have a pretty bad impact on them as well, just in general, you will see a lot of small-services companies end up going out of business.
Then that’s going to lead to unemployment which impacts a lot of other things. I don’t think that the housing market is really gonna go down very much. It probably will stay relatively the same. It’s certainly is not going to be a big growth area. Then what was the last one that you said? Oh, the stock market. I think that it will level off a little bit but I don’t think that it’s going to go down.
Rob: I’ve updated your prediction with a few bullets that kind of captures that so when we come back next year, we can measure it correctly.
Mike: What’s your next prediction?
Rob: My first prediction, the Swiss Alps bunker one, is not going to come true. I think 2018 will be the year of non-institutional startup funding. I think this has already begun. We’ve seen more and more angel investments coming out. The more I get involved with this, the more I realize the power of money that comes from angels, rather than going the traditional institutional route. Jason Calacanis’ book, Angel which came out a few months ago, it was really good. I think some people will probably dive into it from there.
Crowdfunding, this is maybe my opposite of my prediction for 2017, but I do think that crowdfunding will continue to build some steam. The ICOs are a bit dubious as to whether they’ll stick around. But I know that’s a big push right now, people are trying to fund startups using ICOs. Through those three avenues, I think it’s gonna be easier, and even more prevalent, and become a more common thing for people to invest in early stage startups. I think it will become easier as a startup to raise non-institutional funding. This is kind of tied to fund strapping a little bit. It will be easier to fund strap because of that. Fund strapping being raising a small round of funding without the intention of the implied series A, of having to then go to institutional money in 18 months but to actually become profitable with that initial round.
Mike: My next prediction kind of revolves around in app purchases. One thing that I’ve heard talk off is about legislating that. Mainly because when Star Wars Battlefront 2 came out, there was complains about how much the game costs, and then the fact that inside the game, you could go in and you could purchase basically, a loot crate and you had a chance to get certain items but you are not guaranteed to get something specific. The rationale people were putting forward is well, that’s actually gambling because you’re buying a chance to get something that may or may not be valuable and it is being presented in such a way that that fits the definition of gambling.
I don’t think that we’re going to see legislation around this. I think that there’s a lot of talk about it. The companies that are behind these types of games are smart enough to be able to avoid that kind of stuff because they’ve got the legal teams to both defend them and point them in the right direction and say, “You should or shouldn’t be doing this. Here’s what we can get you out of and here’s what we can’t.” I don’t think that there’s going to be any actual legislation around it but I do think that you’re going to see gaming companies come to better definitions and I would say be a little bit more careful about how they’re putting those offerings together for those in app purchases.
Rob: My second prediction for the year is that artificial intelligence/machine learning will continue to be marketed as the next big thing in terms of enterprise SaaS and even small and medium size SaaS and software, but once again, it will not deliver in 2018. By not deliver, what I mean is it’s being touted before it can really provide value for most people and most businesses.
One of the big issues is especially with machine learning, you need such large datasets to actually train the algorithms. I see these SMB tools saying, “We’ll use our machine learning to help you do…” That’s over promising and I think it’s gonna burn people out on it. I’ve already had conversations with a guy who used to run a big ecommerce store and he’s like, “We’ve been sold artificial intelligence for 15 years and it’s still not as smart as me sitting down and whatever, building out a funnel or a campaign.”
I think there’s danger of it becoming a complete marketing fad. I do think that eventually, this stuff’s gonna work and it’s gonna be genius. There’s examples of it. We use what I call artificial intelligence to detect spammers when they come into Drip based on behaviors. We have all these signals we look at and we auto-flag and our accuracy is really high. We’ve developed that algorithm over the last several years and I know that there are other startups that do this internally. This stuff can work. There’s just certain approaches that you need to take to it. We have stuff that we’re already thinking about inside Drip like, “How could we automate this? How could we make this smarter?” People have been saying it for many years, it’s not there yet, and some people will actually do some intelligent things this year. Hopefully, we will release something, but it’s not going to be the promise of everything’s done for you, and you just sit back and press one button and all your marketing is essentially automated, which is what so many of people in the mar-tech space are claiming.
Mike: I think that’s a difference in the bounds of the problem too. For example, detecting that somebody is coming in and going to be sending spam, or is a fake account that signed up, and their intent is to do that. There are certain patterns that you can recognize very easily because there’s only so many things that you can do or that can be done in the app. You can do time-ins around when one request happens versus when another. It makes it easier to scour that and kind of detect whether or not somebody’s doing that. Versus in an ecommerce, how do you predict whether somebody’s gonna come back and buy something else, or how do you predict the best thing to upsell them to. That’s a lot more of an open-ended problem with no real bounds versus, “Is this person going to be a spammer? Yes or No?” Does that make sense?
Rob: Yup, totally does.
Mike: I think that the two things are very different. I totally agree that enterprise companies are being sold to this type of stuff and it just doesn’t work.
Rob: Yep. How about you? What is your last prediction?
Mike: My last prediction is actually about Uber and it is that Uber is not going to regain the ground that they have lost. Lyft is a lot smaller than they are, but I think that because of all of the, I’ll say, political fallout and loss of goodwill towards them – not that they probably had a ton of it to begin with, but I think that they have really lost a lot of the leverage points that they probably had. They’re going to have to work harder to do the same things that they were able to do last year, and the year before. Just because of the fall out from the allegations of misconduct and all of the internal stories that have come out of how badly they’re treating people. I just don’t think that they’re going to recover as well as they probably think that they are. Like I said, the big problem is it’s going to take them a lot more effort to do the same things that they were able to do last year with substantially less effort.
Rob: When you say not regain the ground they’ve lost, do you mean in the valuation? Because, as of this writing or as of this recording, their valuation is like 30% lower based on a round that they have to raise from SoftBank. I think Uber’s burning $1 billion a month. It’s a lot of money. Is that much money?
Mike: I don’t know.
Rob: It’s a lot of money. Yeah. They’re in a place of having to raise capital and with this kind of tarnish on them, and they’ve lost their CEO, SoftBank offered them 30% less than the previous round. Are you thinking that in terms of evaluation or you’re thinking in terms of market share? I know we don’t know their market share for sure but there are estimates and such and they have taken a big time hit with people deleting their app altogether.
Mike: Yeah, that’s more what I’m thinking. Market share, because we don’t have the actual numbers, it’s gonna be a little bit difficult to, I’ll say, measure that in a year. When I say that they’re not going to regain the ground they’ve lost, as in the people who have deleted their app will probably not reinstall it unless they have no other option. I don’t think that they’re going to win those people back even if the company changes its tune and goes out of its way, I’ll say, to overhaul their culture. I don’t think that they’re going to win those people back which will have an impact on their market share and their ability to grow as a company.
Rob: Sounds good. My third prediction is that there will be an enormous crash in Bitcoin’s valuation. Right now it’s on a huge rise, but long term I am still bullish.
Mike: Wait, didn’t it crash three days ago?
Rob: It crashes every few days but it comes back. I’m saying more of, I don’t wanna say sustained crash, but if you look back over its history a couple years ago, it built up into the 400, 500, 600 range and it crashed and it was down for a year, just fumbling around. Maybe even more, it might have been 18, 24 months. It’s kind of bumping around and around a few hundred and then there’s this more recent rise. I’m a person, I’m long Bitcoin. I own several Cryptocurrencies and not in small quantity either. It’s not like I bought one. I’m kind of keeping my eye on it and it’s tough, this is similar to my prediction of the stock market correction.
I think the way Bitcoin is going up right now is like no mania that we’ve ever seen, the volatility is just crazy. I do think that the next 12 months, that is likely to end. I of all people would be ecstatic if it didn’t, if it kept going up, doubling, tripling. Bitcoin has had a 2100% return in the last year. That’s kind of tough not only to sustain but even sustain the current valuation. With that said, long term, even as I sell some of the Bitcoin as it gets really high and my assets get way out of allocation, or out of the percentages that I like. I’m certainly not exiting those positions at all because I think I’m long Bitcoin and I’m long cryptocurrencies in general.
As you look out 5 and 10 years, it’s kind of like being here at the advent of the personal computer, the advent of the internet, the advent of smartphones. Bitcoin and crypto in general is this movement and long-term is going to stick around even after a crash. If we think about the 2000 Dotcom crash, there was all this hype around it from ‘94 from the IPO of Netscape, ‘94-’95, all the way to 2000, and then everything crashed, and people said, “Boy, Dotcom, those internet sites, they’ll never amount to anything.” Now, here we are. The biggest companies in the world essentially either came out of that or have something to do with that. If you had just been long the whole time, you’d have to wait through that decade-long trough, essentially, when it all bottom-dropped out of it. I guess I see there could be a similar frenzy around Bitcoin and other Cryptocurrencies, where there will be a big crash, but long term it will be a viable store value or a way to move money around.
Mike: I think the volatility of it is kind of a big turn off to me. I saw a tweet earlier today from somebody who said, “I bought a USB cable from Newegg with some Bitcoin ones. Feel free to ask me sometime and I’ll show you a $3500 USB cable.”
Rob: So funny. That’s the thing, I don’t think Bitcoin is a currency. I think cryptocurrency is a misnomer and I view it much more as a store value in a way to get money out of a situation… I view it more as gold. I wouldn’t go buy bread with gold. I wouldn’t go buy USB cable with gold and I won’t do it with Bitcoin either. I do believe it’s a great way if your currency is going crazy and this happens every several months to just get money out of my currency because the government won’t allow me to exchange it for US dollars, that’s much more stable, and I don’t want to see this hyperinflation. People are dumping their money into Bitcoin or into other cryptos. It’s a great way to, I shouldn’t say great, but it is a way people are using to not lose all the value of their money during this currency crisis.
And then you look at when Brexit happened and there was this uncertainty. When there is economic uncertainty, obviously, there’s a lot of volatility in Bitcoin. It’s been lucky enough to keep going up. It’s a way that if you had a hundred thousand dollars in the bank, or I should say a hundred thousand Argentinian pesos or whatever, hyperinflation hits and it’s 100% a weak inflation, you can’t go buy $100,000 worth of gold because everybody goes and buys it and they’re trying to get stable assets. But you can go buy $100,000, in theory, of Bitcoin quickly. That’s been one of the ways that people have seen these big rises.
Mike: Do you think that long term digital currencies will replace gold as the asset to go put your money in for stability?
Rob: No. I think they will both co-exist because gold has just been around too long, it does have a small amount of value in manufacturing, some amount of value in jewelry, but more than that, it’s just that we’ve all agreed that it’s worth something. I don’t think any time soon everyone’s gonna agree that it’s not and agree that crypto is. I don’t think that it’s realistic but I do see that it’s just another asset to hold. That’s how I did asset allocation or I do asset allocation. That’s how I have money in all of these things, all amounts divided between them, although my cryptocurrency is no longer a small amount. I kind of laugh because it’s a good problem to have when it goes up, but it also completely jacks your plans when you’re like, “Oh, I don’t actually want to own. I don’t want that much of my networth to be tied up in something that’s this volatile.”
With that, my fourth and final prediction is that cryptocurrencies will be regulated by several large governments. There’s already been statements from the US government about what Bitcoin is but there is no SEC oversight of Bitcoin exchanges. There’s a bunch of regulation that could be in place. I don’t know that it will happen in the US government, I know it’s happening in smaller governments. I think that this will be the year where government really starts stepping up and putting legislation or more regulation in place to get involved with cryptocurrency and get out ahead of it to make sure that for whatever reason, they pass regulation, they’ll be doing that. They probably would have done it this year but large governments move slowly and I think they’re all waiting to see what happens. I don’t think that it’s going away anytime soon, this will be the year that things will really ramp up.
Mike: I wonder if any of that legislation is gonna be based around security standards. Banks have security standards that they have to comply to. There’s been no shortage of stories of these cryptocurrency sites that have gotten hacked and they lose millions or tens of millions of dollars. I can totally see some government agency coming out and saying, “Hey, in order to be able to trade in whatever the digital currency is, you have to follow certain security standards in order to be able to do it.” I think it’s gonna take them a few years in order to be able to nail down exactly what those are. They’ll sit in their committee for like a year or two at least before they get to any sort of concrete implementation guidelines.
Rob: When they’re first announced, it might be a big negative hit to Bitcoin and the crypto valuations, “Oh no, government’s gonna get involved.” Then long term, it could feasibly make it more stable or it could make it less likely to get stolen from marketplaces. It’s hard to predict what it will do. I think there will be mixed reaction to it.
Mike: Yeah. It depends on whether they legislate it or decide to back it as they do bank transactions. Because with banks, it’s federally insured versus Bitcoin it’s not. If it’s a digital currency and it all gets stolen, it’s the government going to step in and say, “We will back this up to $250,000,” or whatever, but my suspicion is no, they’re not going to go down that path.
Rob: That wraps us up for today. If you have a question for us, call our voicemail number at 888-801-9690 or email us at questions@startupsfortherestofus.com. Our theme music is an excerpt from We’re Outta Control by MoOt used under Creative Commons. Subscribe to us in iTunes by searching for Startups and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening, we’ll see you next time.
Episode 317 | Our Predictions for 2017
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Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike make their predictions for 2017. They also look back on the previous year’s predictions and evaluate whether or not they were correct.
Items mentioned in this episode:
Transcript
Rob: [00:01] In this episode of Startups for the Rest of Us, Mike and I talk about our predictions for 2017. This is Startups for the Rest of Us episode 317. […] Welcome to Startups for the Rest of Us, a podcast that helps developers, designers, and entrepreneurs be awesome in building, launching, and growing software products, whether you’ve built your first product or you’re just thinking about it. I’m Rob.
Mike [00:26]: And I’m Mike.
Rob [00:27]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, Mike?
Mike [00:33]: Well, my wife and I rescued a cat this week. There was a cat that was coming up the driveway and our kids were looking at it. It was very friendly and it seemed, obviously, like a stray of some kind, but it got close to us and it was kind of rubbing against my son, and he was patting and he’s like, “Can we feed it?” and of course because you don’t really want to go feeding random stray cats, because they’ll never leave. But this one was like scrawny as all hell. It was probably only about four or five pounds when we found it, and it was full-grown, so it was just obviously in need of some love and care. But it was somebody’s cat. I don’t know whose it was, but we think that somebody just dropped it off. We took it to the vet and had them check it and see if there was like a chip in it, and there was nothing. Posted on Facebook groups and tried to find its owner and haven’t been able to find it, but over the course of about four days, it ate probably close to four pounds of food, which is just an ungodly amount of food for a cat that was that size. So we’ve decided in the end to keep it. So we’ve taken it to the vet, had its shots, and it’s been hanging around in the basement for the past week or so.
Rob [01:35]: Oh geez. Are you prepared for the responsibility? I guess cats are a lot less responsibility than dogs, but have you had a pet in the past?
Mike [01:42]: Well, we already have one cat, so right at the moment, that’s why this one’s in the basement. We’re keeping them separate for the time being, because our other cat is not, I’ll say, very friendly. I’m not exactly a cat person; I’m more of a dog person to begin with, but our upstairs cat is just, you know, she wants to be left alone, left to herself. She just wants to sit in a corner. She’s more a cat that’s like, “Pet me. Stop.” It just does not want to be involved in any way, shape, or form, unless it’s dinner time. So we’re keeping them away. This upstairs cat is definitely not particularly happy that there’s something in the basement, although, I don’t think she really understands what is down there, but she does not like going near the door anymore. She used to go down there all the time and now she’s won’t go near the door. So it’s probably going to be like a month or two before we can integrate them together. But we’ll see how it goes. The kids are in love with the new cat and like playing with it, and we’ve been locking one of them in a bedroom and then just letting the downstairs one come upstairs and hang out a little bit. But we’ll see how it goes.
Rob [02:42]: Sounds good. I wanted to bring up a subject we talked about last week, which was Wistia pricing plans. And when we were on the show, I’d said that Sproutvideo was cheaper. I think it has a –whatever it is – a $15 plan or a $25 plan. And I mentioned that Wistia is basically starts at $100 and I think you said that they had a $25 plan. But since then I went there – because I was talking to someone else a day or two later and we went and looked and it was like, they have a free plan that’s super limited. You get three videos. So it really is hyper-limited. And in essence, they start at 100 bucks at this point. Just to clarify.
Mike [03:18]: They used to, and it’s funny because I’m on their $25 plan. So I used to be on a $100 plan with them, and then they moved a lot of their pricing plans around and it made more sense for me just to switch down to their $25 plan. And then since then, they’ve gotten rid of that and now they only offer the $100 plan again.
Rob [03:35]: And so they start around $100 and then Sprout does have a $20, basically a $25 plan that is, again, it’s a bootstrapper plan is how I think about it, because it doesn’t have all the features that Wistia does but it is a perfectly competent platform and you can capture emails and do stuff – just not as much fancy stuff as you can with Wistia. Other thing for me is, first time ever this week going to Disney World. Actually taking the kids there as a surprise. I’m pretty excited to get down there and see what’s up. I’ve been to Disneyland a few times but I heard that it’s quite different. It’s a different scale. Have you been there? Have you been to Disney World?
Mike [04:10]: I have. I’ve been there I think twice. So we went down there with the kids both times and we took my mother-in-law once as well, just because she could help out with the kids. But it sprawls. There’s a lot to Disney World. Do you know where you’re going, or?
Rob [04:23]: Yeah. We’re staying in one of the resort hotels and then we have basically three days and we go to three different parks. So we’re not doing Epcot; we’re doing all the other three parks. The thing I’ve been really impressed with, with Disney is the level of technology that they’re using. So I’ve received basically a print on demand booklet that says, All-in family vacations, has the Incredibles on the front. You flip it over and it’s like your itinerary is all custom-printed inside, it looks really sharp. Then they send you the wrist bands and those must be NFC or something, because they say that’s your FastPass, that’s your key to your door of your hotel room. That’s your meal ticket. It’s like everything. And each of them is monogrammed. It’s etched with the name of the person. It’s really, really pretty impressive. And then I’ve been selecting FastPass stuff online in advance and I’ve been able to move that around and it’s super flexible and I’m impressed with the level of sophistication and really feeling like we’re not just going somewhere and going to spend days standing in line, but actually able to plan this thing and feel good that things are taken care of.
Mike [05:22]: When we went to Disney World, we went to a couple of the different parks. We went to Epcot and we went to the regular Magic Kingdom and there was – there was also, I think it’s Animal Kingdom?
Rob [05:31]: There’s a wildlife, yeah.
Mike [05:33]: So we went to those, but we ended up spacing it out a little bit. So we were there for about a week, I think, and we went to a different park every other day, and what we found out was that the kids were just wiped out by the end of each day. So the next day it was like a recovery day, and we would just stay at the hotel or go someplace else and not let them be as overwhelmed. And then the following day we would go to one of the parks. And we found out that that worked well. But they were younger then. So your kids are older than they were, so I think that they’ll probably be fine.
Rob [06:01]: We’ll see. I’m sure we’ll all be exhausted by the time it’s done, but we basically have three full days down there and then the two book end days are our travel days. So it’s nice to do it. And we’re actually recording a couple of weeks in advance, so this is over Thanksgiving, which is why we decided to do it now.
So let’s dive in to our predictions. In a true Startups for the Rest of Us tradition, we like to look back at the predictions we made last December. We made predictions for 2016. We each have four. We’re going to look at those, evaluate whether we think they became true, whether we think we were correct with them, and then we’ll wrap up the show with our predictions for the coming year. So you want to kick us off with your first prediction that you made last December for 2016?
Mike [06:41]: Sure. So the first one I made was that lots of churning would happen in the wearables’ category. And I had said that I didn’t think that I saw most of these going anywhere and that it’d be a few years before any of these became really big. And one of the things that I had mentioned specifically was that I didn’t think that the Apple Watch was ever going to be a big thing like the iPhone or the iPod. And I would say that this probably turned out to be true. I look at the landscape and I don’t see anything that came out where everyone was like, “Oh, I have to have that,” or, “I really want that.” And even Apple this past year came out with the Watch 2, and there wasn’t really a lot of hubbub about that from the community or from the people who were out there investing in those types of technologies. They looked at it and they said, “Yeah, that’s okay. It’s a nice incremental improvement, but the first one was not so overly impressive that it really made a big difference in my life.” I even saw some people who they said that they regretted getting it. And I think that there’s a lot of those different wearables, especially when you see things like the things coming out from Fitbit and various other companies. There’s just not a lot to them. They augment what’s going on already, but they don’t necessarily change how you live your life, or what sorts of things you do.
So again, I think that this came true or it just was status quo I’ll say more than anything else. But I think it’s going to be a while before the wearables category really starts to take off, because it’s going to be a while before people figure out what is it that the consumers really want or would really alter their lives or make them better. And I don’t think it’s really obvious what those things are. I think there’s a lot of opportunity, I just don’t think that there’s – there’s not that killer feature yet that people are like, “Oh, I absolutely have to have that.”
Rob [08:17]: My first prediction for 2016 was that single-round bootstrapping, also known as fundstrapping will become a common, viable option. And I would say that it has become more of a viable option. I’m not so sure it’s common. I had imagined more people taking this road. Although it is more viable, it is more popular, and I’m seeing more people seek this road as they hear about it, right, as we talk with the Jordan Gall or Justin McGill who have really done the fundstrapping model. Or when I had Bryce from India VC on the show a few episodes, that seemed to really resonate with people on the thought of being able to raise around, to get there faster, and to be able to basically quit your job from day one but not be beholden to VCs and not be beholden to this implied series A. I think it’s really appealing to people and it has a lot of the pluses of bootstrapping with some of the benefits of basically raising funding. And it’s a mix. So I think this is a partially accurate assessment. I think maybe I’m ahead of the game, but I do continue to believe in this model and I think it’s going to become even more popular over the next year or two, especially as a lot of the startups space and specifically the SaaS space continues to be really competitive.
Mike [09:27]: My second prediction was that we’re going to see a lot more bootstrappers in our circles concentrating less on making money and more on doing what they’re enjoying doing, and more or less living their lives in their own terms – less consumerism and less accumulating of stuff and more doing what they enjoy. And I don’t know, I think this one’s hard to gauge. I definitely wouldn’t say that this was an obviously accurate statement, but at the same time, I wouldn’t say that it was obviously proven to be false either. It’s somewhere in between, but it’s hard to measure that as well.
Rob [09:54]: I think we need to make more concrete predictions, because some of these are hard to gauge, you know?
Mike [09:59]: Yeah.
Rob [10:00]: So my second one was Twitter will become less relevant over the next year, returning to its roots, it’ll be journalists and technorati and it will be ripe for an acquisition. And this, of all the predictions I’ve made, perhaps over the past several years, this one I think was dead-on. And this was not – it’s obvious now that this is happening, but this was not on people’s radar a year ago. Twitter was still growing and people were on it and stuff. So I remember making this and thinking, “Boy, I’m kind of going out on a limb with this one.” And I’d say this is really accurate as we’ve heard lately with acquisition talks and failed acquisitions rumored, all types of stuff. So what do you think?
Mike [10:40]: I’ll admit. I thought that you were definitely going out on a limb on that one, but I’ve noticed that even I’ve stopped using Twitter nearly as much in the past 12 months as I have in the previous couple of years. So it’s interesting to see that. It’s not something I would have expected, but anecdotally from my own experience, I’ve used Twitter a heck of a lot less this past year than I have in the previous couple of years.
Rob [11:00]: And you’re not alone. You said growth is basically mostly flat-lined and the revenue is not growing as fast as people want. It’s still growing but the stock market doesn’t love the growth and then, like I said, there have been acquisition rumors that have fallen through. So I think I nailed it on this one.
Mike [11:18]: My third prediction was that there’d be fewer IPOs and more acquisitions in the tech space. And I also felt like there’d be more stagnation from the unicorn companies. And if you look at some of the classic unicorn companies like Airbnb and Dropbox, they still obviously exist and there’s nothing wrong with them – at least it doesn’t seem to be in terms of their business model – but they don’t appear to be doing anything radically different and they’re definitely not on the same growth trajectories that they used to be. It seems like they’re still growing but not nearly at the rates that they were before. And I’m not seeing anything new from them. I am seeing that they’re going through and acquiring certain technologies or other companies that will help augment their services, but there’s nothing so dramatically new there. I also haven’t seen very many tech IPOs this past year, but there have been acquisitions as well. So those acquisitions have continued to happen. Drip is an example of one of those things. You didn’t go IPO with that, but I don’t think you ever really had intended to do that either, but there was that acquisition and then there’s other companies out there that have been acquired in the past 12 months as well and it’s – I would say that this is probably more accurate than not. But again, like you said earlier, it’s hard to quantify because we haven’t really put any sort of benchmarks on these.
Rob [12:30]: My third prediction for 2016 was that public markets would continue to value companies lower than their private valuations. And what was going on at the time was that folks were raising these funding rounds from venture capitalists and the good companies were getting these really high valuations and then they would go public, and their per share price would actually be lower than their most recent round. It was like going public was a down round. And from what I’ve seen this year, it has continued to be that. I think there was a big hit. You know remember, we made these in November, December last year and there was a massive hit, especially to SaaS, to B2B and SaaS valuations last January, where I think SaaS valuations were right around seven times annual revenue and they were cut to about 3.3 within a two-week span in January. Now they’ve since recovered and they’re up in the – let’s say between four and six range, depending. But there has continued to be – I’d say this has continued to be accurate. This is something that was already playing out in 2016. I wouldn’t even venture to say what’s going to happen in 2017. It depends a lot on what the public markets do. But it’s an interesting twist in that if you looked 5 or 10 years ago, and especially even 15 years ago, during the .com boom, the public valuers were always higher than private, because that was the scale up, is that you’d raised your series A, your B, maybe a C – and then you go public and you’d get this big bump whereas people who were, you know, even as of last year, people who were in on the last round of investment were basically losing money when the IPO happened. So it was this interesting frothy market.
Mike [14:02]: So my fourth and final prediction last year was that drone technology was going to take a serious step forward based on the FAA regulations for registering drones over eight ounces. And I look at the technology itself and it feels to me like things have come a long way. Now I don’t know really whether that was driven specifically by those new regulations, but if you go look at toy magazines for example, or websites where they have drones as like a peripheral thing, not necessarily – you don’t want to go to a drone website where all they sell is drones, because obviously that’s – it influences in the wrong way. But if you look at things like, for example, a Target newsletter or a weekly flyer or something like that, you will see small drones in there that you really didn’t before, and they’ll have several different variations of them. So I do think that the technology has taken some serious steps forward – whether it’s directly influenced by those regulations, I don’t know for sure. My suspicion would be yes, but it’s hard to say definitively that that was exactly the reason. But I would say that this was relatively accurate.
Rob [15:00]: My fourth and final prediction for last year was that virtual reality would be a hit with the early adopters set in 2016. And I would say this is not accurate. I think it’s still too early. I just think we haven’t hit that. Even with early adopters, I know there’s a lot of headsets coming out and there’s AR fighting VR, and it’s a really interesting space to watch. But it still feels like early days and I definitely wouldn’t call it a hit yet. I wonder if in the next – it’s kind of hit eventually, right? So in the next 12 to 18 months I think things will go. But definitely didn’t happen as quickly as I had imagined.
Mike [15:40]: So those are our 2016 predictions. Why don’t we go into our 2017 predictions? Rob, why don’t you kick us off?
Rob [15:46]: So my first prediction for 2017 is that there will be another high-profile acquisition in the bootstrapped space. And by another, I mean, Drip being one that happened this year that is an example of our little community that started with a few bloggers and you and I talking on a mic and then getting 100 people together in a room in Vegas in 2011 has really grown, and not only in size but just in the apps we’re building and the impact we’re having both on our lives individually, on each other with all the masterminds that come out of the community that we built, as well as the apps that are coming out of it. And they’re becoming higher and higher profile, and so I’m going out on a limb and I’m saying that there’s going to be another – when I say high profile, I don’t mean a technology sale of a web app for a 3.5 times annual net. I mean another one that’s a big funded company or a larger company buying someone that we know – that we know by name in the Microconf circles, in our podcast circles, and folks who we’ve talked about in the past on the show. And I don’t know of anything that’s coming specifically or I don’t know specifically who it’ll be, but I have a few ideas and it’s just some potentials.
Mike [16:52]: Bottom line you’re saying you’re not cheating with insider information.
Rob [16:55]: Exactly. That’s what I’m trying to clarify here. This really is a prediction and not just me gossiping about rumors that I’ve heard or anything.
Mike [17:03]: Sure.
Rob [17:04]: How about you?
Mike [17:04]: Well, my prediction for 2017 is that health insurance rates are going to become a much bigger issue for self-funded companies. And I’ve heard talks quite a bit about this over the past – I don’t know, maybe three to six months I’d say – where people are starting to ask more questions from the bootstrapped community. And I think that this coming year it’s going to become a much bigger topic, just because the way the election went and there’s all these questions and uncertainty moving forward. And the reality is that if you look at the health insurance rates for a self-funded company if you’re self-funded, you’re running the business, and you’re the only employee, for example, you have very little data to go on in terms of what other people are paying for health insurance and what’s common and what’s not. So there’s all this obscurity around what should you be paying for your health insurance and what is normal? And I think that as people get more comfortable asking those types of questions, that’s going to come up – and I think it’s going to become a much bigger issue in our circles for people – not just in what it is that they’re paying but who they’re using and what’s common, what’s normal, and quite frankly – do they even need it? Are there other ways that you can go about solving this particular type of problem for yourself and for your family that may not necessarily be options for – I don’t want to say mainstream people, but for people who are W2 employed for like a large company. Are there other options that people in our circles are going to come up with that are helpful and useful in that specific situation that would not be generally applicable outside of that situation?
Rob [18:35]: And I would say this is already an issue today. So you’re saying it’s going to get worse?
Mike [18:41]: I’m saying that it’s going to get worse and it’s going to get talked about. I think that previously –I’ve seen a few talks about it here and there, and I’ve seen some conversations happening here and there, but I think that those types of conversations are going to become more mainstream in our circles, just because the sheer cost associated with paying for your own health insurance is starting to rise dramatically – and I’ve noticed this myself with my own insurance, where from one year to the next I might be paying $3-400 a month in addition to what I was paying before, which that can be easily 30-40%. And you look at that and you say, “Well, okay, what other options do I have here?” What I’ve seen is that some of the insurance companies, they’ll just jack up to your prices until they get to a point where you’ve decided that it’s no longer worth it for you to have insurance through that company, and then you’ll go to some other company. And I think what they’re doing is they’re essentially price testing on their own customers to see who’s going to tolerate those price increases and who’s not, and using the knowledge of their current customers to help them basically extract more money out of their customer base. And if a bunch of them cancel, so be it. If they don’t, well, that’s fine, they’ll get the extra money, and then they’ll kind of adjust that. But because not everybody’s health insurance renews on the same month of the year, they’re able to do that on a monthly basis – and essentially I feel like they’re price testing that month in and month out and adjusting their prices over the course of the year.
Rob [20:07]: And this is mostly a US only prediction, because a lot of the countries in the world take care of their folks and don’t let the insurance companies do what they do here. So my second prediction is that startup crowdfunding in the JOBS Act here in the states which allows non-accredited investors to invest through sites like Indiegogo, and they just launched this week – they’re crowdfunding. I’ve gone back and forth on this but I think I’m pretty confident that it’s going to fizzle out. It’s not going to have legs like Kickstarter and product crowdfunding has, where you do something and you get a product in the end. I think that people like to think about this idea of putting $100 into a bunch of different startups, and that that’s fun and exciting, and I think there’ll be buzz about it, but I don’t think it’s going to take off in any meaningful way. I think that like the good startups, and the best that are raising money are not maybe going to go to crowdfunding. That they have either the connections or they have the traction to get known angel investors and people on angel.co and institutional investors and that kind of thing, and that startup crowdfunding will probably be filled with a lot of noise. There’ll be some signal there but it’ll be people who basically can’t raise or aren’t able to raise through their network, and so it’s naturally – again, this is just my prediction – naturally going to be the lower end and the startups that are less likely to be successful.
Mike [21:29]: My second prediction is that the bar for building a SaaS is going to continue to become harder to reach. And I feel like there’s almost this tipping point that’s starting to happen, where companies are – instead of taking that approach where they go out and they do the customer development and do a lot of the upfront work that has traditionally been done to identify the market and the different channels you can use, and customer validation and all that, I feel like that is still a viable channel, but I think that people are going to start moving more towards the model of building a service around that offering first and offering more of a comprehensive, complete solution for people that’s all manual driven, driven by people on the backend, and then once they’ve figured out the market, transition into building software to kind of SaaSify the whole thing so that they can go mass market with it.
I’m starting to see this in a couple of different places, but I don’t think that it’s really become mainstream yet, but I think that this year we’re going to start to see a lot more of that because the risks associated with building a services company, I think, are dramatically lower than they are for building a SaaS where you’ve got this long development cycle upfront and then you start putting customers in it. And the funding that is required to do that type of thing is substantially more than if you were to build a services company where you’re charging people 500, 1000, 2000 dollars out of the gate, per customer – and yes, you’ve got a lot more cost behind it, but you’ve also got the ability to put in five customers, and that’s 10k in revenue – whereas if you have a SaaS offering and you put in 10 customers, you’re probably only getting like 5 or 600 dollars a month. And the revenue that is different between them is just – it’s dramatic. You can build a services based company like that very quickly, because you’ve got the revenue coming in. And well it’s very easy to make adjustments to the processes that people go through, but it’s much more difficult and much more time consuming to change a software package when you don’t have enough volume going through it to be able to justify or be able to clearly say, “Look, this particular piece,” or, “This feature needs to be changed,” or, “This feature needs to implemented.” You can change the processes much, much faster than you can change software, and I think that people are going to start to go in that direction and it’s partially due to the fact that that bar that people have as an expectation for how good a piece of software is when they first sign-on to it is so much higher now than it was two, three, five years ago.
Rob [23:50:]: So I actually think this is really already going on. This is the concept behind Brian Casel’s talk at Microconf here last year about productizing services. What are you saying that’s going to be different than what’s already gone on?
Mike [24:03]: What I’m saying is that we’re going to start to see a lot more of this type of approach, where people build – so like take for example, Brian Casel where he was talking about Audience Ops – and I think there’s a difference between just building a services-based company versus building a services-based company and then leveraging that into a SaaS product that you build as a follow-on for like the lower-end market that you’re not addressing because you don’t have the manpower and they’re not willing to pay that level. And I guess if you were going to point directly to Brian with Audience Ops, they’re coming out with the Audience Ops calendar. And that’s out on their website; you can go take a look at it, but they are moving in the direction where they have this Audience Ops process that they’re putting in place and they’ll do it for you as a service, but based on all the things that they’ve learned, they’ve said, “Okay, well, if we’re going to build a product out of this, how do we go about doing it and what needs to go into it?” They’ve already done all the customer development. They’ve learned all the different things that need to go into it, now they’re distilling it down into a software package that they can sell. That’s the model that I see coming to the forefront, where people will build the services company first and then build the product afterwards – as opposed to doing it the other way around or just going strictly on the software-only model.
Rob [25:12]: My third prediction for 2017 is that we’re going to see a correction in the US stock market and I think it’s going to be 20% or perhaps more. I’m not commenting on the broader economy. I don’t necessarily think that there’s going to be any type of recession or anything, but the stock market is averse to uncertainty, and that’s when the stock market does crazy things – goes up really fast or down really fast. And I think that if anything, our president elect, Trump, is someone who inspires uncertainty. I think some of the things that he’ll wind up doing over the coming year will probably have a negative impact on the stock market, and I also think that obviously it’s pretty obvious that interest rates are going to be coming up after historic lows and that always sends the stock market down as people come in and now put money into T-bills and other things that are going to pay higher interest rates. So I’m not one to have bearish predictions in general; I tend to like to have a positive outlook on things, but I for one I’m keeping my eye on the stock market and the economy as a whole, and thinking that we’re due for some type of correction, I think, that most people who follow the market would agree, that we’re probably pretty over-valued right now and that something needs to give there.
Mike [26:18]: My third prediction actually relates to that a little bit. And it’s not so much directly related to the stock market correction so much as it is about the uncertainty of the future. And I think that what we’re going to see, as a result of that, is that some of the more small-scale businesses or small-scale entrepreneurship is going to pick up steam, and I think related to that we’re also going to see a lot more of the small- scale entrepreneurial meet-ups around the world.
I think still Tiny Conf this past year is split out into three different locations. There’s the – there used to be just East and now there’s East and West and then there was the East, West and now there’s Europe. I think that we’re also going to start to see various meet-ups that are completely unrelated to those around the world as well. I’ve seen some start popping up over in Germany and in London, and I feel like this is the year where we’re going to start to see those types of things advertised a little bit more, and become much more common. Even two, three, four years ago, around here – like I only live an hour outside of Boston and I’m just not – I haven’t been seeing those types of things. And now I’m starting to see them. I’m starting to see them pop up even around where I live, which it’s interesting to see that because, yes, I live near Worcester which is I think it’s the second largest city in Massachusetts, but historically, there has not been a lot of activity around this particular space and I think that with the uncertainty that’s coming up, with the president elect, Trump, and all the other things, the interest rates going up, I feel like companies may very well start cutting back a little bit, and when those types of things happen, if companies start letting people go, there’s one of two things that usually happens with people that either leave their jobs – whether it’s voluntarily or not – they tend to either go back to college or they start their own business. And I feel like a lot more people are going to end up going out and starting their own businesses, because to them they’ve been working at those companies for a while, yes it’s been great but there’s starting to be a downturn and they say, “Hey, you know what? I’m a little bit too old to go back to school. I don’t want to. I’ve been down that road before. Let me go out and start my own thing, because I have the awareness or the knowledge of the different markets and confidence to go out and try my own thing.”
Rob [28:23]: As I said in the very first original micropreneur.com, reports that people could download – it was that Lead Magnet or opt-in reward – there has never been a better time in history to start a software company. And I think that’s continued. I wrote that in 2008 or 2009, and I still believe that today. My fourth and final prediction for 2017 is that the first package will be legally delivered with an unmanned drone. This will be somewhere in the world that I don’t think it’ll be in the US, due to the regulation, but I think some country in the world will not care and that a consumer package is what I mean, is someone paying for something. I know there’s already a disaster of the leaf drones where they maybe get medicine to places where the roads have been decimated by a flood or an earthquake or something, and that’s already going on. And in times of emergency, people are allowing that to happen. But I’m imagining someone either paying for something like from an Amazon or walmart.com or food – ordering food and having that delivered.
Mike [29:23]: I was just thinking tacos.
Rob [29:25]: Tacos is really good. And the reason I said legally is that there’s already been – there was a story two weeks ago in New Zealand where somebody took a drone, programmed it, and wrote and put a note on it and like a $10 bill and it flew down to this sausage store or like a butcher, I guess, butcher shop of some kind and it said, “Please, give me one pound of sausage.” And they put the change in an envelope and attached the sausage to the drone and then it flew back to the guy. And I think the cops sighted him. You’re not supposed to fly unmanned drones over people, you’re not supposed to fly them out of line of sight, and so it was there. So that’s why I’m saying the first packets actually legally delivered with an unmanned drone. And I do mean a consumer or a purchased product.
Mike [30:11]: I could definitely see this happening. I’m kind of with you. I’m not sure whether it would be inside the United States or not. My suspicion is not, but I could potentially see where they allow it in a particular test scenario or something along those lines. And so are you thinking that this would be something that is outside of a test scenario or outside of like tightly controlled circumstances?
Rob [30:32]: Yeah. I think that it’s going to be tightly controlled for the first year or two, period. I think that they’re going to basically program a drone to go do something and they’re not going to monitor it super closely, but that it’s going to be unmanned and not piloted. That it’s going to be programmed to do that.
Mike [30:48]: I don’t mean tightly controlled as in them not really paying attention to it, I mean tightly controlled as in, oh, they’ve got a government auditor on site watching the whole thing from beginning to end just to make sure that it works and nothing major goes wrong, and if it does then somebody can ask questions of that person. I mean more of a, they look at the laws that says that they can do it and then they just go do it. Does that make sense?
Rob [31:11]: Yeah, it does. I don’t know that it matters, whether there’s an auditor on site or whether – I don’t know. I think that if something’s delivered legally with an unmanned drone, whether the government is really active in that and it’s part of a pilot project, I think that fits the description of what I’m looking for. I think it’s similar. We can make another prediction about unmanned vehicles, right, about basically self-driving cars. I know they’ve – at least one state, maybe two, have kind of legalized them for test purposes, but I’m curious to see if we’ll start seeing any unmanned trucks or unmanned cars really starting to take shape here in 2017. I don’t have a prediction about it, but it’s definitely something we’re going to see unfolding here pretty soon.
Mike [31:53]: I think eventually, yes, but for the time being, I don’t know about that. I could see it being done on highways for like long haul stuff – I don’t know about inside of a city where you’ve got lots of things going on. I think that people would be a lot more hesitant about. But driving across the country a couple of thousand miles, I could definitely see stuff like that happening.
Rob [32:12]: Long haul trucking and stuff?
Mike [32:13]: Yeah.
Rob [32:14]: They’re saying that’s going to be disrupted pretty early.
Mike [32:15]: Well, if you have a question for us, you can call it in to our voicemail number at 1-888-801-9690 or you can email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from We’re Outta Control by MoOt used under Creative Commons. Subscribe to us on iTunes by searching for Startups and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening and we’ll see you next time.
Episode 270 | Our Predictions for 2016
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Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike make their predictions for 2016, forecasting bootstrapping related topics as well as the greater technology space.
Items mentioned in this episode:
Transcript
Mike [00:00]: In this episode of Startups For the Rest of Us, Rob and I talk about our predictions for 2016. This is Startups For the Rest of Us, Episode 270. Welcome to Startups For the Rest of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at launching software products, whether you’ve built your first product or you’re just thinking about it. I’m Mike.
Rob [00:23]: And I’m Rob.
Mike [00:24]: And we’re here to share our experiences to help you avoid the same mistakes we have made. What you doing this week, Rob?
Rob [00:28]: Things are pretty good. It’s the last week of the year and we have a new Drip HQ. We moved offices just a few blocks to a nicer building. We’re up on the second floor now, with a nice view of a busy street, and it feels cool to be downtown and just have a lot of people around. It’s like a 50,000-square foot building here in downtown Fresno, and it’s good to be around even more tech companies. We were around maybe 27-ish small software companies over at the other building, but it was only about 10,000 square feet, and this one just has a larger feel. And it’s new construction retrofitting a 100-year-old building. It’s got a unique vibe to it.
Mike [01:03]: Cool. Did everybody move from the other building over to this one? Or how does that work?
Rob [01:07]: A lot of us did, yeah. It was up to you if you wanted to move. The rent’s a little higher here. And it’s in a different location, so some folks opted to stay at the other one and then were backfilling with other companies. There’s been a nice tech scene that’s formed here over the past few years. And so what’s nice is there’s a waiting list at both buildings, from what I understand, and so we’re able to keep them occupied and keep the energy level. It’s something that I think’s going to be taken up. We’re one of the first companies, but I think there’s maybe a half dozen, that are moved in here, and there’s going to be 40 eventually. So it’s still pretty sparse, but just seeing people on the hallway and being able to look out over a cool downtown street is fun. It’s a different vibe than I’m used to, but it’s neat.
Mike [01:44]: That’s cool.
Rob [01:44]: How about you? What’s going on?
Mike [01:45]: Well, I’ve realized that one of the things that I talked about last week on our yearly goals episode was I was going to try and be writing more. And I realized that I should probably have classified that as more of a success than I think I initially did because I realized that one of the things that I’ve been doing is keeping a journal and writing in it three times a day. And I don’t know why I completely spaced out on that, but I did. So I would probably say that that was much more of a success than I initially had indicated on the podcast even though I write it for myself. But I write in it, like I said, three times a day: once first thing in the morning, and then once in the late afternoon, and then once just before I go to bed.
Rob [02:21]: Yeah, it’s interesting because your goal was actually “Keep up my writing habit.” And that doesn’t necessarily mean publishing, although that’s what I had read it as. I’d assumed that you meant to actually blog and push stuff live. Was that your intent when you said, “Keep up the writing habit,” was just to write and not necessarily to publish?
Mike [02:38]: It was a little of both. I think I had initially intended to publish more, but at the same time, there’s a certain amount of content that you create that you don’t ever necessarily publish either. And what I wanted to do was to make it more of a habit than anything else, so just getting into the habit of writing on a very regular basis as opposed to writing a couple of blog posts or writing a couple of articles or something like that and then not coming back to it for two of three months and just doing zero work on it in any way, shape, or form of writing.
Rob [03:06]: I see some value in writing and not publishing, but I think there’s so much more value in getting it live. And so I would give you a half pass on this.
Mike [03:14]: Sure.
Rob [03:14]: Just on my personal, metric system, my arbitrary, personal metrics.
Mike [03:18]: Yeah, but I think that when I’d looked at that on last week’s episode, I’d looked at it from the perspective of, “Oh, I haven’t really written anything at all.” And that wasn’t necessarily true. I agree with you I’d probably get half credit on that, definitely not full credit of course because I don’t think it got published. There’s a huge amount of work in there that just never got published. But the idea I had in mind was like, “Oh, I was actually writing quite a bit here.” I do think I need to do a better job of publishing more, so that will make its way to the forefront, I think, this year.
Rob [03:45]: Indeed. Other news, wrapping up the year, was able to finally make a solid hire to help with growth. He started last week. So pretty excited about that, able to pull some stuff away from myself and Anna, marketing tasks that we’ve been handling. And he is going to be able to focus on this stuff. And so one example is I was messing around with retargeting and trying to optimize it and get it to the place where it needed to be. And then eventually we stopped it at a certain point, and he is able to spend 30 hours a week basically focusing on this kind of stuff. And so already he came in with a much more advanced- and it’s a time-consuming approach but it’s definitely one that I think has legs. So I’m really looking forward to getting going in January with our ramping back up marketing. Because as of essentially next week, when this episode comes out, that’s when things start to come back alive and all the dips and trials and the dips and growth and all that stuff I think starts to turn around for all of us. And so yeah, I’m always excited to hit the ground running as we enter early in mid-January.
Mike [04:39]: It seems odd to be hiring right at the very end of December.
Rob [04:43]: Yeah, it was a little bit of a coincidence. I think I posted it in November and then really wanted to find the right candidate. Because what’s interesting is there are a lot of developers, as an example, and designers. And they’re not necessarily easy to find really good ones, but they’re out there, and you know how to test for that. But finding someone who has the right mentality, or the right experience, and the right hunger to actually do pretty intense marketing and really go after the growth opportunities, it’s still such a nascent, unique skill set, right? It’s not something I think that’s easy to test for. And so that’s what I did, was went around and around with a bunch of people. And when he finally came on, I realized that it’s actually a pretty good time for him to come on because it’s so quiet.
And so we haven’t launched anything yet, but it’s been all prep work. I got him onboarded, got him in the system in terms of payroll and all that HR stuff, and then got him into our processes. He’s now the blog editor in essence. And he really hasn’t started doing any outreach or doing any of the stuff yet, but he’s all set up to hit it hard next week when everything actually ramps up. So it turned out to be decent timing even though it didn’t first appear it would be.
Mike [05:49]: Very cool. To circle back on one of the things that we talked about last week, was some of the different monthly experiments and things that I wanted to do this year, and you had ask me to come back with a list of these 12 different things. And so what I did was I sat down and I started looking at those, and what I realized was it wasn’t necessarily a series of month-long experiments so much as it was an extension of what I read in a book called Habit Stacking. You can find it on Amazon. We’ll link it up in the show notes. It’s called Habit Stacking: 97 Small Life Changes That Take Five Minutes or Less. And what I want to do is essentially stack a bunch of these things together. And a lot of them are just little things. They’re not necessarily major life alterations or anything like that.
So one of them, for example, is drinking at least eight glasses of water a day, which I did it for a little while, but I didn’t keep up with that habit. So what I want to do is I want to go back to some of these and revisit them and start working on those and try and stack them up over time. And I’ve stumbled across a website called healthmonth.com, which allows you to put forth goals that are essentially measurable, and you can put things like that in there. So whether it’s getting up early, or exercising, or setting aside time to do X, Y or Z, you can track those things in there. And it will go on a month-by-month basis, and you get to essentially measure your progress against that of other people who have set a similar number of goals for the month.
Rob [07:06]: So are you going to report on that weekly, bi-weekly here on the podcast?
Mike [07:10]: Probably not. Because, like I said, there’s a bunch of them in there. But you had asked me to put together what that list was, so I’ll quickly run through them. We’re not going to spend very much on it, I don’t think. But they included things like exercising at least 30 minutes a day for 6 times a week, drinking 8 glasses of water a day, going to bed and waking up early at certain times, no junk foods or snacks after 7.00 PM, setting aside an hour to write for my blog, working at a co-working facility 3 times a week, which is something I’ve tried in the past but it’s never really stuck or worked out for me. So I think I’m ready to go back and try and revisit that and try it for a month or two.
Another one was to track all my food intake every day, meeting 10 new people in a given month. I’m going to specifically target a non-MicroConf month for that. I’m not going to cheat on that one. And then spending 15 minutes a day doing, I think I’d talked about this before, it’s a mental game called SuperNBack which allows you to train your brain to remember things a little bit better. So I’ve got a game called Reactor on the iPad that is really good for that, and then scheduling my work day in advance, and checking e-mail only twice a day, which I do that on occasion, but I’m not real good at limiting myself and checking e-mail twice a day so –
Rob [08:19]: Is each of those a one-month thing then?
Mike [08:21]: Yes, they are. My goal is to say, “Okay, let me take one or two of these and just do that for at least a month and see if I can maintain that habit over the course of the month.” And the goal, of course, is to, by the end of the month, turn it into a habit as opposed to something that I’ve just tried out. And if I need to extend it as something that I’m going to track, I will. But the idea is to be able to take those things and engrain them into my daily routine so that I don’t necessarily have to think about it or track it anymore, I will just do it. And that way, I can drop off my list of things that I want to stick with. And if it turns out that there’s something that I really just don’t enjoy or don’t want to continue with, then I’ll just drop it off. And then the next month I won’t continue tracking that or doing it.
Rob [09:07]: I think if there’s one adjustment I would make, as you said, you want to look at one or two of these things in a given month, and I would definitely not start with that. If you’re going to go January 1, pick one and focus on it. If you try to do too many things, it overwhelms you and it’s hard to change behavior. So at least for the first five or six months, until you get the hang of this, I would probably try to attack one thing at a time, unless you really feel like you can do multiple things.
Mike [09:31]: Yeah, some of them are easy enough. For example, drinking more water per day, that’s not terribly difficult. Really what it boils down to is just remembering to do it. So you can do that with timers. I found that there is a prescription reminder application from I think it’s Walgreens or something along those lines that you can throw something in there and it just reminds you every couple of hours to do something, and I’ve used that in the past.
Rob [09:54]: So you mentioned drinking eight glasses of water per day, but you missed the one of drinking eight glasses of beer a day.
Mike [10:00]: Well, that is in the water. You can call it beer if you want to, but –
Rob [10:04]: Right. Beer, water with hops.
Mike [10:06]: Yes.
Rob [10:06]: All right. Well, let’s dig in today. We’re doing our predictions episode, which is an episode that we like to have fun with, right? We made some predictions about a year ago, and some of them have nothing to do with entrepreneurship. We had predicts about Google Glass, net neutrality. And so we revisit those and we figure out if we had success or totally whiffed on those. And then we look at some predictions moving forward and what we think is going to happen in 2016. I think we each have one or two that might relate to bootstrapping, and then others that we just see in the greater tech space. So why don’t you kick us off with maybe looking back at some of your predictions from 2015?
Mike [10:37]: So the first one I had was that net neutrality is going to take a bigger stage. And the thinking I had behind that was that Netflix had started paying service providers for higher bandwidth to serve up a lot of their content. And internet speeds, in general, have increased by 50% since the beginning of last year. So what I was thinking was that this was going to be essentially a problem for many businesses where they were going to feel that they needed to pay for their content to be served up. And I don’t think that this has really come true. I haven’t seen a lot of battles or a lot of public discussion about people having to pay extra for their content to be served up. And it could just be that Netflix is so large and serves up so much bandwidth worth of content every single night that they’re more of an outlier than anything else.
What I have seen though is an interesting shift in how a lot of the content providers have started to go direct to people. So I think it’s interesting that companies like HBO and Starz and Showtime have started coming out with their own subscription services that essentially bypass the cable networks. So I don’t think that those directly affects net neutrality. I would probably call this one a miss more than anything else, but it’s interesting to see the shift for the content providers to go direct to the consumers rather than directly through cable providers.
Rob [11:55]: Yeah, I’d agree with you on this one. I don’t think you hit the nail on the head, but there’s definitely something cooking there where we’re going to continue to see shifts and conflicts in this space. My first prediction for 2015 was that Twitter would become profitable and it would piss off its users in the process, but it would be a solid opportunity for paid placement or promotion for bootstrappers and startups. And I think that I was wrong on the first two aspects because as far as I know, Twitter was not profitable during any quarter in the previous year. They obviously haven’t recorded Q4 earnings, but in Q3, they were still losing money. I don’t feel like they pissed off their users in the process of not becoming profitable. What I was trying to imply there was that they would become profitable but they would have to just stuff so many ads down our throats that there’d be a backlash. That didn’t happen. Solid opportunity for paid placement and promotion, I do think that one is correct and that Twitter cards and other Twitter paid placement is still a viable alternative, even heading into 2016, to get some cheap clicks.
Mike [12:53]: My second prediction was that the number of startups in the wearables category is going to skyrocket, both in terms of the hardware and software. And I hesitate to say that this was a complete failure or a complete success in either way. It just doesn’t seem to me like there’s been a huge number of startups in this area. Obviously Apple came into this space with the Apple Watch, and Fitbit and a couple of other companies have started pushing their wearables, but it doesn’t seem like the number has skyrocketed. I was thinking it would have much more of an impact than it probably has.
Rob [13:26]: Yeah. I think there hasn’t been enough of a ecosystem around it since the Apple Watch. It didn’t “take off.” I know a lot of people bought it, but it really has not become a day-to-day use thing. I don’t think I’ve seen anybody in a while wearing an Apple Watch, maybe one or two people at a tech conference or something. But it hasn’t become a day-to-day thing like an iPod or an iPhone did that I think the wearables category is either still getting going or it’s dying at this point, and I’m not sure which. I think eventually wearables will find out which form factors work for us, but 2015 was not the year of that, for sure.
Mike [13:59]: Yeah, I have seen a couple of people use them, but I think it’s going to be probably several years before companies really figure out what people even really want from a wearable device.
Rob [14:08]: Yeah, and that’s what we were saying back in 2013. So my second prediction was that video ads, namely YouTube ads, would be a big opportunity for cheap clicks in 2015. And I think this one was a success. I don’t know how bold of a prediction it actually was. I guess the way they could have not been an opportunity for cheap clicks is if a lot of advertisers had jumped in on it and, to be honest, that’s what’s happened with Facebook ads now, right? Facebook is a lot more competitive. They’ve nailed mobile and they’re making buckets of money off of their ad platform. And typically when the provider’s making buckets of money, like a Facebook or a Google, that means it’s not a good opportunity for cheap clicks anymore.
And so that could have feasibly happened with YouTube in 2015. It did not. It is still a big opportunity for both retargeting and just cheap ad clicks in general, if you can figure it out how to make it work and reach your audience. If you haven’t looked into it and you are looking for another paid marketing avenue, YouTube ads continue to be there.
Mike [15:02]: My third prediction was that Google is going to screw all the bootstrap startups and there’s very little we can do about it. And I don’t think that there was any large event that comes to mind in terms of Google making our lives difficult. Obviously they make changes to the UI in some of their different applications and stuff like that, and the cost of doing paid advertising through Google AdWords is really high. But it doesn’t seem to me like there was any one major event that you could point to and say, “Hey, these guys have really screwed over a bunch of people.” I would chalk this up to an inaccurate prediction.
Rob [15:33]: My third prediction was that VR, Virtual Reality, would actually be a hit with the early adopters set in 2015, and that did not come true. I know that a couple of headsets came out. It does not seem, even with the early adopters, to have taken off in any way, shape, or form.
Mike [15:49]: My next prediction was that Google Glass isn’t going to go anywhere fast. And I would say that this one, it’s hard for me to judge on whether or not this prediction is successful because I have not seen very much uptake and people using Google Glass. But just a couple of days ago, Google came out and said, “Hey, we’ve got another version of Google Glass coming out.” I really thought that they were probably going to be shutting it down. But I just don’t see any demand for it. I don’t think that people are going to use it in a widespread fashion. I can definitely see places where people would use it in very specific scenarios, but I just don’t see it becoming widely adopted.
Rob [16:23]: Yeah, it was an experimental form factor and they were pushing the envelope. It didn’t take off. They obviously sold their early $1500 versions. They’ve redoubled, and they’re iterating on a hardware schedule, right? You can’t iterate as fast with hardware as you can with software. I think it will find some niches and it will be really worthwhile for whatever, airplane mechanics or surgeons or something. But I don’t see that this will have mass market adoption. I would agree that if you look back a year ago, we didn’t know if Google Glass was going to take off or if they were going to do an actual consumer version. So I think your prediction came true. The fact that nothing really happened with it is what happened in 2015.
My next prediction is that we would see our first sub-$100-a-year, consumer-level, five-terabyte cloud storage service. And I think the week after I said this, someone said that Microsoft was already offering unlimited cloud storage. And then within the past month, they actually revoked that. I don’t know if you heard about that, but they basically said, “We’re not going to do unlimited anymore.” And they backed it way off to a couple of terabytes, I guess. So I’m not sure if this has happened. I was trying to Google around a little bit before this episode and I didn’t particularly come across a mass-market, five-terabyte, sub-$100-a-year service. Certainly, if it didn’t happen this year, I think it’s going to happen in 2016. But maybe if someone out there knows of a reputable service that’s not some fly-by-night thing in someone’s garage that is actually offering this level of storage for that price, you could hit us up in the comments or via e-mail at questions@startupsfortherestofus.com.
Mike [17:49]: Yeah, it’s interesting because I’ve looked around at that a little bit as well, and you see places where they’re doing unlimited backups for $5 a month for Backblaze and a couple of other service, but that is more of an archiving service. It’s not necessarily real-time like Dropbox, where even Dropbox is what, $15 a month or something like that. You can get a terabyte, but you can’t get five yet. But I think you’re right though. I think that it’s coming.
My last prediction was that cloud platforms and services are going to be viewed as a commodity by the end of the year, with not much differentiation between them other than their brand identity. And I have gone through and poked around the differences between Amazon, like the AWS services, Azure, and Rackspace. And quite frankly, there is very little to differentiate them from one another. They’re all trying to point to Gartner or third-party companies that are doing experiments and research on the platforms to try and find out which one is the fastest and which one is the best. And of course they’re paying these companies to do that research. So it does make it a little bit suspect when they come back and say, “Oh, sure. Microsoft paid us, but we did find that they were faster.” But I don’t see very much difference between any of these different platforms. I just don’t see it. So I would say that this one’s a win.
Rob [18:59]: My last prediction for last year was that we would start seeing 3-D printers in the houses of our early adopter friends and I would call this a miss. I know very few people who have 3-D printers in their homes. I’ve seen them start to get into schools. Several of the schools in our area have them, seeing them more and more in local labs and makerspaces, also saw them for sale at Barnes and Noble the other day. There was a 3-D printer there, which was surprising. But being in the home thing, it just doesn’t seem to be there, and I’m wondering if it’s ever going to have that moment that computers had where suddenly we all owned one, or if 3-D printers are going to continue to be this external service that we see at schools and maybe in offices and facilities that need to print and we’re all just going to do it on-demand instead of owning and maintaining our own 3-D printers.
Are you ready to dive into our predictions for 2016?
Mike [19:46]: Yeah, absolutely. Let’s go.
Rob [19:47]: Why don’t you kick us off?
Mike [19:48]: Well, the first one is an add-on to last year and it’s about the wearables category. And I don’t see this going too far. I think that there’s still going to be a lot of churning in the wearables category and it’s going to be several years before any of these devices become really big. I think that the Apple Watch is not going to be nearly as big as the iPhone or the iPod ever turned out to be. So I think that Apple is, in the coming years, going to be looking to see what other products they can develop. And maybe they’ll launch a new product by the end of the year. I don’t necessarily think that’s the case, but at the same time, the general prediction here is that over the course of the coming year, we’re probably not going to see a lot out of this category. There’s going to be some new announcements here and there, but there’s not going to be anything major that comes out of it.
Rob [20:30]: Ooh, I like this prediction because it feels pretty bold. Because I think we’re ripe for someone to come in and really nail this. And it is most likely going to be Apple with like a V2 of the watch, because that’s when they start getting traction with stuff, but I think somebody’s out there really doing some good work, and there’s a decent chance that we could see someone disrupt this category this year.
Mike [20:48]: Got you. Well, I’ll take the opposed view on that and say, “Not this year.”
Rob [20:51]: Yeah, totally. Well, that’s why I like the prediction, right? That it’s actually bold, and maybe a little bit counter to what I think some other folks might think. My first prediction is that single-round bootstrapping, also known as fundstrapping, will become a common, viable option, both in our circles and elsewhere. I’m just hearing more and more about bootstrappers who are getting to a little bit of traction, let’s say between 5 and 20K MRR, and then raising around to just up the game to grow pretty quick, and then to get to profitability and essentially issue dividends to the investors and then spit off cash, instead of doing these multiple rounds of financing where you’re just trying to get bigger and bigger and bigger, and eventually most of them implode.
And so whether you call it fundstrapping or single-round bootstrapping, this is a term I’m tossing around right now, I am seeing more of it, and my hope is that it does continue to become a pretty viable option in 2016. The reason I like this model is because it counteracts all of the negatives of raising traditional VC funding, right? The thing of someone taking over your board and taking control is gone because there’s no board seats. The idea that you’re pushed to get just get bigger and bigger and bigger and basically destroy a company that could be viable as a million-dollar or five-million-dollar company is gone because that’s not what you’re doing. It also gets around the idea of “I’m going to build slide decks instead of build businesses, and I’m going to spend six months pitching and trying to raise this $2 million thing. And that’s the big victory lap is when I raise the funding.” That goes away because let’s say you’ve already built the business up to a 5 to 20K MRR business, which means you’ve actually done something interesting and you’ve had the rubber meet the road, and then you’re purely raising the fundraising as a growth mechanism, which is always the point where I have thought that funding is a good idea. It’s when you have some traction and you just need to add $1 in order to pull $5 out the other side.
So all that to say I still think bootstrapping is very, very much alive and it’s going to be far more common. But this idea of a [?] raising a single round, single-round bootstrapping as I’m looking at it now I think is something that I’d like to see more of in 2016.
Mike [22:51]: Are there any other specific metrics you’re pointing at for here or you’re looking at for specific websites where there are terms sheets for this type of thing commonly available?
Rob [23:00]: Yeah, I see your point. It’s like, “How do you measure this?” right? Because I basically said it will be a common/viable option. What we’ve already seen in 2015 is Indie.vc has basically an outstanding offer on their website to do this. I have heard David Hauser was on Rocketrip podcast a few weeks ago talking about this kind of stuff, although he’s investing at a higher MRR. I’m doing it. I’ve talked to a couple of other successful folks, who, if I’d mention their name, you would know who they are, and they’re looking to invest in startups like this. Because the interesting thing is these kinds of startups have a huge chance of success, but it’s more of a modest chance of success. So it’s a lower risk than investing in the next Twitter or Facebook, and there’s a lower rate of return as well, right? You’re not going to 10X your money with this. You’re not going to 100X your investment. But you stand a much, much better chance of hey, maybe you earn 10%, 20%, 30% on your money every year as this thing spits off dividends. And so I do see people moving into it. I don’t know that I have an absolute metric of what I think we could measure this by, but it’s just something that I think’s going to become more prominent in 2016.
Mike [24:04]: Yeah, that leads into my next prediction, which is I think that we’re going to see a lot more bootstrappers in our circles concentrating less on making money for the sake of making money and focusing more on doing what they enjoy doing and living their lives on their own terms. And essentially what that amounts to is a less of an emphasis on consumerism and accumulating stuff. Because I think you get to a certain point in your life or your career, and you look at it and you say, “Having the big house or the big mansion on the hill doesn’t really matter so much as the things that you’re doing and the things that you find enjoyable on a regular basis.” And this is another one of those things where I think it’s difficult to measure, but I feel like we’re going to hear a lot more stories about this kind of thing.
Rob [24:43]: My second prediction is that Twitter will become less relevant than it is today. It will return more back to its roots where a lot of journalists are using it, news continues to spread on Twitter and the technorati will use it. But the adoption curve for Twitter I actually think is going to be on the decline. I think it’s going to be ripe for an acquisition. It’s still has been unable to turn a profit. It’s been unable to monetize it’s user base, and it just can’t do that forever. And I think 2016 will spell some changes for it. I still think Twitter is a reasonable communication tool, but it’s definitely a lot different than it was a year or two ago. And unless Jack is able to get in and really turn things around, I think they’re looking to be on the decline in 2016.
Mike [25:25]: My next prediction is that we’re going to see fewer IPOs and more acquisitions in the tech space, especially at the higher end. And the reason I think that is because from the so-called unicorn companies, there’s a lot more of them now than there used to be, the ones that that are valued at a billion dollars or more. And I don’t see a lot of these companies doing anything dramatic or really innovating in their spaces. I think that they’re going to hunker down. And they may run some experiments here and there, but it also feels to me like their main growth strategy is going to be through acquisitions and acqui-hires rather than building their own stuff and extending their reach. And as a result, I think that we’re going to see fewer of these companies actually go through an IPO, and we’re going to see more of them eating each other alive.
Rob [26:09]: That’s interesting. That ties into my third prediction, which is that the public markets will continue to value companies lower than the private markets. This has already started in 2015 where companies being privately held as they raise rounds of funding, they’ll be valued at a certain level, and then they go public and their stock actually drops when they go public. And this was the exact opposite 15 years ago, right? That was the liquidity event and the big payday when everyone doubled their money from the most recent private round. And it’s been the opposite a number of times in 2015. And this ties in with what you’re saying, that unicorns are starting to stagnate.
A lot of them don’t have unit economics that actually make sense. They have literally been paying a dollar to make 50 cents. And they keep saying, “We’re going to make it up in volume.” And certain business models, like in Amazon, you can do that with, but several of these unicorns have forsaken any type of not even just profit, but any type of unit economics that make sense. And so I think we’re going to see some fallout from that, as you predicted, and I think that’s going to continue to result in these public market valuations being lower than private markets, which is going to keep a lot of people private longer, resulting in fewer IPOs.
Mike [27:13]: Yeah, it almost seems to me like the fact that they’re paying more to acquire a customer than they’re making from the customer, it’s not even just that they’re doing that. It’s just that they’re also not maintaining those people as customers moving forward. So you had said that oh well, companies like Amazon can do that and make it up on volume. And I think what you really mean is that because somebody uses Amazon, they’re so happy with it, they will continue to be a long-term customer for it. So depending on how you’re going to measure the cost of acquisition for that customer, maybe it is a dollar and you only make 50 cents from the customer, but over the course of the long term, you’re going to be a Amazon customer for a long time. I looked on my account, and I think I have been an Amazon customer for almost 15 years now. I’ve spent easily tens of thousands of dollars with them. And they’re able to do that. But I think a lot of these companies are just not getting people to come back because it’s interesting for people to check them out. But after that, they have no real reason to come back and buy a lot of other stuff from them.
My last prediction is that drone technology’s going to take some serious step forward. And I base this on the idea that new FAA Regulations that have come out that essentially force people to register any drones that are over eight ounces, and I think it’s about 250 grams or so. And there are a lot of drones that fall into that particular category, but because of that lower weight limit that says, “Hey, anything underneath this limit, you don’t need to register,” I think that there’s going to be a lot of technology advances in the space that make it feasible to have drones that are very small, or I’ll say featherweight or ultra-light or whatever the term is, that they’re going to be using for that these days. But I think that you’re going to see a lot of advancements in the size of the components and the weight reduction and things like that to essentially circumvent the FAA Regulations for registration.
Rob [28:58]: And my fourth and final prediction for 2016 is that virtual reality will actually be a hit this year with the early adopter sets. So this is just carrying last year’s forward. I think this thing’s going to catch. I think VR and AR really have a future. And I hope it doesn’t turn into an AI thing where 10 years down the line, I’m still making the same prediction. But I feel like with the release of the Oculus, which is supposed to happen, what, here in Q1 of 2016, that we’re going to start seeing something catch on because [?], the Internet of Things, wearables, and VR, right? These are the next big things. One of these has to catch.
Mike [29:30]: I think I heard a podcast episode from, was it the Daily Tech News Show, where they talk a little bit about some of these different things. And especially with the VR headsets and things like that, there are certain things that almost need to be in place in order for it to catch on. Like the early days of the internet, you need to be able to buy stuff and you need to be able to not take the headset off in order to interact with the world around you. And if there’s any sort of pay walls inside of a virtual reality system that you have to leave that frame of reference, it’s going to make it difficult for it to catch on.
Rob [030:02]: So those are our predictions for 2016. It’s our last episode of the year, and we will see you in early January. If you have a question for us, call our voicemail at 888-801-9690, or e-mail us at questions@startupsfortherestofus.com. Our theme music is an excerpt from We’re Outta Control by MoOt. It’s used under Creative Commons. Subscribe to us on iTunes by searching for “startups,” and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening and we’ll see you next time.
