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In this episode of Startups For The Rest Of Us, Rob talks with Matt Wensing about his exit from his company Riskpulse, dealing with multiple investors, his new company Summt, and why forecasting is crucial.
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Rob: Welcome to this week’s episode of Startups for the Rest of Us. I’m your host, Rob Walling. This week I chat with Matt Wensing of Summit and of Riskpulse, a SaaS company he ran for 15 years before selling it earlier this year. We dig into his journey, building it to multiple seven figures, finding a CEO and replacing himself in 2019, and then selling Riskpulse in 2020 for a life changing sum of money, then moving on to Summit which is a tiny seed funded company.
We also dig into forecasting because Riskpulse and Summit are both forecasting engines. Riskpulse did it for logistics, and Summit does it for SaaS companies, and recurring revenue companies. Super interesting conversation, Matt is just sharp as a tack, and has a really deep insight into forecasting, and how it works, and why it works, and when it does, and all that stuff.
I enjoyed our conversation. I hope you do as well. Before I dig into that, I wanted to call your attention to MicroConf On Air. Go to microconfonair.com. It’s a daily live stream that I’ve started doing. It’s 30 minutes every day at noon Central Time, and it’s an idea that we came up with the MicroConf team to try to connect people together. Really, right now a lot of us are essentially in our homes 23 hours a day and a lot of us have kids at home as well.
Even though if you’re used to working from home, it’s still such a different situation now, you can’t go to coffee shops in a lot of places in the world. We just can’t do the normal things that we’re used to. I started doing this live stream. I’ve been really enjoying it, microconfonair.com if you just want to watch it, if you want to be involved with it you go to microconfconnect.com and apply to be part of our Slack group. Once you’re in the Slack group, then you can ask questions.
I’m hosting Q&As. I’m hosting happy hour typically on Thursday or Friday. We’re doing some video rundowns where we actually watch MicroConf talk videos from 2019 with different founders. This week as this episode comes out, we’re going to have Craig Hewitt from Castos, we are going to have Ben Orenstein from Tuple. The idea is that we release their videos, and you can watch them a day or two in advance, and then you can ask them questions about their talk videos or about anything about their story.
I’m pretty excited about it. It’s the first time we’ve ever embarked on something like this, so we pulled it together very, very quickly, over the course of about 24, 48 hours. The first live stream was supposed to be 30 minutes and wound up being about 9 minutes before the stream crashed, but since then, things have been going really well. I’d love to have you join us there at microconfonair.com. Let’s dive into my conversation with Matt Wensing. Matt Wensing, thanks so much for joining me on the show again.
Matt: Hey, thanks Rob for having me on again.
Rob: Absolutely, man. I talked in the intro about you growing Riskpulse, finding a CEO, and selling it. I always ask people who had these life changing exits what was it like when you looked at your bank balance, you hit refresh, and you see all those zeros for the first time in your life?
Matt: I think for me it was a huge relief just because the sheer number of years that I put into it, it was not a, hey let’s bet the summer on this. It wasn’t quite the farm. I didn’t go that far like if it hadn’t happened, things would have been okay but I was very invested in it. It was a huge relief to see that definitely, as you said life changing. Obviously, life improving, but really just that peace of mind that you don’t have for sometimes a very long time in startups.
Rob: Indeed. It was a really long journey for you, right?
Matt: It was.
Rob: Was it 15 years?
Matt: Yeah. I had the idea in 2004. I went from idea in 2004 drawing little notes and posted notes on my lunch hour while on break as a software developer thinking, hey, steps one to four of starting a startup let’s do this. 15 years later.
Rob: Congratulations, man. Did you buy anything? Did you buy a Porsche, did you buy a house?
Matt: Yes, I did. I did a couple things. We’ve been postponing a great ski vacation for a long time. It happened in December and guess what? It was time, so I took the kids. It’s something I’ve wanted to do for years, just take the kids on a ski vacation. We last minute booked all that, didn’t worry as much as we normally would about the last minute rates. Went up to Whistler, Canada and had a great time with family, inviting family to come join us.
That was great. I inherited a car from my parents a few years ago just because they didn’t need it anymore. I was like, okay, extra commuter cars are always helpful, especially when it’s paid off and was able to get rid of that and get a new vehicle which felt great.
Rob: Very nice. There’s a podcast called the Tropical MBA. Dan talks about the Entrepreneur Mobiles. It’s basically that cheap piece of […] that you drive while you’re trying to build your company because you’re not actually making much money. I drove a salvage title 2006 Buick Rendezvous that at one point had a bunch of duct tape, the mirror got hit. I drove that up until a year after I sold Drip.
I like that car. Then, the next car I bought was a nice car. It’s a Volvo. It’s the nicest car I’ve ever owned. In fact, I still bought it used though. I couldn’t bring myself to buy a new car.
Matt: That’s funny. We had the 2005 Toyota Sienna minivan which we put 215,000 miles on as a family. We replaced that with a modest, functional SUV, but then I had inherited a car from my parents, that was in 2004, and it worked. It was fine. It was exactly what you described. It paid off, and worked, and got me from place to place. I traded it, and I did get an off lease vehicle because again, I didn’t want to pay the depreciation, but it’s a lot more fun to drive.
Rob: Once a scrappy founder, always a scrappy founder. It’s hard to change it. I want to ask you about a couple things. One thing that you did that was super interesting with Riskpulse is you build the SaaS app to multiple seven figures, and then you replaced yourself with a CEO. You moved on to start Summit, which we’ll talk about towards the end of the interview.
It’s very unusual. Most people don’t go through that experience. Most people aren’t able to find a CEO. It’s not even on the radar of a lot of people. What was that process like and why did you take that step?
Matt: It was a process, I think it was the deciding that he was going to be CEO was definitely the last step in a mental journey that started when we needed an experienced enterprise sales executive to join the team. I had a recommendation from a board member, which is a great example of how board members can be value add, and is helping you find top talents.
In this case, he knew him professionally, they worked together before. It was somebody that had significant experience building companies from the few million in revenue to the next phase, the 10 employees to 100 employees phase, which is a great fit for where we were. I initially hired him to be Chief Strategy Officer, which is a fancy way of saying not quite sure what your title is going to be, but I know that you have a lot of experience and we want to just get you involved.
The first thing he did was really focused on sales and overhauling the sales process. It’s an enterprise sales process. Even though I had more experience in the business, of course, because I’ve been doing it for years, he brought in that outside experience and revamped our sales process, professionalized it. That was the word, he was really going through professionalizing each function in the company.
After sales, it was marketing, and customer success, and fin ops, and all down the list. Lastly, we just got to the point where it wasn’t that I didn’t want to manage him. It was more what’s in it for me? Why do I want to hold on, because it was clear at that point that he could be CEO, and that I didn’t need to be, so it was an either, or. Without any forcing from the board, this was completely my idea.
I said I never intended to run this company forever, that was not my identity. I think that was the key decoupling that was already true in my mind and heart was like who I am is not the CEO of Riskpulse. It’s the founder of Riskpulse, maybe a little bit more, but the CEO to me was always a title that could be changed at some points, and I always intended to change it at some point.
It just became a really natural transition to say he’s that person now. Announced it to the board. The board was a little surprised at my willingness. It was almost like what you said. This doesn’t usually happen, and it isn’t usually peaceful when it does happen. I think that should be the goal of maybe more of us, a peaceful transition of leadership and power. That’s an important tenet of a well functioning organization.
I was happy to do it. It just immediately freed me up to focus on just the things that I was world class at, and still wanting to focus on, and then ultimately wind myself out of the business.
Rob: When you work on a business like that for 15 years… In your shoes, I would have grown tired of it, probably quite a bit before that. I’m not putting words in my mouth saying you grew tired of it, but we as founders, as entrepreneurs, we like to build new interesting things. It’s sometimes hard to do that once a business is as mature as Riskpulse was.
Matt: There were some elements of that which was, I was functioning well, but the reality is my superpower if I have one is doing new things. Once a company gets to a growth phase where it’s about doing the things that are working more and more and less about creating new things that add risk and add new variables to the equation, I wasn’t getting to use that superpower as much as I even wanted to.
It made a lot of sense for me to either A, find a different role in the organization. For a while I was chief strategist, so I just gave myself a new title and said that gives me a little bit of freedom to figure out what I want to do and see where I can add value to the organization. But like I said, once you get in that growth phase of let’s do more of what’s working but faster. It’s not the same. It’s not the same job.
Rob: I think one of the really savvy benefits or one of the pros of doing it is that when you sold Riskpulse just a month or two ago, you weren’t forced to stay on and work for someone else for a year or two. The turnout wasn’t there because you were so unaffiliated, but you just weren’t actively working on the business day to day.
Matt: That was just a coincidence. I wasn’t attached, like you said. I wasn’t mission critical might be the right way to put it. I was there as an advisor and a board member and clearly had a lot of institutional knowledge, but at that point of vision and the leadership and everything had been transferred over to the team. I was just a just a shareholder at that point, obviously, a huge fan.
Rob: Before we talk about your next act, which is Summit. I just have a question or two about the exit itself, about selling Riskpulse. I’m going to assume what was the emotional high, and I’m just going to put words in your mouth that it closed. It was the relief of everything being done and 15 years of hard work paying off, is that accurate?
Matt: Yes.
Rob: What I want to hear now is there’s so many lows in these types of acquisitions and stuff goes sideways. Most of the time during the long process, a lot of stuff goes sideways in the last week. Every time that people think that buying a house is stressful or selling a house is stressful, this is 10 times or 100 times, nothing is standard.
There is no realtor document that everybody uses. It’s just a big argument fest is what it felt like to me. I’m curious if you could talk us through a point where you had your head in your hand and you were thinking this isn’t going to happen.
Matt: I carried that thought in my head. I would actually have to say until the wires were done. Almost to the point of absurdity, except I was not disappointed. What I mean is I always had that thought in my mind, this is so fragile. It’s always fragile until it’s finished, and I think that’s the way with all deals. Time is the enemy of all deals.
To make a more concrete, Riskpulse at that point like we said, we incorporated in 2007, but we had raised money in 2012 and 2013. Because of that, we had a number of shareholders on the cap table that was not your typical three investors, and that was it. There were a lot of stakeholders at that point. I definitely had my role in the transaction which was hey, Matt, you’re the one that raised money from all these people.
You have relationships with these folks, and we need somebody to be the spokesperson. Obviously, being a board member, that was my role was reaching out to all these folks that had some stake or some ownership in the business and let them know here’s what’s going on, and here’s what’s next, and here’s what we need you to sign.
When you need to get X number of signatures to have something go through, even if everything makes perfect sense to you. Just the simple act of needing to depend on the signatures of 10, 20, 30, 40, 50 other people, it just creates a lot of extrinsic risk of somebody could be sick right now, somebody could be on vacation for three months, somebody could be no longer in the mood to do this, who knows what. I’d like to say I had a close relationship with everybody at some point, but years go by and you’re not really sure where everybody’s at.
There was always this risk there in my mind of who knows what’s going to happen? I think for me, the worst was the week that the deal was supposed to be done was the worst because you’re landing the plane. Most accidents happen when the plane is either taking off or landing. Needing to see the green lights, if you will, light up one, two, three, like sequentially just see everything go through was very nerve wracking.
I kept telling my wife something’s going to happen, something’s going to happen and then I will get into detail like there were weeks where things did happen. Thank goodness, had a great team. We had reasonable acquirers, great lawyers, and everything worked out. It was not just smooth like you said, hey, check here and sign here and everything’s done. It was an orchestration. You’re just hoping everybody does what they’re supposed to do.
Rob: There’s that many parties involved. It does get complicated. Did you regret raising money or raising money from so many investors, because it brought that complexity on the exit?
Matt: Yes. I didn’t regret raising money for sure. That many though, yes. That’s not something I’m going to do again. A lot of it was just when you need money, and you’re first starting out your first company and somebody offers you small angel investments, you take it. When you’re looking for wins and need to pay the bills and all that, you take it. It’s not like something I could go back and just decide to do differently.
There are ways now to improve that. One of them obviously, is when you have a lot more credibility. You have the luxury of maybe doing things differently. The other part is now we have things like angel syndicates, and ways of bundling investments. There’s a lot more seed investors too who will just say you don’t need to raise $5000 from 10 people, I’ll just write you a check for 50 grand or 100 grand. That wasn’t as common in 2010, 2011 and 2012, as it is now.
I don’t think I could go back and actually do it differently, but the second time around, I definitely will be doing some things differently just to decrease that risk. That’s just inherent in having a lot of stakeholders. Not that any of them are controlling, but it’s simply just a matter of the more servers you have running, the more likely that one of them is going to go down. It’s that kind of thing.
Rob: Yeah. Like you’re saying, your first one you have to do what it takes to keep the servers on and to pay the bills. It’s an interesting thing. I’ve made some decisions like that that wound up coming back to bite me years later, but I never regretted them because they were the right decision at the time. I wished it was different but there’s oftentimes nothing you can do.
Matt: Exactly.
Rob: Let’s talk about your transition from Riskpulse to seed the idea of Summit. Summit’s at usesummit.com if folks want to check it out. Your headline is great teams forecast early and often, upgrade your gut feeling to forward looking metrics. Riskpulse was weather prediction and logistics prediction. I think you mentioned last time you were on the show that a friend of yours jokes with you that you’re a one trick pony that you take prediction and you just moved it from niche to niche.
There’s a lot of analytics providers. We can go to Baremetrics, ProfitWell, and ChartMogul, there’s a bunch of stuff. Even Google Analytics, although doesn’t have anything to do with revenue. There’s Stripe dashboards, there’s all this stuff. What made you come up with the idea for Summit, and why build another analytics provider?
Rob: Great question. I was running a SaaS business with Riskpulse and I had some metrics. I would say that some of the tools you just mentioned either weren’t there or we didn’t adopt them early. Our metrics were harder to put together than just looking at ProfitWell, or Stripe, or whatever dashboard. The problem I set out to solve wasn’t having analytics, per se. It was that I’m getting asked hard questions by investors and my team about how the business works, and how the business would behave if we changed something about it.
That’s something where, yes, you can look at a chart and you can definitely look at a history and it tells a story. If you’re good at interpreting the data, you can tell the story of why your MRR looks like it does or ARPU or whatever. But this was more of a what if question of not what happened, but what would happen if we did this or we did that, or what’s going to happen if we do nothing?
It was always about the future because I spent a lot of time fundraising with Riskpulse. Those questions are just really hard to answer. When I want to answer them, the metrics on hand were a great starting point, but they didn’t give the answer that people were looking for. We all know the tale of the hockey stick, a founder left alone in a room with a Google spreadsheet will exit with a hockey stick of some kind, if nobody’s checking and balancing that.
That’s not what I wanted. I wanted something that I could use. Ultimately, as a business, we did end up building a fin ops team. That was really a game changer in terms of now we’re managing the business through the lens of how we’re performing, and how we think we’re going to perform over the next 12 months. I said this is super valuable, but it’s something that most people can’t hire two or three headcount to focus on, or a CFO.
The challenge for me was how do I productize that value, which is really about forward looking for the sake of making decisions today that have an impact tomorrow. That was really the genesis of it.
Rob: It’s interesting that you’re catering both to investors and also to startups. How are you thinking about that?
Matt: Startups need forecasting and we can talk about the use cases for that and why, but one of them that comes up again and again, is when potential investors ask for these things. If there’s ire and some groaning about the realism, or the likelihood of these forecasts being true when startups make them, investors that receive these things, it’s easy to make fun of investors and a lot of people like to do that.
The reality is like good investors don’t want unrealistic or silly projections either. I know that everybody thinks we want that slide that has everything up into the right, but a good investor, especially one that’s thinking about sustainable, profitable businesses, which is an investor that’s more common these days, really wants something that is defensible and rigorous. The big thing is consistency.
I think for you, Rob, if you had to look at 10 different ways of presenting metrics and 10 different ways of presenting a forecast every month, it’s just way more overhead. For me, it’s a convenience service for the investor. I think in the future, it will become something more of an analytical engine for them, but for now they love the consistency of it.
I’ve had more investors say that they’d be willing to essentially tell startups, hey, when you send me your metrics, can you send me the Summit URL instead of a spreadsheet that you create today, because it’ll have everything I want to need. Frankly, it’ll be a little bit more professional than probably what you put together in a crunch.
Rob: That was a field we actually had in the tiny seed batch two applications. “Do you Summit?” Put your URL, your shared URL in here. When folks sign up for Summit, they just connect their Baremetrics, ProfitWell, ChartMogul, or Stripe accounts. Then it just pulls in all the stuff that the backwards looking data, and then Summit does forecasting based on that. Is that accurate?
Matt: Yeah, exactly. It generates a trend cast, as I like to call it, of all that data, which basically says you’re moving in this direction. This is how things are likely to keep going just based on almost thinking of it like inertia. That’s just helpful to see what direction the business is going. That’s the initial reality check of it is that as entrepreneurs, we can be incredibly biased towards what’s happened last month.
In other words if last month was great, we feel great and we think everything’s going to just keep skyrocketing. If last month was down we also sometimes think that the sky is falling. That piece there is really meant to do some just initial resetting or setting of expectations for everyone.
Rob: There are a lot of folks you mentioned if you’re going to raise investment, oftentimes investors will ask for forecasts. A lot of folks in the audience are not going to raise investment. They’re going to bootstrap. What’s the benefit there? Why should they think about looking ahead 3, 6, 12 months and trying to figure out where their business might be?
Matt: There definitely is also application there. I actually think of it in two ways. One is if you’re in the default dead stage, which if everything continues, like it is, essentially, this business is going to run out of money, then the clear one there is there’s nicer phrases, let’s just call it the drop dead date. What’s the date where this thing runs out of money? You can do that with a simple calculation that just says take the bank account balance today and withdraw a certain amount each month, if your business is that stable.
It can help with that. Cash forecasting and runway forecasting would be the primary use case for a default dead “startup” even if you don’t plan to raise money. You’re just trying to get to profitability. The next one is like, okay, when are we going to get to break even? That’s what so many bootstrappers are obviously striving for is, when am I finally going to get to that X k a month that makes this my full-time job or makes this my long term occupation.
Getting a sense of that, and really, with the forecast and the way it’s done in Summit, the benefit is you can run that calculation, and you can get a different number each time, depending on the assumptions that you make. If you assume that your close rate is 25%, maybe your breakeven date is seven months from now. But you probably don’t have that level of confidence in your close rate, like maybe what you want to say instead is I don’t know, my close rate is probably going to be somewhere between 15% of 30%. You look at the independent SaaS report and you just saw Rob, and you’re like at some point, it’s like, what’s the benchmark for these numbers?
Let me just assume a range. Well, what happens if your breakeven is maybe 7, but maybe it’s 12, just helping to get an understanding that the future is uncertain. We don’t forecast to be precise and certain about things. In some cases we forecast to accept, or maybe come to grips with the variability in some of these things.
It’s like a five month difference in breakeven. It could be huge. When do I actually want to quit my consulting gig, or when do I actually quit my job, or how much emergency savings do I really need? Those are all big decisions that you make, even if you’re not fundraising.
Rob: I was thinking I could have used this with Drip, we would grow by $5000 MRR and then I would be like, okay, now I have enough money to hire a customer success person or support person. Then we grow by $10,000 and it’s all right, now I have the money to hire a developer. It was always once that had happened, then I would start the process and then it would take two to three months to hire that person.
If I had some inkling, and like you said, it’s not an exact prediction. It’s hey, in the next 30 to 60 days or whatever, you’re going to be at this level where there’s that much more profit.
Matt: That’s the use case, definitely on the default to live, and maybe still living off of your revenues and not fundraising as we know that hiring takes time, knowing that you’re very likely to have the revenue that you need to support that person ahead of time. Absolutely, getting ahead of hiring is strategic.
Rob: As I think about prediction and forecasting, I have almost no exposure to it other than looking at the weather on my iPhone all the time because I live in Minneapolis. How accurate can you get with something like this, because I have to imagine there’s some skepticism. If you look at any random metrics provider, and the revenue is going up into the right gradually and then there’s today, and then it just keeps going up. It’s just a linear extrapolation on what’s going on. How is Summit different than that and how accurate can it actually be, crazy randomness of startups?
Matt: I think you’re right. If you just take a trendline, which is what we’ve been talking about so far. I think that numbers don’t really understand the business in the way that we do as entrepreneurs. We can look at that line and see it going up into the right. We have a lot of intuition that that’s not right. That’s wrong, for some reason, and is a straight line better than nothing like maybe.
A trend is probably better than nothing, but where it really gets interesting is when we use more than one method of coming to that conclusion. Folks can be scientific. If you think about a scientific theory for example, where you can start to have more confidence in something is when you make observations, and they both confirm or corroborate a theory that you have.
It’s like we measured this thing, we took the temperature, and we also looked at the rock formations, or whatever it is, so you take geology and meteorology, take a bunch of different scientific disciplines. You look at all the evidence and you say, wow, the evidence from all these different fields says that this probably happened. It’s like we’re used to other domains as scientists, but we don’t think of it in terms of startup. What the heck does it have to start up?
Think about it this way. Statistics is one thing like your revenue is growing at 5% month over month. Therefore, this is what your revenue is going to be in December. You need another method to check and balance that and say that’s what this method says. If you just use arithmetic and linear growth or compounding growth, you’re here.
What Summit also does is it brings in simulation, and simulation is different because it’s not machine learning in the sense of like looking at a bunch of data, and finding patterns and coming to a conclusion. It’s simulating the life of your business. I always like to give this example like revenue might go up into the right if you just do a statistical outlook like 5% every month. You’re going to be here by December. It’s like, yeah, that’s great.
What the statistics don’t know is that you don’t have the cash to keep hiring salespeople, or you don’t have the cash on hand to keep spending on paid acquisition, which is how you’ve been growing revenue so far. The simulation is very useful, because it will look at your cash balance, and you can almost think of it like reconciling things. Revenue can’t keep going up if we run out of money. At some point, your engineering team is going to be so busy with the current feature set that they’re not going to be able to roll out features as fast. Stuff just starts to change over time in a way that a purely mathematical view doesn’t understand.
What the simulation does is it actually does run through those different kinds of dependencies of saying your sales are dependent on hiring salespeople, your cash balance does not support you hiring another salesperson in three months. Therefore, you’re not going to keep adding revenue. However, if you want to keep adding revenue, you should go hire a salesperson. It’ll give you a recommendation to go hire a salesperson. That to me is where it gets a lot more realistic. The evidence of that is if you run through a bunch of forecasts in Summit, it’s actually hard to get the thing to draw a hockey stick. It’s like you need a lot of things working really well to do that. Whereas, if I left you alone with a spreadsheet, you could come up with a hockey stick in five minutes because it’s just wish casting.
Back to the point, I think your confidence can go up, the more different ways you have of forecasting and seeing those line up. I’ve seen some startups where it’s like the statistical trends are very consistent and high confidence levels. If you put all these assumptions in the simulation, you get a very similar result. That’s the business that has figured out its business model. I think you can put a lot more confidence in that than somebody who’s like I’m not certain about my pricing, I’m not certain about my close rates, I’m not certain about et cetera, et cetera. That’s where all this risk comes from in our forecasting is we ourselves don’t know what tomorrow is going to hold.
Rob: That makes sense. The simulation, is it a Monte Carlo simulation?
Matt: Yeah, it is a Monte Carlo simulation. It’s a Monte Carlo method. If we want to geek out for a second, and I’ll keep a high level, it’s a simulation in a way of stepping through time and making decisions, but the decisions that it makes do use Monte Carlo methods, which is really a dice roll. I like to use examples of D&D players will love this, but anybody that plays games. Basically, the simulator rolls dice many, many times every month to decide what happens next. The shape of those dice, if you will, depends on your business. I’ll just leave it at that.
It’s a bunch of randomness that gets inserted too, and the randomness is helpful because then the output is a range of possibilities, not just one possibility. You can see some cool stuff like, wow, there is a big spread in terms of where we’re going to be in 12 months. How do we tighten that up so that we can be confident that when we hire this person, we’re able to keep them hired into the future?
Rob: The fun part is all the TinySeed portfolio companies are using Summit. I’ve talked to a few of them who say that they go in and it’s like a little toy. You’re like, I’m going to change this assumption and see what happens. I’m going to change that assumption and see what happens. If you do like to nerd out on your own SaaS metrics, which I will raise my hand and admit. I’ll be the first one to admit that I would check revenue constantly, and MRR growth and all that stuff when I was back in the day. It’s something you can really geek out with.
I really like that you pointed out that trying to get a hockey stick is really hard, like a ton of things have to come together because that’s reality. That’s why so few businesses hockey stick, and when they do, it’s because this creates hard work, and market timing, and then a little bit of luck, and you did some things right. It’s all this stuff has to come together for that to work.
You talk to any founder who’s done it, I believe if they’re being honest with themselves, it’s a lot of factors. It’s never like, oh, I was really smart. It’s always this, this, that, and this, and I happen to time right as this technology took off, and SaaS was becoming a thing. Or, the iPhone had just come out, et cetera, etcetera, et cetera. It just goes on. I think that’s cool.
Matt: I think that the challenge I might have for folks is the thing you’re working on right now, like the feature you’re about to launch, the marketing campaign you’re doing, have you had the time, or giving yourself the time to really predict I’ll say or decide what the impact is going to be to your business? You’re working on that feature because you think it’s going to improve retention. Let’s run with that for a second.
How much? Maybe you don’t know, maybe it’s just a little bit, maybe it’s a lot. Have you run the numbers against your business and said if this works, and then improves retention by X percent, where are we 12 months from now? Compared to maybe not doing it at all, or doing something different.
My dream scenario is when people get together to decide what they’re going to work on next. Imagine running a unit test, if you will, of your financials, your business, and saying wait a minute, if we work on this for a month and it only improves retention by 6%, that’s not going to help us hit our annual revenue target. Imagine deciding that that’s not the right thing to work on right now because it just doesn’t move the needle. Even if it goes exactly as you want to, and customers receive it the way that you expect them to. If it doesn’t move the needle, should you be working on it next? I don’t think most of us have the luxury of doing that analysis, but I’d love to make that really easy for folks.
Rob: As we wrap up, I want to call out one of the reports you have is a survivor curve, and it’s like the opposite of a cohort churn grid. If you’re listening to this and you run a SaaS app and you’ve never seen a survivor curve for your app, I would really encourage you to check this out. You can go to usesummit.com, and you have a free plan so people can log in, and you just connect your Stripe analytics. The survivor curve shows, I believe it’s by cohort, how many people stick around after X months. It’s this long line, it’s like after one month you have this many left, after six months this many left. If that curve doesn’t flatten out somewhere, you have a problem. Would you agree with that sentiment? I would hand build these for Drip until we can get the code to do it. It was quite complicated, actually. I would sit there and stare at that thing, and you want it to flatten because going down in essence, because it’s how many users you have remaining from that cohort.
You want it to be as shallow as possible, meaning it goes down just a little bit and it flattens, but most startups it’s not that. It just winds up being this gradual, gradual, gradual, and if it ends up going asymptotic to zero, and it really never flattens out, then you can grow a decent sized business but trying to get into many millions of dollars, you’re going to have a really, really wide funnel at the top to get there.
Matt: Yeah, that’s your foundation. The way I think of it is if that curve stretches out to zero or 2% sometimes, maybe they stick around. You’re building on quicksand and you’re just trying to build that sandcastle if you will, as the base is eroding, is almost impossible. Seeing something where 30%, 40% of your customers stick around almost “indefinitely,” that is the foundation you need. I agree, it actually is all of your customers from all your cohorts, so you can look at these in Baremetrics or Stripe. I know and see like out of last month’s sign ups etcetera, how many stick around. This is actually looking at, in aggregate, across all subscriptions for all time, how long does the average signup stick around? It’s foundational.
Rob: Sounds good, sir. Thanks again for coming on the show. If folks want to hear you talk for about 45 minutes every week about what you’re up to from the maker and manager side with our good friend, Peter, they can head over to the Out of Beta Podcast. You’re @mattwensing on Twitter, where you’re pretty active, and you have some good thoughts you’re sharing on there. I encourage folks to check out all the stuff Matt is up to.
Matt: Thanks so much.
Rob: If you have a question for me, for Matt Wensing, really for any guests that we’ve had on, you can email questions@startupsfortherestofus.com, attach an audio file, it’ll go to the top of the stack. If you send it in text, obviously, I will read that as well. You can also leave us a voicemail at 888-801-9690. Subscribe to us by searching for Startups in really any of the pod catchers.
It’s crazy on Spotify right now. I’m seeing new users being added constantly. I don’t listen to podcasts on Spotify but they’re obviously getting some traction, pretty interesting. If you’re a podcaster and you’re not already submitted to Spotify, it’s something I’d recommend. Of course, visit startupsfortherestofus.com for full show notes, a full transcript of each episode, and to lend us your thoughts. If you want to tweet me, I’m @robwalling. This podcast is @startupspod. Thank you so much for listening, and I’ll see you next week.
We also dig into forecasting because Riskpulse and Summit are both forecasting engines. Riskpulse did it for logistics, and Summit does it for SaaS companies, and recurring revenue companies. Super interesting conversation, Matt is just sharp as a tack, and has a really deep insight into forecasting, and how it works, and why it works, and when it does, and all that stuff.
I enjoyed our conversation. I hope you do as well. Before I dig into that, I wanted to call your attention to MicroConf On Air. Go to microconfonair.com. It’s a daily live stream that I’ve started doing. It’s 30 minutes every day at noon Central Time, and it’s an idea that we came up with the MicroConf team to try to connect people together. Really, right now a lot of us are essentially in our homes 23 hours a day and a lot of us have kids at home as well.
Even though if you’re used to working from home, it’s still such a different situation now, you can’t go to coffee shops in a lot of places in the world. We just can’t do the normal things that we’re used to. I started doing this live stream. I’ve been really enjoying it, microconfonair.com if you just want to watch it, if you want to be involved with it you go to microconfconnect.com and apply to be part of our Slack group. Once you’re in the Slack group, then you can ask questions.
I’m hosting Q&As. I’m hosting happy hour typically on Thursday or Friday. We’re doing some video rundowns where we actually watch MicroConf talk videos from 2019 with different founders. This week as this episode comes out, we’re going to have Craig Hewitt from Castos, we are going to have Ben Orenstein from Tuple. The idea is that we release their videos, and you can watch them a day or two in advance, and then you can ask them questions about their talk videos or about anything about their story.
I’m pretty excited about it. It’s the first time we’ve ever embarked on something like this, so we pulled it together very, very quickly, over the course of about 24, 48 hours. The first live stream was supposed to be 30 minutes and wound up being about 9 minutes before the stream crashed, but since then, things have been going really well. I’d love to have you join us there at microconfonair.com. Let’s dive into my conversation with Matt Wensing. Matt Wensing, thanks so much for joining me on the show again.
Matt: Hey, thanks Rob for having me on again.
Rob: Absolutely, man. I talked in the intro about you growing Riskpulse, finding a CEO, and selling it. I always ask people who had these life changing exits what was it like when you looked at your bank balance, you hit refresh, and you see all those zeros for the first time in your life?
Matt: I think for me it was a huge relief just because the sheer number of years that I put into it, it was not a, hey let’s bet the summer on this. It wasn’t quite the farm. I didn’t go that far like if it hadn’t happened, things would have been okay but I was very invested in it. It was a huge relief to see that definitely, as you said life changing. Obviously, life improving, but really just that peace of mind that you don’t have for sometimes a very long time in startups.
Rob: Indeed. It was a really long journey for you, right?
Matt: It was.
Rob: Was it 15 years?
Matt: Yeah. I had the idea in 2004. I went from idea in 2004 drawing little notes and posted notes on my lunch hour while on break as a software developer thinking, hey, steps one to four of starting a startup let’s do this. 15 years later.
Rob: Congratulations, man. Did you buy anything? Did you buy a Porsche, did you buy a house?
Matt: Yes, I did. I did a couple things. We’ve been postponing a great ski vacation for a long time. It happened in December and guess what? It was time, so I took the kids. It’s something I’ve wanted to do for years, just take the kids on a ski vacation. We last minute booked all that, didn’t worry as much as we normally would about the last minute rates. Went up to Whistler, Canada and had a great time with family, inviting family to come join us.
That was great. I inherited a car from my parents a few years ago just because they didn’t need it anymore. I was like, okay, extra commuter cars are always helpful, especially when it’s paid off and was able to get rid of that and get a new vehicle which felt great.
Rob: Very nice. There’s a podcast called the Tropical MBA. Dan talks about the Entrepreneur Mobiles. It’s basically that cheap piece of […] that you drive while you’re trying to build your company because you’re not actually making much money. I drove a salvage title 2006 Buick Rendezvous that at one point had a bunch of duct tape, the mirror got hit. I drove that up until a year after I sold Drip.
I like that car. Then, the next car I bought was a nice car. It’s a Volvo. It’s the nicest car I’ve ever owned. In fact, I still bought it used though. I couldn’t bring myself to buy a new car.
Matt: That’s funny. We had the 2005 Toyota Sienna minivan which we put 215,000 miles on as a family. We replaced that with a modest, functional SUV, but then I had inherited a car from my parents, that was in 2004, and it worked. It was fine. It was exactly what you described. It paid off, and worked, and got me from place to place. I traded it, and I did get an off lease vehicle because again, I didn’t want to pay the depreciation, but it’s a lot more fun to drive.
Rob: Once a scrappy founder, always a scrappy founder. It’s hard to change it. I want to ask you about a couple things. One thing that you did that was super interesting with Riskpulse is you build the SaaS app to multiple seven figures, and then you replaced yourself with a CEO. You moved on to start Summit, which we’ll talk about towards the end of the interview.
It’s very unusual. Most people don’t go through that experience. Most people aren’t able to find a CEO. It’s not even on the radar of a lot of people. What was that process like and why did you take that step?
Matt: It was a process, I think it was the deciding that he was going to be CEO was definitely the last step in a mental journey that started when we needed an experienced enterprise sales executive to join the team. I had a recommendation from a board member, which is a great example of how board members can be value add, and is helping you find top talents.
In this case, he knew him professionally, they worked together before. It was somebody that had significant experience building companies from the few million in revenue to the next phase, the 10 employees to 100 employees phase, which is a great fit for where we were. I initially hired him to be Chief Strategy Officer, which is a fancy way of saying not quite sure what your title is going to be, but I know that you have a lot of experience and we want to just get you involved.
The first thing he did was really focused on sales and overhauling the sales process. It’s an enterprise sales process. Even though I had more experience in the business, of course, because I’ve been doing it for years, he brought in that outside experience and revamped our sales process, professionalized it. That was the word, he was really going through professionalizing each function in the company.
After sales, it was marketing, and customer success, and fin ops, and all down the list. Lastly, we just got to the point where it wasn’t that I didn’t want to manage him. It was more what’s in it for me? Why do I want to hold on, because it was clear at that point that he could be CEO, and that I didn’t need to be, so it was an either, or. Without any forcing from the board, this was completely my idea.
I said I never intended to run this company forever, that was not my identity. I think that was the key decoupling that was already true in my mind and heart was like who I am is not the CEO of Riskpulse. It’s the founder of Riskpulse, maybe a little bit more, but the CEO to me was always a title that could be changed at some points, and I always intended to change it at some point.
It just became a really natural transition to say he’s that person now. Announced it to the board. The board was a little surprised at my willingness. It was almost like what you said. This doesn’t usually happen, and it isn’t usually peaceful when it does happen. I think that should be the goal of maybe more of us, a peaceful transition of leadership and power. That’s an important tenet of a well functioning organization.
I was happy to do it. It just immediately freed me up to focus on just the things that I was world class at, and still wanting to focus on, and then ultimately wind myself out of the business.
Rob: When you work on a business like that for 15 years… In your shoes, I would have grown tired of it, probably quite a bit before that. I’m not putting words in my mouth saying you grew tired of it, but we as founders, as entrepreneurs, we like to build new interesting things. It’s sometimes hard to do that once a business is as mature as Riskpulse was.
Matt: There were some elements of that which was, I was functioning well, but the reality is my superpower if I have one is doing new things. Once a company gets to a growth phase where it’s about doing the things that are working more and more and less about creating new things that add risk and add new variables to the equation, I wasn’t getting to use that superpower as much as I even wanted to.
It made a lot of sense for me to either A, find a different role in the organization. For a while I was chief strategist, so I just gave myself a new title and said that gives me a little bit of freedom to figure out what I want to do and see where I can add value to the organization. But like I said, once you get in that growth phase of let’s do more of what’s working but faster. It’s not the same. It’s not the same job.
Rob: I think one of the really savvy benefits or one of the pros of doing it is that when you sold Riskpulse just a month or two ago, you weren’t forced to stay on and work for someone else for a year or two. The turnout wasn’t there because you were so unaffiliated, but you just weren’t actively working on the business day to day.
Matt: That was just a coincidence. I wasn’t attached, like you said. I wasn’t mission critical might be the right way to put it. I was there as an advisor and a board member and clearly had a lot of institutional knowledge, but at that point of vision and the leadership and everything had been transferred over to the team. I was just a just a shareholder at that point, obviously, a huge fan.
Rob: Before we talk about your next act, which is Summit. I just have a question or two about the exit itself, about selling Riskpulse. I’m going to assume what was the emotional high, and I’m just going to put words in your mouth that it closed. It was the relief of everything being done and 15 years of hard work paying off, is that accurate?
Matt: Yes.
Rob: What I want to hear now is there’s so many lows in these types of acquisitions and stuff goes sideways. Most of the time during the long process, a lot of stuff goes sideways in the last week. Every time that people think that buying a house is stressful or selling a house is stressful, this is 10 times or 100 times, nothing is standard.
There is no realtor document that everybody uses. It’s just a big argument fest is what it felt like to me. I’m curious if you could talk us through a point where you had your head in your hand and you were thinking this isn’t going to happen.
Matt: I carried that thought in my head. I would actually have to say until the wires were done. Almost to the point of absurdity, except I was not disappointed. What I mean is I always had that thought in my mind, this is so fragile. It’s always fragile until it’s finished, and I think that’s the way with all deals. Time is the enemy of all deals.
To make a more concrete, Riskpulse at that point like we said, we incorporated in 2007, but we had raised money in 2012 and 2013. Because of that, we had a number of shareholders on the cap table that was not your typical three investors, and that was it. There were a lot of stakeholders at that point. I definitely had my role in the transaction which was hey, Matt, you’re the one that raised money from all these people.
You have relationships with these folks, and we need somebody to be the spokesperson. Obviously, being a board member, that was my role was reaching out to all these folks that had some stake or some ownership in the business and let them know here’s what’s going on, and here’s what’s next, and here’s what we need you to sign.
When you need to get X number of signatures to have something go through, even if everything makes perfect sense to you. Just the simple act of needing to depend on the signatures of 10, 20, 30, 40, 50 other people, it just creates a lot of extrinsic risk of somebody could be sick right now, somebody could be on vacation for three months, somebody could be no longer in the mood to do this, who knows what. I’d like to say I had a close relationship with everybody at some point, but years go by and you’re not really sure where everybody’s at.
There was always this risk there in my mind of who knows what’s going to happen? I think for me, the worst was the week that the deal was supposed to be done was the worst because you’re landing the plane. Most accidents happen when the plane is either taking off or landing. Needing to see the green lights, if you will, light up one, two, three, like sequentially just see everything go through was very nerve wracking.
I kept telling my wife something’s going to happen, something’s going to happen and then I will get into detail like there were weeks where things did happen. Thank goodness, had a great team. We had reasonable acquirers, great lawyers, and everything worked out. It was not just smooth like you said, hey, check here and sign here and everything’s done. It was an orchestration. You’re just hoping everybody does what they’re supposed to do.
Rob: There’s that many parties involved. It does get complicated. Did you regret raising money or raising money from so many investors, because it brought that complexity on the exit?
Matt: Yes. I didn’t regret raising money for sure. That many though, yes. That’s not something I’m going to do again. A lot of it was just when you need money, and you’re first starting out your first company and somebody offers you small angel investments, you take it. When you’re looking for wins and need to pay the bills and all that, you take it. It’s not like something I could go back and just decide to do differently.
There are ways now to improve that. One of them obviously, is when you have a lot more credibility. You have the luxury of maybe doing things differently. The other part is now we have things like angel syndicates, and ways of bundling investments. There’s a lot more seed investors too who will just say you don’t need to raise $5000 from 10 people, I’ll just write you a check for 50 grand or 100 grand. That wasn’t as common in 2010, 2011 and 2012, as it is now.
I don’t think I could go back and actually do it differently, but the second time around, I definitely will be doing some things differently just to decrease that risk. That’s just inherent in having a lot of stakeholders. Not that any of them are controlling, but it’s simply just a matter of the more servers you have running, the more likely that one of them is going to go down. It’s that kind of thing.
Rob: Yeah. Like you’re saying, your first one you have to do what it takes to keep the servers on and to pay the bills. It’s an interesting thing. I’ve made some decisions like that that wound up coming back to bite me years later, but I never regretted them because they were the right decision at the time. I wished it was different but there’s oftentimes nothing you can do.
Matt: Exactly.
Rob: Let’s talk about your transition from Riskpulse to seed the idea of Summit. Summit’s at usesummit.com if folks want to check it out. Your headline is great teams forecast early and often, upgrade your gut feeling to forward looking metrics. Riskpulse was weather prediction and logistics prediction. I think you mentioned last time you were on the show that a friend of yours jokes with you that you’re a one trick pony that you take prediction and you just moved it from niche to niche.
There’s a lot of analytics providers. We can go to Baremetrics, ProfitWell, and ChartMogul, there’s a bunch of stuff. Even Google Analytics, although doesn’t have anything to do with revenue. There’s Stripe dashboards, there’s all this stuff. What made you come up with the idea for Summit, and why build another analytics provider?
Rob: Great question. I was running a SaaS business with Riskpulse and I had some metrics. I would say that some of the tools you just mentioned either weren’t there or we didn’t adopt them early. Our metrics were harder to put together than just looking at ProfitWell, or Stripe, or whatever dashboard. The problem I set out to solve wasn’t having analytics, per se. It was that I’m getting asked hard questions by investors and my team about how the business works, and how the business would behave if we changed something about it.
That’s something where, yes, you can look at a chart and you can definitely look at a history and it tells a story. If you’re good at interpreting the data, you can tell the story of why your MRR looks like it does or ARPU or whatever. But this was more of a what if question of not what happened, but what would happen if we did this or we did that, or what’s going to happen if we do nothing?
It was always about the future because I spent a lot of time fundraising with Riskpulse. Those questions are just really hard to answer. When I want to answer them, the metrics on hand were a great starting point, but they didn’t give the answer that people were looking for. We all know the tale of the hockey stick, a founder left alone in a room with a Google spreadsheet will exit with a hockey stick of some kind, if nobody’s checking and balancing that.
That’s not what I wanted. I wanted something that I could use. Ultimately, as a business, we did end up building a fin ops team. That was really a game changer in terms of now we’re managing the business through the lens of how we’re performing, and how we think we’re going to perform over the next 12 months. I said this is super valuable, but it’s something that most people can’t hire two or three headcount to focus on, or a CFO.
The challenge for me was how do I productize that value, which is really about forward looking for the sake of making decisions today that have an impact tomorrow. That was really the genesis of it.
Rob: It’s interesting that you’re catering both to investors and also to startups. How are you thinking about that?
Matt: Startups need forecasting and we can talk about the use cases for that and why, but one of them that comes up again and again, is when potential investors ask for these things. If there’s ire and some groaning about the realism, or the likelihood of these forecasts being true when startups make them, investors that receive these things, it’s easy to make fun of investors and a lot of people like to do that.
The reality is like good investors don’t want unrealistic or silly projections either. I know that everybody thinks we want that slide that has everything up into the right, but a good investor, especially one that’s thinking about sustainable, profitable businesses, which is an investor that’s more common these days, really wants something that is defensible and rigorous. The big thing is consistency.
I think for you, Rob, if you had to look at 10 different ways of presenting metrics and 10 different ways of presenting a forecast every month, it’s just way more overhead. For me, it’s a convenience service for the investor. I think in the future, it will become something more of an analytical engine for them, but for now they love the consistency of it.
I’ve had more investors say that they’d be willing to essentially tell startups, hey, when you send me your metrics, can you send me the Summit URL instead of a spreadsheet that you create today, because it’ll have everything I want to need. Frankly, it’ll be a little bit more professional than probably what you put together in a crunch.
Rob: That was a field we actually had in the tiny seed batch two applications. “Do you Summit?” Put your URL, your shared URL in here. When folks sign up for Summit, they just connect their Baremetrics, ProfitWell, ChartMogul, or Stripe accounts. Then it just pulls in all the stuff that the backwards looking data, and then Summit does forecasting based on that. Is that accurate?
Matt: Yeah, exactly. It generates a trend cast, as I like to call it, of all that data, which basically says you’re moving in this direction. This is how things are likely to keep going just based on almost thinking of it like inertia. That’s just helpful to see what direction the business is going. That’s the initial reality check of it is that as entrepreneurs, we can be incredibly biased towards what’s happened last month.
In other words if last month was great, we feel great and we think everything’s going to just keep skyrocketing. If last month was down we also sometimes think that the sky is falling. That piece there is really meant to do some just initial resetting or setting of expectations for everyone.
Rob: There are a lot of folks you mentioned if you’re going to raise investment, oftentimes investors will ask for forecasts. A lot of folks in the audience are not going to raise investment. They’re going to bootstrap. What’s the benefit there? Why should they think about looking ahead 3, 6, 12 months and trying to figure out where their business might be?
Matt: There definitely is also application there. I actually think of it in two ways. One is if you’re in the default dead stage, which if everything continues, like it is, essentially, this business is going to run out of money, then the clear one there is there’s nicer phrases, let’s just call it the drop dead date. What’s the date where this thing runs out of money? You can do that with a simple calculation that just says take the bank account balance today and withdraw a certain amount each month, if your business is that stable.
It can help with that. Cash forecasting and runway forecasting would be the primary use case for a default dead “startup” even if you don’t plan to raise money. You’re just trying to get to profitability. The next one is like, okay, when are we going to get to break even? That’s what so many bootstrappers are obviously striving for is, when am I finally going to get to that X k a month that makes this my full-time job or makes this my long term occupation.
Getting a sense of that, and really, with the forecast and the way it’s done in Summit, the benefit is you can run that calculation, and you can get a different number each time, depending on the assumptions that you make. If you assume that your close rate is 25%, maybe your breakeven date is seven months from now. But you probably don’t have that level of confidence in your close rate, like maybe what you want to say instead is I don’t know, my close rate is probably going to be somewhere between 15% of 30%. You look at the independent SaaS report and you just saw Rob, and you’re like at some point, it’s like, what’s the benchmark for these numbers?
Let me just assume a range. Well, what happens if your breakeven is maybe 7, but maybe it’s 12, just helping to get an understanding that the future is uncertain. We don’t forecast to be precise and certain about things. In some cases we forecast to accept, or maybe come to grips with the variability in some of these things.
It’s like a five month difference in breakeven. It could be huge. When do I actually want to quit my consulting gig, or when do I actually quit my job, or how much emergency savings do I really need? Those are all big decisions that you make, even if you’re not fundraising.
Rob: I was thinking I could have used this with Drip, we would grow by $5000 MRR and then I would be like, okay, now I have enough money to hire a customer success person or support person. Then we grow by $10,000 and it’s all right, now I have the money to hire a developer. It was always once that had happened, then I would start the process and then it would take two to three months to hire that person.
If I had some inkling, and like you said, it’s not an exact prediction. It’s hey, in the next 30 to 60 days or whatever, you’re going to be at this level where there’s that much more profit.
Matt: That’s the use case, definitely on the default to live, and maybe still living off of your revenues and not fundraising as we know that hiring takes time, knowing that you’re very likely to have the revenue that you need to support that person ahead of time. Absolutely, getting ahead of hiring is strategic.
Rob: As I think about prediction and forecasting, I have almost no exposure to it other than looking at the weather on my iPhone all the time because I live in Minneapolis. How accurate can you get with something like this, because I have to imagine there’s some skepticism. If you look at any random metrics provider, and the revenue is going up into the right gradually and then there’s today, and then it just keeps going up. It’s just a linear extrapolation on what’s going on. How is Summit different than that and how accurate can it actually be, crazy randomness of startups?
Matt: I think you’re right. If you just take a trendline, which is what we’ve been talking about so far. I think that numbers don’t really understand the business in the way that we do as entrepreneurs. We can look at that line and see it going up into the right. We have a lot of intuition that that’s not right. That’s wrong, for some reason, and is a straight line better than nothing like maybe.
A trend is probably better than nothing, but where it really gets interesting is when we use more than one method of coming to that conclusion. Folks can be scientific. If you think about a scientific theory for example, where you can start to have more confidence in something is when you make observations, and they both confirm or corroborate a theory that you have.
It’s like we measured this thing, we took the temperature, and we also looked at the rock formations, or whatever it is, so you take geology and meteorology, take a bunch of different scientific disciplines. You look at all the evidence and you say, wow, the evidence from all these different fields says that this probably happened. It’s like we’re used to other domains as scientists, but we don’t think of it in terms of startup. What the heck does it have to start up?
Think about it this way. Statistics is one thing like your revenue is growing at 5% month over month. Therefore, this is what your revenue is going to be in December. You need another method to check and balance that and say that’s what this method says. If you just use arithmetic and linear growth or compounding growth, you’re here.
What Summit also does is it brings in simulation, and simulation is different because it’s not machine learning in the sense of like looking at a bunch of data, and finding patterns and coming to a conclusion. It’s simulating the life of your business. I always like to give this example like revenue might go up into the right if you just do a statistical outlook like 5% every month. You’re going to be here by December. It’s like, yeah, that’s great.
What the statistics don’t know is that you don’t have the cash to keep hiring salespeople, or you don’t have the cash on hand to keep spending on paid acquisition, which is how you’ve been growing revenue so far. The simulation is very useful, because it will look at your cash balance, and you can almost think of it like reconciling things. Revenue can’t keep going up if we run out of money. At some point, your engineering team is going to be so busy with the current feature set that they’re not going to be able to roll out features as fast. Stuff just starts to change over time in a way that a purely mathematical view doesn’t understand.
What the simulation does is it actually does run through those different kinds of dependencies of saying your sales are dependent on hiring salespeople, your cash balance does not support you hiring another salesperson in three months. Therefore, you’re not going to keep adding revenue. However, if you want to keep adding revenue, you should go hire a salesperson. It’ll give you a recommendation to go hire a salesperson. That to me is where it gets a lot more realistic. The evidence of that is if you run through a bunch of forecasts in Summit, it’s actually hard to get the thing to draw a hockey stick. It’s like you need a lot of things working really well to do that. Whereas, if I left you alone with a spreadsheet, you could come up with a hockey stick in five minutes because it’s just wish casting.
Back to the point, I think your confidence can go up, the more different ways you have of forecasting and seeing those line up. I’ve seen some startups where it’s like the statistical trends are very consistent and high confidence levels. If you put all these assumptions in the simulation, you get a very similar result. That’s the business that has figured out its business model. I think you can put a lot more confidence in that than somebody who’s like I’m not certain about my pricing, I’m not certain about my close rates, I’m not certain about et cetera, et cetera. That’s where all this risk comes from in our forecasting is we ourselves don’t know what tomorrow is going to hold.
Rob: That makes sense. The simulation, is it a Monte Carlo simulation?
Matt: Yeah, it is a Monte Carlo simulation. It’s a Monte Carlo method. If we want to geek out for a second, and I’ll keep a high level, it’s a simulation in a way of stepping through time and making decisions, but the decisions that it makes do use Monte Carlo methods, which is really a dice roll. I like to use examples of D&D players will love this, but anybody that plays games. Basically, the simulator rolls dice many, many times every month to decide what happens next. The shape of those dice, if you will, depends on your business. I’ll just leave it at that.
It’s a bunch of randomness that gets inserted too, and the randomness is helpful because then the output is a range of possibilities, not just one possibility. You can see some cool stuff like, wow, there is a big spread in terms of where we’re going to be in 12 months. How do we tighten that up so that we can be confident that when we hire this person, we’re able to keep them hired into the future?
Rob: The fun part is all the TinySeed portfolio companies are using Summit. I’ve talked to a few of them who say that they go in and it’s like a little toy. You’re like, I’m going to change this assumption and see what happens. I’m going to change that assumption and see what happens. If you do like to nerd out on your own SaaS metrics, which I will raise my hand and admit. I’ll be the first one to admit that I would check revenue constantly, and MRR growth and all that stuff when I was back in the day. It’s something you can really geek out with.
I really like that you pointed out that trying to get a hockey stick is really hard, like a ton of things have to come together because that’s reality. That’s why so few businesses hockey stick, and when they do, it’s because this creates hard work, and market timing, and then a little bit of luck, and you did some things right. It’s all this stuff has to come together for that to work.
You talk to any founder who’s done it, I believe if they’re being honest with themselves, it’s a lot of factors. It’s never like, oh, I was really smart. It’s always this, this, that, and this, and I happen to time right as this technology took off, and SaaS was becoming a thing. Or, the iPhone had just come out, et cetera, etcetera, et cetera. It just goes on. I think that’s cool.
Matt: I think that the challenge I might have for folks is the thing you’re working on right now, like the feature you’re about to launch, the marketing campaign you’re doing, have you had the time, or giving yourself the time to really predict I’ll say or decide what the impact is going to be to your business? You’re working on that feature because you think it’s going to improve retention. Let’s run with that for a second.
How much? Maybe you don’t know, maybe it’s just a little bit, maybe it’s a lot. Have you run the numbers against your business and said if this works, and then improves retention by X percent, where are we 12 months from now? Compared to maybe not doing it at all, or doing something different.
My dream scenario is when people get together to decide what they’re going to work on next. Imagine running a unit test, if you will, of your financials, your business, and saying wait a minute, if we work on this for a month and it only improves retention by 6%, that’s not going to help us hit our annual revenue target. Imagine deciding that that’s not the right thing to work on right now because it just doesn’t move the needle. Even if it goes exactly as you want to, and customers receive it the way that you expect them to. If it doesn’t move the needle, should you be working on it next? I don’t think most of us have the luxury of doing that analysis, but I’d love to make that really easy for folks.
Rob: As we wrap up, I want to call out one of the reports you have is a survivor curve, and it’s like the opposite of a cohort churn grid. If you’re listening to this and you run a SaaS app and you’ve never seen a survivor curve for your app, I would really encourage you to check this out. You can go to usesummit.com, and you have a free plan so people can log in, and you just connect your Stripe analytics. The survivor curve shows, I believe it’s by cohort, how many people stick around after X months. It’s this long line, it’s like after one month you have this many left, after six months this many left. If that curve doesn’t flatten out somewhere, you have a problem. Would you agree with that sentiment? I would hand build these for Drip until we can get the code to do it. It was quite complicated, actually. I would sit there and stare at that thing, and you want it to flatten because going down in essence, because it’s how many users you have remaining from that cohort.
You want it to be as shallow as possible, meaning it goes down just a little bit and it flattens, but most startups it’s not that. It just winds up being this gradual, gradual, gradual, and if it ends up going asymptotic to zero, and it really never flattens out, then you can grow a decent sized business but trying to get into many millions of dollars, you’re going to have a really, really wide funnel at the top to get there.
Matt: Yeah, that’s your foundation. The way I think of it is if that curve stretches out to zero or 2% sometimes, maybe they stick around. You’re building on quicksand and you’re just trying to build that sandcastle if you will, as the base is eroding, is almost impossible. Seeing something where 30%, 40% of your customers stick around almost “indefinitely,” that is the foundation you need. I agree, it actually is all of your customers from all your cohorts, so you can look at these in Baremetrics or Stripe. I know and see like out of last month’s sign ups etcetera, how many stick around. This is actually looking at, in aggregate, across all subscriptions for all time, how long does the average signup stick around? It’s foundational.
Rob: Sounds good, sir. Thanks again for coming on the show. If folks want to hear you talk for about 45 minutes every week about what you’re up to from the maker and manager side with our good friend, Peter, they can head over to the Out of Beta Podcast. You’re @mattwensing on Twitter, where you’re pretty active, and you have some good thoughts you’re sharing on there. I encourage folks to check out all the stuff Matt is up to.
Matt: Thanks so much.
Rob: If you have a question for me, for Matt Wensing, really for any guests that we’ve had on, you can email questions@startupsfortherestofus.com, attach an audio file, it’ll go to the top of the stack. If you send it in text, obviously, I will read that as well. You can also leave us a voicemail at 888-801-9690. Subscribe to us by searching for Startups in really any of the pod catchers.
It’s crazy on Spotify right now. I’m seeing new users being added constantly. I don’t listen to podcasts on Spotify but they’re obviously getting some traction, pretty interesting. If you’re a podcaster and you’re not already submitted to Spotify, it’s something I’d recommend. Of course, visit startupsfortherestofus.com for full show notes, a full transcript of each episode, and to lend us your thoughts. If you want to tweet me, I’m @robwalling. This podcast is @startupspod. Thank you so much for listening, and I’ll see you next week.
Episode 488 | A Bluetick Progress Update from Mike Taber
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Show Notes
In this episode of Startups For The Rest Of Us, Rob checks in with Mike Taber about his progress with Bluetick. They talk about new growth, where that growth is coming from, theories on why customers are choosing Bluetick over competitors, and more.
Items mentioned in this episode:
Rob: Welcome to this week’s episode of Startups for the Rest of Us. I’m your host Rob Walling. This week, we catch up with Mike Taber. I get an update on his progress with Bluetick. Mike was my co-host for the first 448 episodes of this podcast. Now he’s a host emeritus. He comes on every couple of months and updates us on his story and his progress with his software product bluetick.io. It’s a good update this week. I don’t want to spoil it for you, but needless to say, things are going up and to the right for Mike.
Before we dive into that, I want to give you two things. Number one is invitations for Microconf Connect, which is our online community. The first invitations have been sent out. If you haven’t checked out microconfconnect.com and you are interested in being in a community of, well, there’s more than 1100 applicants at this point, so depending on how many actually come through and sign up, let’s say it’s going to be many hundreds, if not close to a thousand, of indie-funded and self-funded startup founders from around the world. If you’re interested in that, head to microconfconnect.com.
Number two, if you haven’t shared this podcast with someone that you think could get value out of it, it would mean a ton to me. If you feel like you’ve gotten value out of episodes over the past three months you’ve been listening, three years you’ve been listening, the biggest thing that I look at when I look at the success of the podcast, there’s a couple of things.
One, I look at the feedback from listeners and the comments that we receive and the growth of the subscriber base. Really been focusing on that over the past 6–9 months to try to get the message out to more people. The message that we can be ambitious, and we can build life-changing businesses without sacrificing our life or health or family or our relationships in order to do that.
We’d really appreciate it even if that’s just a tweet that says, “Startups for the Rest of Us is a podcast that I enjoy,” or if you do a one-on-one email or text to someone, I would really appreciate it. With that, let’s dive in to my conversation with Mike Taber.
Mike, it’s been a while. How are you doing?
Mike: I’m doing good. How are you doing?
Rob: I’m doing okay. It’s been six weeks to the day since our last conversation. Actually, we ran a Twitter poll a few weeks back because I got a couple of comments on the last episode. Let’s say I got 10 or 12 comments through Twitter, email. and posted to the website. One of them said, “Oh, it’s uncomfortable when you and Mike talk because I feel like you’re putting a lot of pressure on him.” Then someone said, “You should be easier. You should go easier on Mike.” I thought, “Wow. I don’t feel like I’m being hard on you.” Do you feel that way?
Mike: I don’t think so. The questions that you’re asking are pretty valid questions. I feel like it’s easier to answer them. I’ve commented on this before, it feels easier for me to answer them now because there’s more time in between each episode when we talk. It’s like I have more time to work on stuff and I’m not distracted by other things that are going on. I don’t really think so. I don’t know. Maybe I would have felt differently right after an episode is recorded. You can ask me again right after this episode if they were tough questions.
Rob: Totally. That’s the thing that people should know is like you and I were very deliberate, in advance, offline, before we started this whole series of following your story. That I said, “Look, I’m going to ask you questions that I think are helpful to the audience. I want to ask you questions that I think are helpful to hopefully keep you motivated and accountable. Is that okay?” I got your permission to bust your chops a little bit. I’ve never felt like I’m over-the-top, up in your face, sell, sell, sell, buy, buy, buy. I’m not being outrageous. I’m genuinely just asking. I know I am asking some tough questions, but I don’t know.
Anyway, after that, I ran a Twitter poll and I got 114 responses. The results were 8% thought I should go easier on you, 31% said I could push you harder, which I was surprised by, and 61% said they felt like I’m striking a good balance. Overall, 31% Mike, a third of the people want me to bust your chops more. It’s funny.
Mike: It’s all right. If you want to bust my chops a little bit more to appease that 31%, I’m fine with it.
Rob: I don’t. This is very natural. The thing is these conversations, at least from my perspective, are not forced at all. I’m not doing anything that doesn’t feel very natural in the conversation. I’m genuinely just curious about what’s there. When I ask, “Why didn’t you do that?” I’m genuinely curious why you didn’t do something. Anyway, let’s start talking about stuff because I did go back and listen to the last few episodes. It’s been a while. It’s been six weeks since the last one and three months since the one before that. I almost forget the story sometimes of exactly what was happening.
Our last episode was actually really positive. You were upbeat and things seemed to be working well. You had grown the revenue of 50% in two months. You’re still early-stage so folks know—percentages can be deceiving. That’s where we last left you. I’m curious to hear about your high point over the past six weeks. What was your biggest win or the moment where you felt the best? Then conversely, the biggest setback or where you were feeling the worst.
Mike: I think that in terms of the biggest win is I had a customer, and I know that this is on your outline already, so I’m going to totally blow it out of the water. Your question was about the big customer that I had to sign on a couple of months ago for $500 a month and are they still around. The answer is yes, they are still around, but they also asked to upgrade to an annual plan. That just came through yesterday so that’s all set. I’d say that’s probably the biggest one.
In terms of a low point, I can’t really point to anything specific where it’s like, “Oh, I wish this had gone very, very differently.” I’ve got a bunch of things that are up in the air right now. I’m optimistic that some of them will come through and then there are other things where I have to play things by ear for a little while to see how it goes. I don’t know how they’re going to play out yet.
Rob: Congratulations on that; that’s big to get. For them to request to go annual implies that they’re using the tool, they’re enjoying the tool, and they want to use it for the coming foreseeable future. The challenge that I always see with, especially early-stage products, that are really finding their footing is that you can get a big customer, but they’ll stick around for two weeks or a month or two. Then they realize, “Well, this just doesn’t fit what we need.” That is why I kept circling back on that topic is like, “Hey, you have this customer paying you a chunk of money. Are they still around?” That’s great. That’s really a good sign in my opinion. Congratulations on that.
Mike: Another thing that I would say that is, I wouldn’t say there was a particular point where it was a high point as well, but you have mentioned that I had grown revenue by about 50% over the course of two months. Then over the most recent two months, I’ve grown it by roughly another 50%. Basically, double where I was about four months ago. Maybe it’s 4½ months, maybe close to 5, but it’s still pretty close to that. It depends more on how things shake out through this month, which it’s still very early on in the month, but from the looks of it, I would expect that I will eclipse that point.
Rob: Is a big part of this your warm/cold email campaign? Because the last time we spoke, your report was it was working very well, you were getting upwards of 50% response rates, you had so many learnings that you actually had to back off of it so you could get other work done, you were saying some calls were running 1½-2, you had a bunch of notes, and that some were turning into customers. Is that a big part of this? Because to double in four months even at early stages is still traction. That shows that something has happened that wasn’t happening in the prior 18 months frankly.
Mike: Yeah. I look back at the outreach campaign that I was doing. It’s interesting because only one of those conversations has turned into an actual customer. There are maybe three others that are still prospects. One of them is in a trial but I have to implement some additional things before he’ll actually start paying for it. The trial itself right now is like I’ve extended his trial because literally, certain things don’t work for him. I’m trying to go through. I basically just have to implement a couple of extra features before he can start using it. At that point, I’ll restart his trial more or less.
I don’t see any direct correlation between the conversations that I’m having and the revenue, which is weird. Because I look back at it now and I just went through and counted. I’ve had over 30 calls with people in the past 5-6 weeks. Those are just the ones from my outreach campaign, but only one of those turned into a customer.
Rob: That’s crazy. Where’s the growth coming from?
Mike: I’m still working on it.
Rob: Oh, no. You don’t know.
Mike: It’s from a variety of sources. Some of its recommendations are from other people. I onboarded somebody over the past two weeks. They’re a real estate attorney in New York City, and they heard about it from a Facebook group. Somebody else had recommended to him. I’m like, “Well, who was it and what organization was it?” They said it was from the EO group which I think is Entrepreneurs’ Organization or something like that. You have to have a business that’s doing a million dollars in revenue in order to even be eligible to join, and they have to verify it.
Somebody in there said, “Hey, you should check out Bluetick.” I don’t know who that person was, but I don’t necessarily care either. The person signed on and I helped him get everything set up through Zapier. They asked me already about upgrading to an annual plan. I said, “Well, we could do that now but why don’t you wait a month or two and see how things go and then if everything is working well we’ll upgrade you.” It’s very casual and conversational about that.
I think that that’s a good opportunity to try and potentially get either additional recommendations or more revenue what have you. I’m sure these people know other people. I definitely think there are opportunities there that are coming about just from having these conversations.
Rob: Right. That’s the idea is if they do end up being happy, and they sign up for annual, right after they pay for annual, a great ask is, “I know you heard about me through an EO group, would you mind posting back to that group and saying, ‘Hey, I’ve just signed up. It’s been a really good experience.’” At this stage, it’s doing things that don’t scale. At this stage, all of this just helps get you to where you want to go.
Mike: Exactly.
Rob: I’m curious then. Customers are signing up and you obviously have some growth going on, something that I’ve asked you multiple times is why Bluetick? Why did they sign up with Bluetick and not go to one of your probably dozens of competitors, I’m guessing? Last time you had said you had some theories but you hadn’t really figured that out yet.
We tossed around some things like Bluetick checks the mailbox every 10 minutes whereas a lot of your competitors check it every four hours so your data is more up-to-date. You’re more thorough in terms of seeing I think it was like trash and spam and some other folders. Is that it or has there something else that you’ve figured out why these folks come, sign up, and convert to annual with you and not one of your competitors? That key differentiator.
Mike: I don’t think there’s a specific key differentiator in the products, but the recommendations certainly help. As part of those 30-plus calls that I have gone through, one person said, “Hey, I have this customer over here, these couple of customers, and I think that you should go talk to them. For this one, feel free to use my name and say that I said that you should reach out to them.”
I reached out, talked to them. I don’t think that this came up in our last call because it was since then, but I basically had a conversation with them. They said, “Yeah. Actually, your software sounds like it would be really helpful for us. Send me a proposal,” which you wouldn’t think most of the time you’d need to send a proposal to somebody. It’s over $1000 a month for this particular customer. They said, “Send me the proposal.” I sent them a proposal and then without even me asking or following up on the proposal, they didn’t have any questions at all. “This is great. This looks good. I’m going to introduce you to our technical team. Let’s set up a call with them.”
Did that, went through the technical call. At the end of the call, I said, “Are there any objections or questions you have or any problems you see in switching from what you’re using now into this?” They said, “No.” Now I’m at the point where they said, “Okay. Next week’s bad for us, but touch base with us the following week. We’ll see how things shake out from there.” I’m optimistic that that will come in. That’s over $1000 a month in MRR from just that one customer, but I definitely know there are certain things that they’re going to need. The point I’m going after though is the reason that that person took the call was that they got a recommendation from this other person they knew and trusted.
Rob: That makes sense. Your title tag on your website, bluetick.io, is, “Cold and Warm Email Follow-up Software.” Then the headline is, “Personal outreach at scale for all of your follow-up emails.” There’s cold and there’s warm and you’ve tended to be in the warm area of getting things you need from other people. If an accountant needs a tax return, he can put it in here. I’m just giving an example. I guess you don’t have any accountants.
Mike: I do, actually.
Rob: Oh, you do? Okay. Or a conference organizer needs to bother sponsors until they pay, you put them in Bluetick and they would do that. Which of these new sign-ups over the past four months are they using? Are they doing it more for the cold or more for the warm?
Mike: Most of them are warm, to be honest. As I’m thinking about it, most of them are warm. They’ve done business in some way shape or form but it’s not a tight relationship, it’s very loose. Maybe there was a transaction of some kind. Maybe there was a trial that was downloaded. Maybe there was an introduction or something along those lines. There was at least some touch-point and then they go in to use Bluetick to help move them to the next step and strengthen the relationship.
Rob: It’s less about sales. It’s part of the sales process but it’s not usually the first step in the sales process. There’s at least some relationship then it’s how do we keep moving it down, which is what you wanted to do. Remember, we talked about it a year ago. You said, “I feel like a lot of the cold outreach is spammy. I have a struggle with how some of these folks are doing it.” This feels better to you?
Mike: Yeah. What’s interesting, though, is that those that I’ve had come on so far, those tend to be like they want to do the warm outreach, but then the demo for the customer who the price quote I gave them (I think) was $1200 a month. They’re going to have upwards of 20–30 mailboxes and their growth anticipation is going to get up to between 50 and 60 by the end of the year. What they do is they do lead gen for other companies. They basically work with marketing agencies who are trying to do market analysis and market research, and they get people on the phone to talk to those companies.
I’ve actually started going down the road of looking out there to see what marketing agencies that are out there that are currently doing lead gen and see if I can get conversations going with them to ask how they’re doing that now. My suspicion is most of them are running a bunch of different campaigns in parallel.
They probably have anywhere between 20 and 50 or 100 mailboxes, which I would basically be charging them for each one of those, but let’s say that it’s 50 mailboxes at my current price in which I’d probably cut them a bulk discount at some point. I don’t know what that would look like. Let’s say it’s just raw numbers alone right now, fifty mailboxes at $50 a month is $2500 a month. That’s huge.
One of those customers could substantially start moving the needle for Bluetick, especially if they go and sign up for an annual plan. Not that I think that they would do that on day one, but fast forward a month or two if it’s working better for them than their current solution then it would make sense for them to go to an annual plan to get a little bit more of a discount.
I do think that there are opportunities there are for Bluetick to go in and do some competitive displacements for people who are using things like SalesLoft, Outreach, or Reply because it does have that more in-depth hooks into the mailbox and it can do more in-depth checks to make sure that it’s identically identifying, was this a reply? Was that a reply? Did I get a reply from a different email address or was it forwarded? All those kinds of things. I just have the capability to do a more in-depth analysis that I don’t think that those other products have nor do I think that they care about. Their pricing has started going through the roof like they’re really going upmarket in terms of the pricing.
Rob: Which leaves a nice opportunity for you because even having these several hundred dollars a month/low four-figure per month clients is such a different business than a $40 or $50 a month app. You need so many fewer clients. Bravo to that. High ARPU (Average Revenue Per Customer) is just one of the Holy Grails. That’s awesome.
Mike: I’m working those angles to try and see how that works out. I just don’t know how it’s going to play out yet.
Rob: You never do. It’s pipeline stuff. Listeners should realize you’re not saying, “I’m counting on all of these deals to close.” You’ve done sales enough to realize that only a certain percentage of your pipeline closes. But the fact that you’re even sitting at the table with someone who could feasibly pay you $1000, $2000 a month is so far removed from where you were a year ago or 18 months ago.
That’s the part I’m excited about because you don’t need all of these to pan out. You just need a certain percentage. You’re growing, you’re off to the races, and you’re profitable, supporting yourself. You get to the point where you can hire someone to handle your audits and rewrite that sealed .NET component.
Mike: What’s motivating about it is that I feel like I’m winning a disproportionately large number of them, too.
Rob: Why is that?
Mike: Honestly, I think it’s me. It’s the conversations that I have with people. Even in the demo that I did with the customer that I did a custom proposal for, when I was talking to them they were asking questions about the software and how it worked. They had some very specific requirements as well, which I was shocked by because most people are like, “Oh, I just want to be able to detect replies and be able to send out emails and make sure that those are going out to people who didn’t reply.”
One of the specific requirements they had was they’re like, “This has to be able to send an email out as a reply to a previous email and it has to include the contents of the other one.” I said, “Yes. It can do that. This is exactly how it looks.” and I showed them an example. They’re like, “That’s perfect. That’s exactly what we need.”
It’s just being able to have that discussion and then also explain this is how it was built and this is why it was built this way. Fascinated is not the right word for it, but they really liked hearing that the person on the phone giving them the demo was the person they would also talk to for support if they needed help, or the person who built it. If there’s something wrong and it doesn’t work, they can talk to me and I can get it fixed for them. Whereas with the current vendor they have, it’s got to go through three layers of support, there was a project manager and put out a roadmap. You don’t have to do that with me. You’re going to talk to me. I can get things done.
Rob: That’s the thing when you’re small and you’re competing with venture-backed startups or even just larger companies, founders will often say, “Well, I’m outgunned.” How can I possibly compete with them? You can. You just have to use your advantages.
Mike: Didn’t you call this—I think it was in Microconf Europe—the founder advantage?
Rob: Maybe I did. Thank you for reminding. I’ll have to go back.
Mike: I think that was you.
Rob: I don’t recall but we should find out. Anyway, in Judo, you’re supposed to—even if you have a larger opponent—use their force against them. Let’s say they swing at you or whatever, it’s more about dodging and pulling them in the direction that they swung to flip them over or whatever.
I’ve only done Judo a couple of times, so it’s not something I’m an expert at, but when you are a small company you are super agile. You can get stuff done super-fast. They can talk directly to the founder. These are the advantages that you can just use against larger companies over and over and over. There are others as well. All that to say, that’s cool to be able to do that. Obviously, it doesn’t last forever, but while you have it, this should absolutely be something that you’re taking advantage of.
Mike: I totally am for the time being.
Rob: Cool. Curious, some of these other questions I’m not even sure are worth going into since things are working. You’re doing demos, you’re talking to customers, you’re selling, and they’re writing you checks. It’s like, “Should you even be bothering with these other things?” I come back to the podcast tour where (I guess) you put it into Bluetick. You were doing cold outreach to try to get on podcasts. Scaled it back a bit because you got busy with calls. Then you ramped it up again. Curious for an update on that.
Mike: I had scaled it down and I’d planned on ramping it up again, but I started sending out a couple of emails and I haven’t gone back to start sending out more of them. I was basically doing it individually. It’s like approving them one at a time. I got busy with all the phone calls and everything. I haven’t gone back to that.
I basically have stopped learning things from the conversations that I’ve been having with the people I was reaching out to. I’m going to put some of that stuff on autopilot and try to involve myself a little bit less. Instead of pitching it as, “Hey, I’d like to get on a phone and talk to you because I’d like to learn,” now I’m going to present it as, “These are the things that I’ve learned. Are there ways that you can help me or other people that you could refer to this particular product because I think I have a better story or position around that?”
I’m going to do that instead. Now that my learning process there I think it is a little bit more complete. I’m going to go back and start doing the podcast outreach again. I just haven’t done it yet.
Rob: Yeah. You’re trying to balance four things. Development of features is one thing; sales and learning, which is what a lot of LinkedIn and that warm outreach; and then marketing. You haven’t been doing much marketing because sales and learning are taking so much at the time. It sounds like you’ve learned. I think what you’re saying to summarize is you’ve learned about as much as you need for now and you can really dial that down and then switch some focus to marketing to then generate leads for you to continue with sales, right?
Mike: Yeah. I don’t want to not correct you, but to narrow it down exactly on the learning side of it. The reason I’m backing off on that is because I’m starting to hear the same things over and over. It’s not that I don’t think that I have anything left to learn because I certainly think there’s lots more, but the people that I’m talking to it’s getting repetitive now. I’m hearing the same things over and over. Going through the rest of the list of people that I was reaching out to, I don’t think that that’s going to be fruitful in terms of learning stuff. I do still think that there’s a lot of value in continuing to reach out to those people and seeing if there are people that they could introduce me to or put the product in front of.
Rob: Right. You’re switching from learning to sales. In essence, you’re switching that campaign, which is exactly what I think you should be doing based on what you’re saying. It’s funny for these episodes that we do every month or two, it’s typically been a roller coaster; one where you’re up and one where you’re down. We now have two back-to-back where you’re up. You got it, so it’s going to get boring for people after a while, Mike. If your #winning every episode, people will stop listening. Next episode, bring some low points.
Mike: I’ll say I got a hangnail.
Rob: Exactly.
Mike: They’re terrible.
Rob: I’m joking, obviously.
Mike: I can barely type with my finger. Do you want to see that finger, Rob?
Rob: Not really. Good thing this is an audio podcast. I’m happy for you and I’m happy the way things are going. Again, it’s like we’ve talked about this sealed .NET component for so long. The last episode I finally said, “You know what, if sales are working I wouldn’t replace it right now unless it’s causing you the inability to close sales,” because right now, number one is getting revenue up. It was my thinking at the time. We were both agreeing on it. You were saying, “Yeah. I know I need to replace it at some point.” Given where you’ve been, have you ever given it a thought over the past six weeks?
Mike: I have. It’s more, I would say, over the past 1½–2 weeks where I’ve started to look at that a lot more. The main reason for looking at that is that I mentioned it earlier but I didn’t go into the details of a customer where I basically extended their trial because certain things weren’t working for them. To drill into that is they have an exchange server.
Rob: That’s their first mistake?
Mike: Yeah.
Rob: Oh, snap. No, I’m just kidding. Send hate mail to mike@mike—
Mike: I didn’t say it. It wasn’t me.
Rob: I know.
Mike: Anyway, the issue is that yes you can enable IMAP on an exchange server, but the default is to not have it enabled. There are tons of sales organizations out there where they have exchange server. Unless you have a device that directly goes into the exchange server to use these exchange web services, basically, it doesn’t work. And Bluetick relies on that IMAP component.
What I’ve been doing is this person tried to sign up. They went in, try to add a mailbox, it didn’t work. I went through all these things trying to figure out how to make it work. The only way to do it is through exchange web services, which I have a component that can do that, the one that I have now can do it, but it’s got to be rewritten. The underlying storage system has got to be changed in order to help support that.
I knew that all that stuff needs to be done anyway in order to basically replace how that sealed .NET component is currently used. It was never a priority before because stuff works, but now it’s at a point where I have to replace this. I have to rewrite some of that code otherwise I can’t get this customer onboarded.
Now it’s a barrier to revenue. I can justify it now especially since, I think he said there’s 70 sales reps in the organization and if I can get it working for him, its land and expand because he’s more than willing to introduce me to these two managers of all the sales reps, but I have to get it working for him first.
Now, I’m in a position where I have to do this now. Technically, I don’t have to. I can say, “Screw it. I’m just going to go find other customers.” But the combination of this particular person needing that and this customer where there’s $1200 of MRR is initially on the table, where I know that their mailboxes are going to be coming from their customers.
My suspicion is at least some of those customers are going to be using an exchange server. It did come up in the call when they asked, “Can you integrate with an exchange server?” and I said, “Yes,” thinking that I can do it through IMAP. Then, I onboarded this other customer and realized that’s not going to work if you have to go through the IT department and the IT department has to justify why they’re going to turn that capability on for a particular mailbox. Now I’m like, “I have to fix that at this point.” That’s why I’m looking at it now.
I’ve spent the last week or so looking at redesigning it, doing a bunch of different prototyping and testing and figuring out how it’s going to work. I’m pretty close to being able to move forward with it. I just haven’t written any production code to screw with it.
Rob: Good for you. That’s cool. That’s actually good news because that’s exactly the time that you should be doing it. It’s when it impacts revenue. You’d mentioned last time you can flip in the database to do it for one mailbox at a time, which also is a nice luxury to maybe not have to deal with all of the data migration that will take a week or more all at once. That’s cool.
Something else that we talked about a few times is that Enneagram test, it’s a personality test. The reason that we started talking about it was we’re talking about you know what motivates you deep down as a human being and also what are your blind spots? We all have these blind spots in our personalities that perhaps behaviors that aren’t helpful to us getting stuff done. I’m a fan of these personality tests because they just help (in most cases), give me insight about who I am, what my blind spots are, what motivates me, all that kind of stuff.
When we were last talking, you had taken the Enneagram but you said you hadn’t really dug into it to suss out actionable bits of things that you should think about on a day-to-day basis. It’s fun to read through the whole doc, but if you’re not going to then somehow implement that in your life then it is all just a waste of time. I’m curious if you had time to go through and highlight and maybe a couple of key takeaways you might be able to take action on or at least be aware of in your day-to-day.
Mike: Yeah, I did. I started going through, and I was going to highlight a bunch of stuff. Then, I said, “I’ll just underline it instead,” which is close enough. It’s one of those things where the different personality types that it has for me printed out it, comes out (I think) 16 or 18 pages; it’s about six pages for each one.
There is a lot of stuff underlined. Some of it is just notes for me, but there’s also stuff in here where I like the fact that they put together things and they say, “These are ways that you can make things work better.” Some of them are things I’m already doing. For example, one of them was like, “Oh, if you’re this particular personality type then it can very much help you to either get in a room with other people and just talk about these types of issues or do journaling and write that stuff down.”
It was interesting that I discovered the journaling aspect on my own because I’ve been doing that for a couple of years. I do find it extremely helpful because I can sit there and basically do a brain dump at the end of the day. I’ve found that by doing that, it helps me clear my thoughts and helps me sleep at night. Then, there are a few other things that I went through. I still have to go back through it again just because there’s so much here. I definitely think there’s a lot more in here that I could probably pull out. A few, I wouldn’t call them productivity hacks but life hacks, so to speak, is like, “Oh, do this, and this other piece of your life will be made easier.” If that makes sense.
Rob: It does.
Mike: Some of it is just managing negative emotions. Some of it is being able to express feelings about certain things or be more assertive about what you want or what you need. Generally, I’m a low-key person, low-maintenance, but it doesn’t mean that I don’t have needs that somehow need to be met. I just don’t really talk about it. I’m much better at advocating for other people than I am for myself.
Rob: Yeah. That’s something good to know about yourself, right?
Mike: Yeah. I intuitively know that but seeing it written down on papers is like, “Hey, this is a part of your personality profile. Here are some ways to deal with that.” Some of it is you read through some of this text that’s in here and some of it is just coaching. It says, “Hey, you may believe this, but has anything ever really gone that badly? The answer is probably not.” It’s just a good reminder.
Rob: Indeed. How about your sleep? How’s it been in general?
Mike: Generally, pretty good. The past week or so has been pretty stressful. It’s funny because in the Enneagram there are specific sections in there that call out and say, “When you are under stress, if this is your personality profile then you switch over to this other thing. These are the types of behaviors you exhibit.” For the most part, they’re pretty dead-on. It’s nice to go through and read those and see that those things can impact my stress levels, which then turn around and impact my sleep. Last week or so has been pretty stressful, but I think there’s definitely some strategy and takeaways in there that I can leverage to help clear that up.
Rob: And that’s something that was game-changing for me (it’s gone up and down but let’s say) about 8 or 10 years ago. I realized that I would just wake up in the morning or I would just be walking around and I would feel this enormous amount of stress. I would just feel it, live it, and let it consume me.
Over time, I learned through stuff like this, this self-awareness and these tests, why do I feel that way? I think there’s a biological component. When I look at my family history on both sides there’s all these anxiety disorders and all this stuff we don’t need to go into here. I’m naturally prone to just have constant mid-level, I won’t say high-grade anxiety because I don’t have panic attacks, but I do have low- to mid-level stress all the time.
What I learned to do was I would say, “Why am I feeling that way? Literally, why am I feeling that way?” I would say, “Well, it’s because someone said this,” or, “It’s because I’m worried about this revenue thing,” whatever. But then, I could actually look at it and say, “Well, how likely is that to happen and how bad would it be if that happened?”
Then, I can just try to left-brain myself out of it. It works for me to really look at it and say, “Look, there’s no new information. You can’t fix this. It actually isn’t going to be that big of a deal if it happens. If it is, there’s contingency A, B, and C that I could use to get around it. So put it to bed for now and if it comes back up then deal with it.” You know what, 90% of the time none of them come back up. It’s just wasted. It’s just wasted worry. It doesn’t help anybody to worry about it.
I’m not saying you or anyone else should do that, but it works for me. The only way that I came across these types of coping mechanisms is, (1) is being married to Sherry, (2) listening to the Zen Founder podcast, and (3) learning this about myself to know, “Wow. This isn’t normal and other people don’t feel this way all the time.”
All right. As we’re wrapping up, I’m curious what, between now and our next chat, what are you most looking forward to?
Mike: I’m going to be diving back into the technical side of things to rewrite that email synchronization mechanism and get it working so that the exchange server can just be connected without having to worry about IMAP or enabling certain things. It should just work at that point. I’m hoping that by the time the next time we get on a call, that stuff will be taken care of and at least started onboarding this customer that I quoted the $1200 to.
Those are the things that I’m looking at the most, and then trying to go through and see if I can have some more conversations with other marketing agencies that do lead gen or do market analysis and outreach; because they’re doing it at scale with small numbers of people, and it’s not as if they’ve got 80 people that need to be trained to use Bluetick. It’s a handful of people that are using it on behalf of a much larger group of people. I do think that that could potentially be an area of growth, but I don’t know yet. I want to explore that quite a bit more.
Rob: Sounds good. As always, thanks for coming on the show again, having a conversation. I always enjoy chatting with you and the listeners benefit from it as well.
Mike: Awesome. Thanks for having me back and I will definitely keep you guys posted.
Rob: Awesome. Talk to you soon.
Mike: All right. Bye.
Outro: I always enjoy my conversations with Mike and it’s good to hear him you know feeling well and feeling motivated. If you’ve been a listener for any length of time, you know that he’s definitely had some entrepreneurial ups and downs. To get to two positive updates in a row, I’m thankful for that.
If you have a question for me, for a guest, or for Mike, you should either email us questions@startupsfortherestofus.com. You can attach an audio file to that; it will go straight to the top of the Q&A stack. Or you can leave us a voicemail at (888) 801-9690. Of course, you can just write a text or email to that address.
If you haven’t checked out startupsfortherestofus.com, every episode has a full transcript within a week or two of being published. We have show notes, we have links to everything that is in these episodes. If you’re not subscribed, we have links there, too. You can head to iTunes, Spotify, Stitcher, and all those to get every episode dropped into your inbox.
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Before we dive into that, I want to give you two things. Number one is invitations for Microconf Connect, which is our online community. The first invitations have been sent out. If you haven’t checked out microconfconnect.com and you are interested in being in a community of, well, there’s more than 1100 applicants at this point, so depending on how many actually come through and sign up, let’s say it’s going to be many hundreds, if not close to a thousand, of indie-funded and self-funded startup founders from around the world. If you’re interested in that, head to microconfconnect.com.
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One, I look at the feedback from listeners and the comments that we receive and the growth of the subscriber base. Really been focusing on that over the past 6–9 months to try to get the message out to more people. The message that we can be ambitious, and we can build life-changing businesses without sacrificing our life or health or family or our relationships in order to do that.
We’d really appreciate it even if that’s just a tweet that says, “Startups for the Rest of Us is a podcast that I enjoy,” or if you do a one-on-one email or text to someone, I would really appreciate it. With that, let’s dive in to my conversation with Mike Taber.
Mike, it’s been a while. How are you doing?
Mike: I’m doing good. How are you doing?
Rob: I’m doing okay. It’s been six weeks to the day since our last conversation. Actually, we ran a Twitter poll a few weeks back because I got a couple of comments on the last episode. Let’s say I got 10 or 12 comments through Twitter, email. and posted to the website. One of them said, “Oh, it’s uncomfortable when you and Mike talk because I feel like you’re putting a lot of pressure on him.” Then someone said, “You should be easier. You should go easier on Mike.” I thought, “Wow. I don’t feel like I’m being hard on you.” Do you feel that way?
Mike: I don’t think so. The questions that you’re asking are pretty valid questions. I feel like it’s easier to answer them. I’ve commented on this before, it feels easier for me to answer them now because there’s more time in between each episode when we talk. It’s like I have more time to work on stuff and I’m not distracted by other things that are going on. I don’t really think so. I don’t know. Maybe I would have felt differently right after an episode is recorded. You can ask me again right after this episode if they were tough questions.
Rob: Totally. That’s the thing that people should know is like you and I were very deliberate, in advance, offline, before we started this whole series of following your story. That I said, “Look, I’m going to ask you questions that I think are helpful to the audience. I want to ask you questions that I think are helpful to hopefully keep you motivated and accountable. Is that okay?” I got your permission to bust your chops a little bit. I’ve never felt like I’m over-the-top, up in your face, sell, sell, sell, buy, buy, buy. I’m not being outrageous. I’m genuinely just asking. I know I am asking some tough questions, but I don’t know.
Anyway, after that, I ran a Twitter poll and I got 114 responses. The results were 8% thought I should go easier on you, 31% said I could push you harder, which I was surprised by, and 61% said they felt like I’m striking a good balance. Overall, 31% Mike, a third of the people want me to bust your chops more. It’s funny.
Mike: It’s all right. If you want to bust my chops a little bit more to appease that 31%, I’m fine with it.
Rob: I don’t. This is very natural. The thing is these conversations, at least from my perspective, are not forced at all. I’m not doing anything that doesn’t feel very natural in the conversation. I’m genuinely just curious about what’s there. When I ask, “Why didn’t you do that?” I’m genuinely curious why you didn’t do something. Anyway, let’s start talking about stuff because I did go back and listen to the last few episodes. It’s been a while. It’s been six weeks since the last one and three months since the one before that. I almost forget the story sometimes of exactly what was happening.
Our last episode was actually really positive. You were upbeat and things seemed to be working well. You had grown the revenue of 50% in two months. You’re still early-stage so folks know—percentages can be deceiving. That’s where we last left you. I’m curious to hear about your high point over the past six weeks. What was your biggest win or the moment where you felt the best? Then conversely, the biggest setback or where you were feeling the worst.
Mike: I think that in terms of the biggest win is I had a customer, and I know that this is on your outline already, so I’m going to totally blow it out of the water. Your question was about the big customer that I had to sign on a couple of months ago for $500 a month and are they still around. The answer is yes, they are still around, but they also asked to upgrade to an annual plan. That just came through yesterday so that’s all set. I’d say that’s probably the biggest one.
In terms of a low point, I can’t really point to anything specific where it’s like, “Oh, I wish this had gone very, very differently.” I’ve got a bunch of things that are up in the air right now. I’m optimistic that some of them will come through and then there are other things where I have to play things by ear for a little while to see how it goes. I don’t know how they’re going to play out yet.
Rob: Congratulations on that; that’s big to get. For them to request to go annual implies that they’re using the tool, they’re enjoying the tool, and they want to use it for the coming foreseeable future. The challenge that I always see with, especially early-stage products, that are really finding their footing is that you can get a big customer, but they’ll stick around for two weeks or a month or two. Then they realize, “Well, this just doesn’t fit what we need.” That is why I kept circling back on that topic is like, “Hey, you have this customer paying you a chunk of money. Are they still around?” That’s great. That’s really a good sign in my opinion. Congratulations on that.
Mike: Another thing that I would say that is, I wouldn’t say there was a particular point where it was a high point as well, but you have mentioned that I had grown revenue by about 50% over the course of two months. Then over the most recent two months, I’ve grown it by roughly another 50%. Basically, double where I was about four months ago. Maybe it’s 4½ months, maybe close to 5, but it’s still pretty close to that. It depends more on how things shake out through this month, which it’s still very early on in the month, but from the looks of it, I would expect that I will eclipse that point.
Rob: Is a big part of this your warm/cold email campaign? Because the last time we spoke, your report was it was working very well, you were getting upwards of 50% response rates, you had so many learnings that you actually had to back off of it so you could get other work done, you were saying some calls were running 1½-2, you had a bunch of notes, and that some were turning into customers. Is that a big part of this? Because to double in four months even at early stages is still traction. That shows that something has happened that wasn’t happening in the prior 18 months frankly.
Mike: Yeah. I look back at the outreach campaign that I was doing. It’s interesting because only one of those conversations has turned into an actual customer. There are maybe three others that are still prospects. One of them is in a trial but I have to implement some additional things before he’ll actually start paying for it. The trial itself right now is like I’ve extended his trial because literally, certain things don’t work for him. I’m trying to go through. I basically just have to implement a couple of extra features before he can start using it. At that point, I’ll restart his trial more or less.
I don’t see any direct correlation between the conversations that I’m having and the revenue, which is weird. Because I look back at it now and I just went through and counted. I’ve had over 30 calls with people in the past 5-6 weeks. Those are just the ones from my outreach campaign, but only one of those turned into a customer.
Rob: That’s crazy. Where’s the growth coming from?
Mike: I’m still working on it.
Rob: Oh, no. You don’t know.
Mike: It’s from a variety of sources. Some of its recommendations are from other people. I onboarded somebody over the past two weeks. They’re a real estate attorney in New York City, and they heard about it from a Facebook group. Somebody else had recommended to him. I’m like, “Well, who was it and what organization was it?” They said it was from the EO group which I think is Entrepreneurs’ Organization or something like that. You have to have a business that’s doing a million dollars in revenue in order to even be eligible to join, and they have to verify it.
Somebody in there said, “Hey, you should check out Bluetick.” I don’t know who that person was, but I don’t necessarily care either. The person signed on and I helped him get everything set up through Zapier. They asked me already about upgrading to an annual plan. I said, “Well, we could do that now but why don’t you wait a month or two and see how things go and then if everything is working well we’ll upgrade you.” It’s very casual and conversational about that.
I think that that’s a good opportunity to try and potentially get either additional recommendations or more revenue what have you. I’m sure these people know other people. I definitely think there are opportunities there that are coming about just from having these conversations.
Rob: Right. That’s the idea is if they do end up being happy, and they sign up for annual, right after they pay for annual, a great ask is, “I know you heard about me through an EO group, would you mind posting back to that group and saying, ‘Hey, I’ve just signed up. It’s been a really good experience.’” At this stage, it’s doing things that don’t scale. At this stage, all of this just helps get you to where you want to go.
Mike: Exactly.
Rob: I’m curious then. Customers are signing up and you obviously have some growth going on, something that I’ve asked you multiple times is why Bluetick? Why did they sign up with Bluetick and not go to one of your probably dozens of competitors, I’m guessing? Last time you had said you had some theories but you hadn’t really figured that out yet.
We tossed around some things like Bluetick checks the mailbox every 10 minutes whereas a lot of your competitors check it every four hours so your data is more up-to-date. You’re more thorough in terms of seeing I think it was like trash and spam and some other folders. Is that it or has there something else that you’ve figured out why these folks come, sign up, and convert to annual with you and not one of your competitors? That key differentiator.
Mike: I don’t think there’s a specific key differentiator in the products, but the recommendations certainly help. As part of those 30-plus calls that I have gone through, one person said, “Hey, I have this customer over here, these couple of customers, and I think that you should go talk to them. For this one, feel free to use my name and say that I said that you should reach out to them.”
I reached out, talked to them. I don’t think that this came up in our last call because it was since then, but I basically had a conversation with them. They said, “Yeah. Actually, your software sounds like it would be really helpful for us. Send me a proposal,” which you wouldn’t think most of the time you’d need to send a proposal to somebody. It’s over $1000 a month for this particular customer. They said, “Send me the proposal.” I sent them a proposal and then without even me asking or following up on the proposal, they didn’t have any questions at all. “This is great. This looks good. I’m going to introduce you to our technical team. Let’s set up a call with them.”
Did that, went through the technical call. At the end of the call, I said, “Are there any objections or questions you have or any problems you see in switching from what you’re using now into this?” They said, “No.” Now I’m at the point where they said, “Okay. Next week’s bad for us, but touch base with us the following week. We’ll see how things shake out from there.” I’m optimistic that that will come in. That’s over $1000 a month in MRR from just that one customer, but I definitely know there are certain things that they’re going to need. The point I’m going after though is the reason that that person took the call was that they got a recommendation from this other person they knew and trusted.
Rob: That makes sense. Your title tag on your website, bluetick.io, is, “Cold and Warm Email Follow-up Software.” Then the headline is, “Personal outreach at scale for all of your follow-up emails.” There’s cold and there’s warm and you’ve tended to be in the warm area of getting things you need from other people. If an accountant needs a tax return, he can put it in here. I’m just giving an example. I guess you don’t have any accountants.
Mike: I do, actually.
Rob: Oh, you do? Okay. Or a conference organizer needs to bother sponsors until they pay, you put them in Bluetick and they would do that. Which of these new sign-ups over the past four months are they using? Are they doing it more for the cold or more for the warm?
Mike: Most of them are warm, to be honest. As I’m thinking about it, most of them are warm. They’ve done business in some way shape or form but it’s not a tight relationship, it’s very loose. Maybe there was a transaction of some kind. Maybe there was a trial that was downloaded. Maybe there was an introduction or something along those lines. There was at least some touch-point and then they go in to use Bluetick to help move them to the next step and strengthen the relationship.
Rob: It’s less about sales. It’s part of the sales process but it’s not usually the first step in the sales process. There’s at least some relationship then it’s how do we keep moving it down, which is what you wanted to do. Remember, we talked about it a year ago. You said, “I feel like a lot of the cold outreach is spammy. I have a struggle with how some of these folks are doing it.” This feels better to you?
Mike: Yeah. What’s interesting, though, is that those that I’ve had come on so far, those tend to be like they want to do the warm outreach, but then the demo for the customer who the price quote I gave them (I think) was $1200 a month. They’re going to have upwards of 20–30 mailboxes and their growth anticipation is going to get up to between 50 and 60 by the end of the year. What they do is they do lead gen for other companies. They basically work with marketing agencies who are trying to do market analysis and market research, and they get people on the phone to talk to those companies.
I’ve actually started going down the road of looking out there to see what marketing agencies that are out there that are currently doing lead gen and see if I can get conversations going with them to ask how they’re doing that now. My suspicion is most of them are running a bunch of different campaigns in parallel.
They probably have anywhere between 20 and 50 or 100 mailboxes, which I would basically be charging them for each one of those, but let’s say that it’s 50 mailboxes at my current price in which I’d probably cut them a bulk discount at some point. I don’t know what that would look like. Let’s say it’s just raw numbers alone right now, fifty mailboxes at $50 a month is $2500 a month. That’s huge.
One of those customers could substantially start moving the needle for Bluetick, especially if they go and sign up for an annual plan. Not that I think that they would do that on day one, but fast forward a month or two if it’s working better for them than their current solution then it would make sense for them to go to an annual plan to get a little bit more of a discount.
I do think that there are opportunities there are for Bluetick to go in and do some competitive displacements for people who are using things like SalesLoft, Outreach, or Reply because it does have that more in-depth hooks into the mailbox and it can do more in-depth checks to make sure that it’s identically identifying, was this a reply? Was that a reply? Did I get a reply from a different email address or was it forwarded? All those kinds of things. I just have the capability to do a more in-depth analysis that I don’t think that those other products have nor do I think that they care about. Their pricing has started going through the roof like they’re really going upmarket in terms of the pricing.
Rob: Which leaves a nice opportunity for you because even having these several hundred dollars a month/low four-figure per month clients is such a different business than a $40 or $50 a month app. You need so many fewer clients. Bravo to that. High ARPU (Average Revenue Per Customer) is just one of the Holy Grails. That’s awesome.
Mike: I’m working those angles to try and see how that works out. I just don’t know how it’s going to play out yet.
Rob: You never do. It’s pipeline stuff. Listeners should realize you’re not saying, “I’m counting on all of these deals to close.” You’ve done sales enough to realize that only a certain percentage of your pipeline closes. But the fact that you’re even sitting at the table with someone who could feasibly pay you $1000, $2000 a month is so far removed from where you were a year ago or 18 months ago.
That’s the part I’m excited about because you don’t need all of these to pan out. You just need a certain percentage. You’re growing, you’re off to the races, and you’re profitable, supporting yourself. You get to the point where you can hire someone to handle your audits and rewrite that sealed .NET component.
Mike: What’s motivating about it is that I feel like I’m winning a disproportionately large number of them, too.
Rob: Why is that?
Mike: Honestly, I think it’s me. It’s the conversations that I have with people. Even in the demo that I did with the customer that I did a custom proposal for, when I was talking to them they were asking questions about the software and how it worked. They had some very specific requirements as well, which I was shocked by because most people are like, “Oh, I just want to be able to detect replies and be able to send out emails and make sure that those are going out to people who didn’t reply.”
One of the specific requirements they had was they’re like, “This has to be able to send an email out as a reply to a previous email and it has to include the contents of the other one.” I said, “Yes. It can do that. This is exactly how it looks.” and I showed them an example. They’re like, “That’s perfect. That’s exactly what we need.”
It’s just being able to have that discussion and then also explain this is how it was built and this is why it was built this way. Fascinated is not the right word for it, but they really liked hearing that the person on the phone giving them the demo was the person they would also talk to for support if they needed help, or the person who built it. If there’s something wrong and it doesn’t work, they can talk to me and I can get it fixed for them. Whereas with the current vendor they have, it’s got to go through three layers of support, there was a project manager and put out a roadmap. You don’t have to do that with me. You’re going to talk to me. I can get things done.
Rob: That’s the thing when you’re small and you’re competing with venture-backed startups or even just larger companies, founders will often say, “Well, I’m outgunned.” How can I possibly compete with them? You can. You just have to use your advantages.
Mike: Didn’t you call this—I think it was in Microconf Europe—the founder advantage?
Rob: Maybe I did. Thank you for reminding. I’ll have to go back.
Mike: I think that was you.
Rob: I don’t recall but we should find out. Anyway, in Judo, you’re supposed to—even if you have a larger opponent—use their force against them. Let’s say they swing at you or whatever, it’s more about dodging and pulling them in the direction that they swung to flip them over or whatever.
I’ve only done Judo a couple of times, so it’s not something I’m an expert at, but when you are a small company you are super agile. You can get stuff done super-fast. They can talk directly to the founder. These are the advantages that you can just use against larger companies over and over and over. There are others as well. All that to say, that’s cool to be able to do that. Obviously, it doesn’t last forever, but while you have it, this should absolutely be something that you’re taking advantage of.
Mike: I totally am for the time being.
Rob: Cool. Curious, some of these other questions I’m not even sure are worth going into since things are working. You’re doing demos, you’re talking to customers, you’re selling, and they’re writing you checks. It’s like, “Should you even be bothering with these other things?” I come back to the podcast tour where (I guess) you put it into Bluetick. You were doing cold outreach to try to get on podcasts. Scaled it back a bit because you got busy with calls. Then you ramped it up again. Curious for an update on that.
Mike: I had scaled it down and I’d planned on ramping it up again, but I started sending out a couple of emails and I haven’t gone back to start sending out more of them. I was basically doing it individually. It’s like approving them one at a time. I got busy with all the phone calls and everything. I haven’t gone back to that.
I basically have stopped learning things from the conversations that I’ve been having with the people I was reaching out to. I’m going to put some of that stuff on autopilot and try to involve myself a little bit less. Instead of pitching it as, “Hey, I’d like to get on a phone and talk to you because I’d like to learn,” now I’m going to present it as, “These are the things that I’ve learned. Are there ways that you can help me or other people that you could refer to this particular product because I think I have a better story or position around that?”
I’m going to do that instead. Now that my learning process there I think it is a little bit more complete. I’m going to go back and start doing the podcast outreach again. I just haven’t done it yet.
Rob: Yeah. You’re trying to balance four things. Development of features is one thing; sales and learning, which is what a lot of LinkedIn and that warm outreach; and then marketing. You haven’t been doing much marketing because sales and learning are taking so much at the time. It sounds like you’ve learned. I think what you’re saying to summarize is you’ve learned about as much as you need for now and you can really dial that down and then switch some focus to marketing to then generate leads for you to continue with sales, right?
Mike: Yeah. I don’t want to not correct you, but to narrow it down exactly on the learning side of it. The reason I’m backing off on that is because I’m starting to hear the same things over and over. It’s not that I don’t think that I have anything left to learn because I certainly think there’s lots more, but the people that I’m talking to it’s getting repetitive now. I’m hearing the same things over and over. Going through the rest of the list of people that I was reaching out to, I don’t think that that’s going to be fruitful in terms of learning stuff. I do still think that there’s a lot of value in continuing to reach out to those people and seeing if there are people that they could introduce me to or put the product in front of.
Rob: Right. You’re switching from learning to sales. In essence, you’re switching that campaign, which is exactly what I think you should be doing based on what you’re saying. It’s funny for these episodes that we do every month or two, it’s typically been a roller coaster; one where you’re up and one where you’re down. We now have two back-to-back where you’re up. You got it, so it’s going to get boring for people after a while, Mike. If your #winning every episode, people will stop listening. Next episode, bring some low points.
Mike: I’ll say I got a hangnail.
Rob: Exactly.
Mike: They’re terrible.
Rob: I’m joking, obviously.
Mike: I can barely type with my finger. Do you want to see that finger, Rob?
Rob: Not really. Good thing this is an audio podcast. I’m happy for you and I’m happy the way things are going. Again, it’s like we’ve talked about this sealed .NET component for so long. The last episode I finally said, “You know what, if sales are working I wouldn’t replace it right now unless it’s causing you the inability to close sales,” because right now, number one is getting revenue up. It was my thinking at the time. We were both agreeing on it. You were saying, “Yeah. I know I need to replace it at some point.” Given where you’ve been, have you ever given it a thought over the past six weeks?
Mike: I have. It’s more, I would say, over the past 1½–2 weeks where I’ve started to look at that a lot more. The main reason for looking at that is that I mentioned it earlier but I didn’t go into the details of a customer where I basically extended their trial because certain things weren’t working for them. To drill into that is they have an exchange server.
Rob: That’s their first mistake?
Mike: Yeah.
Rob: Oh, snap. No, I’m just kidding. Send hate mail to mike@mike—
Mike: I didn’t say it. It wasn’t me.
Rob: I know.
Mike: Anyway, the issue is that yes you can enable IMAP on an exchange server, but the default is to not have it enabled. There are tons of sales organizations out there where they have exchange server. Unless you have a device that directly goes into the exchange server to use these exchange web services, basically, it doesn’t work. And Bluetick relies on that IMAP component.
What I’ve been doing is this person tried to sign up. They went in, try to add a mailbox, it didn’t work. I went through all these things trying to figure out how to make it work. The only way to do it is through exchange web services, which I have a component that can do that, the one that I have now can do it, but it’s got to be rewritten. The underlying storage system has got to be changed in order to help support that.
I knew that all that stuff needs to be done anyway in order to basically replace how that sealed .NET component is currently used. It was never a priority before because stuff works, but now it’s at a point where I have to replace this. I have to rewrite some of that code otherwise I can’t get this customer onboarded.
Now it’s a barrier to revenue. I can justify it now especially since, I think he said there’s 70 sales reps in the organization and if I can get it working for him, its land and expand because he’s more than willing to introduce me to these two managers of all the sales reps, but I have to get it working for him first.
Now, I’m in a position where I have to do this now. Technically, I don’t have to. I can say, “Screw it. I’m just going to go find other customers.” But the combination of this particular person needing that and this customer where there’s $1200 of MRR is initially on the table, where I know that their mailboxes are going to be coming from their customers.
My suspicion is at least some of those customers are going to be using an exchange server. It did come up in the call when they asked, “Can you integrate with an exchange server?” and I said, “Yes,” thinking that I can do it through IMAP. Then, I onboarded this other customer and realized that’s not going to work if you have to go through the IT department and the IT department has to justify why they’re going to turn that capability on for a particular mailbox. Now I’m like, “I have to fix that at this point.” That’s why I’m looking at it now.
I’ve spent the last week or so looking at redesigning it, doing a bunch of different prototyping and testing and figuring out how it’s going to work. I’m pretty close to being able to move forward with it. I just haven’t written any production code to screw with it.
Rob: Good for you. That’s cool. That’s actually good news because that’s exactly the time that you should be doing it. It’s when it impacts revenue. You’d mentioned last time you can flip in the database to do it for one mailbox at a time, which also is a nice luxury to maybe not have to deal with all of the data migration that will take a week or more all at once. That’s cool.
Something else that we talked about a few times is that Enneagram test, it’s a personality test. The reason that we started talking about it was we’re talking about you know what motivates you deep down as a human being and also what are your blind spots? We all have these blind spots in our personalities that perhaps behaviors that aren’t helpful to us getting stuff done. I’m a fan of these personality tests because they just help (in most cases), give me insight about who I am, what my blind spots are, what motivates me, all that kind of stuff.
When we were last talking, you had taken the Enneagram but you said you hadn’t really dug into it to suss out actionable bits of things that you should think about on a day-to-day basis. It’s fun to read through the whole doc, but if you’re not going to then somehow implement that in your life then it is all just a waste of time. I’m curious if you had time to go through and highlight and maybe a couple of key takeaways you might be able to take action on or at least be aware of in your day-to-day.
Mike: Yeah, I did. I started going through, and I was going to highlight a bunch of stuff. Then, I said, “I’ll just underline it instead,” which is close enough. It’s one of those things where the different personality types that it has for me printed out it, comes out (I think) 16 or 18 pages; it’s about six pages for each one.
There is a lot of stuff underlined. Some of it is just notes for me, but there’s also stuff in here where I like the fact that they put together things and they say, “These are ways that you can make things work better.” Some of them are things I’m already doing. For example, one of them was like, “Oh, if you’re this particular personality type then it can very much help you to either get in a room with other people and just talk about these types of issues or do journaling and write that stuff down.”
It was interesting that I discovered the journaling aspect on my own because I’ve been doing that for a couple of years. I do find it extremely helpful because I can sit there and basically do a brain dump at the end of the day. I’ve found that by doing that, it helps me clear my thoughts and helps me sleep at night. Then, there are a few other things that I went through. I still have to go back through it again just because there’s so much here. I definitely think there’s a lot more in here that I could probably pull out. A few, I wouldn’t call them productivity hacks but life hacks, so to speak, is like, “Oh, do this, and this other piece of your life will be made easier.” If that makes sense.
Rob: It does.
Mike: Some of it is just managing negative emotions. Some of it is being able to express feelings about certain things or be more assertive about what you want or what you need. Generally, I’m a low-key person, low-maintenance, but it doesn’t mean that I don’t have needs that somehow need to be met. I just don’t really talk about it. I’m much better at advocating for other people than I am for myself.
Rob: Yeah. That’s something good to know about yourself, right?
Mike: Yeah. I intuitively know that but seeing it written down on papers is like, “Hey, this is a part of your personality profile. Here are some ways to deal with that.” Some of it is you read through some of this text that’s in here and some of it is just coaching. It says, “Hey, you may believe this, but has anything ever really gone that badly? The answer is probably not.” It’s just a good reminder.
Rob: Indeed. How about your sleep? How’s it been in general?
Mike: Generally, pretty good. The past week or so has been pretty stressful. It’s funny because in the Enneagram there are specific sections in there that call out and say, “When you are under stress, if this is your personality profile then you switch over to this other thing. These are the types of behaviors you exhibit.” For the most part, they’re pretty dead-on. It’s nice to go through and read those and see that those things can impact my stress levels, which then turn around and impact my sleep. Last week or so has been pretty stressful, but I think there’s definitely some strategy and takeaways in there that I can leverage to help clear that up.
Rob: And that’s something that was game-changing for me (it’s gone up and down but let’s say) about 8 or 10 years ago. I realized that I would just wake up in the morning or I would just be walking around and I would feel this enormous amount of stress. I would just feel it, live it, and let it consume me.
Over time, I learned through stuff like this, this self-awareness and these tests, why do I feel that way? I think there’s a biological component. When I look at my family history on both sides there’s all these anxiety disorders and all this stuff we don’t need to go into here. I’m naturally prone to just have constant mid-level, I won’t say high-grade anxiety because I don’t have panic attacks, but I do have low- to mid-level stress all the time.
What I learned to do was I would say, “Why am I feeling that way? Literally, why am I feeling that way?” I would say, “Well, it’s because someone said this,” or, “It’s because I’m worried about this revenue thing,” whatever. But then, I could actually look at it and say, “Well, how likely is that to happen and how bad would it be if that happened?”
Then, I can just try to left-brain myself out of it. It works for me to really look at it and say, “Look, there’s no new information. You can’t fix this. It actually isn’t going to be that big of a deal if it happens. If it is, there’s contingency A, B, and C that I could use to get around it. So put it to bed for now and if it comes back up then deal with it.” You know what, 90% of the time none of them come back up. It’s just wasted. It’s just wasted worry. It doesn’t help anybody to worry about it.
I’m not saying you or anyone else should do that, but it works for me. The only way that I came across these types of coping mechanisms is, (1) is being married to Sherry, (2) listening to the Zen Founder podcast, and (3) learning this about myself to know, “Wow. This isn’t normal and other people don’t feel this way all the time.”
All right. As we’re wrapping up, I’m curious what, between now and our next chat, what are you most looking forward to?
Mike: I’m going to be diving back into the technical side of things to rewrite that email synchronization mechanism and get it working so that the exchange server can just be connected without having to worry about IMAP or enabling certain things. It should just work at that point. I’m hoping that by the time the next time we get on a call, that stuff will be taken care of and at least started onboarding this customer that I quoted the $1200 to.
Those are the things that I’m looking at the most, and then trying to go through and see if I can have some more conversations with other marketing agencies that do lead gen or do market analysis and outreach; because they’re doing it at scale with small numbers of people, and it’s not as if they’ve got 80 people that need to be trained to use Bluetick. It’s a handful of people that are using it on behalf of a much larger group of people. I do think that that could potentially be an area of growth, but I don’t know yet. I want to explore that quite a bit more.
Rob: Sounds good. As always, thanks for coming on the show again, having a conversation. I always enjoy chatting with you and the listeners benefit from it as well.
Mike: Awesome. Thanks for having me back and I will definitely keep you guys posted.
Rob: Awesome. Talk to you soon.
Mike: All right. Bye.
Outro: I always enjoy my conversations with Mike and it’s good to hear him you know feeling well and feeling motivated. If you’ve been a listener for any length of time, you know that he’s definitely had some entrepreneurial ups and downs. To get to two positive updates in a row, I’m thankful for that.
If you have a question for me, for a guest, or for Mike, you should either email us questions@startupsfortherestofus.com. You can attach an audio file to that; it will go straight to the top of the Q&A stack. Or you can leave us a voicemail at (888) 801-9690. Of course, you can just write a text or email to that address.
If you haven’t checked out startupsfortherestofus.com, every episode has a full transcript within a week or two of being published. We have show notes, we have links to everything that is in these episodes. If you’re not subscribed, we have links there, too. You can head to iTunes, Spotify, Stitcher, and all those to get every episode dropped into your inbox.
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Episode 487 | Startup Roundtable Discussing Hey.com, Leadpages’ Acquisition, and More Hot Topics
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Show Notes
In this episode of Startups For The Rest Of Us, Rob is joined by Jordan Gal and Tracy Osborn for a roundtable discussion. Some of the topics in this episode including Basecamp reinventing email with Hey.com, Leadpages being acquired by Redbrick, the growing popularity of subscription based pricing and how many active subscriptions a person or business has nowadays.
Items mentioned in this episode:
- Bootstrapped Web Podcast
- CartHook
- Hey.com
- Leadpages acquired by Redbrick
- How a 2 person startup already uses 28 other tools
- Tracy Osborn
Intro: Welcome to this week’s episode of Startups for the Rest of Us. I’m your host Rob Walling. Each week on this show we cover topics relating to building and growing startups using an ambitious yet a sane approach. We’re not willing to sacrifice our health or our relationships to grow our company.
I’m excited about this week. I’m diving into this idea of a startup roundtable or a news discussion show. I discussed a few topics with Derek Rhymer a couple weeks ago, but going a little deeper, this is the first essentially roundtable where I invite two guests on and we talk through topics that are relevant to us in the MicroConf, the Startups for the Rest of Us, the self-funded, the indie funded community. I hope you enjoy the show and without further ado let’s dive right in.
Rob: Here we are at Startups for the Rest of Us inaugural startup roundtable discussion. I have some pretty interesting stories to discuss today. Before that, I have two interesting guests I’d like to introduce. First on my right, as no one can see, but we’re in a camera is Jordan Gal, he’s hosted the Bootstrapped Web podcast, as well as founder and CEO of CartHook.
Jordan: Thanks for having me on, Rob. I’m excited for this interesting new format. Let’s see where it goes.
Rob: I’m excited too. Above Jordan in my view is Tracy Osborn, founder of WeddingMarketplace, WeddingLovely that she shut down about a year or two ago, now the TinySeed Program Manager. How are you doing today, Tracy?
Tracy: Doing well, happy to be back. Always excited to join the podcast when I can.
Rob: That’s the cool part is each of you have been on the show now several times: interviews, Q&A episodes, all that kind of stuff. Hopefully, folks are familiar enough with where you come from. That’s what I wanted to do with the show is get different perspectives from different people coming from different directions. I’m pretty stoked to talk through a few of these things.
As you listen to this episode, if you have thoughts on whether I should do it again in a couple of months—what was interesting is I went back to a month’s worth of startup news and tried to pick out stuff that I think is interesting to our little space, kind of the MicroConf Startups for the Rest of Us community. There just aren’t that many stories that are interesting to talk about, and I think we can get going on.
Every month or two, or even two or three months, is what I consider doing. If you like the show, if you don’t like the show, please contact us at questions@startupsfortherestofus.com.
Our first story is about Basecamp watching Hey, it’s at hey.com. They’re essentially reinventing email, they are saying they’re not going to allow tracking pixels so people can track opens. I’m curious, Jordan, have you been following this? Is Basecamp basically potentially taking it too far by blocking tracking pixels? D and J said they’re going to shame people who send with tracking pixels.
Jordan: I have been following it. I think it’s very interesting. We saw Superhuman come out of the gate on fire. Everyone’s talking about how they’re going to be the biggest thing ever. I think that excitement has waned a little bit, they’re not that obsessed with it anymore. Then Basecamp taking on emails is super interesting, but like most things with Basecamp it’s very difficult to separate the people, and Basecamp, and the controversy they create from the actual product. They’re really close to the edge of making themselves too much of the story right now.
These guys are very clever. It’s starting to feel a touch manipulative on what they’re doing with Twitter to get attention. I love their ideological approach. I love that they are unique in their opinions. They take it strongly and they’re not afraid to say it. That’s all awesome, but I think they almost need to chill a little bit and then let the product speak for itself because there’s a lot of talk and it’s constant controversy. It’s a little bit grating.
The latest tweet that Jason put out, I forgot exactly what the context was, but he kind of felt that it went a little too far. I think he was making a comment on another company. People are starting to push back on it where they really have a huge halo effect to their products, but I think they’re right on the edge. Now it’s time to let the products start to speak for itself. I’m definitely interested, I want to see what they do. Because my email, that landing page and the copy that they wrote resonated. My email is an unhappy place. It didn’t used to be, but it’s been so long you forgot that it used to be this cool thing that you communicated with people on and it’s no longer that. They definitely nailed that part of it for me.
Rob: If you go to hey.com, you can read their manifesto where they say exactly that. I’m a big fan of their products, they’re genius product builders, they’re great content marketers. They wouldn’t call themselves that but they are exceptional, some of the best there are. They have this massive audience. It’s been fascinating to watch. What are your thoughts on this, Tracy?
Tracy: I find it funny that you mentioned the Twitter stuff. I feel like they’re using Twitter effectively. It’s how Twitter is meant to be used nowadays, which is annoying. It’s one of the reasons why I’m not on Twitter very often, but I feel like I can’t hate on them for doing this kind of launch because that’s marketing. That’s the way that they’re going to differentiate themselves from say Superhuman or these other ones that are very email marketer focused where Superhuman’s like, “Oh, you’re going to see the location. You’re going to see the tracking pixel. You’re going to track the people that open and close it. We’re giving you all those rates and data and whatnot.” They’re at the opposite end of the spectrum to Superhuman.
I’m personally very excited for it because I think that we do need to have more privacy-focused email clients. Gmail was the king for so long. The average user would use Gmail at a default. We’ve had, as email marketers, this superpower that we were able to see when people open their emails, we were able to see those open rates. I want to say it’s great for email marketers, but for the average person and privacy and whatnot, I want to give people more choice. I think that Basecamp is doing that.
It’s funny to think about email and the superpower and all this data that we had and how it’s hard to give up that data. If you look back to just paper marketing, pay per mail marketing, you didn’t know how many people opened up that envelope that you sent or how many people threw it right into the recycling. I agree that it’s going to hurt email marketers, but for the average user or at least the privacy focusing technologists who need those privacy features, I think it’s something that’s necessary. Basecamp is simply using Twitter the way it’s meant to be used.
Rob: I signed up when I first heard about hey.com. I am curious to use it. They have a list of 25 things that they are saying is wrong with email. I don’t understand how they could possibly fix all those things, but that would tend to be—it’s all these problems with email. You screen your calls, you can’t screen your emails. Some emails are worth your immediate attention, most are not. Files are attached to email rather than the other way around. You don’t need to be told to check your email. I don’t even know, that’s like 5 of the 25. I don’t even know how you go about fixing that. Like you said, Jordan, that’s when it’s time to think about getting into the product and watching it speak for itself.
My take on it, I built Drip. I like the idea and I’m going to be a user of the product, I assume, if it works and has unified inbox and has all the stuff I need, but I feel like railing against the open tracking is taking it a little too far. I like open rates, I think having aggregated open rates of an email is something that is just fine for a marketer to have. Knowing when and where and how many times people open an email could be taking it a little too far, I would admit.
Here’s the thing, they can come out and say, “We don’t use any tracking. We don’t use Google Analytics. We don’t track open rates.” If you have $100 million business throwing off tens of million a year in net profit with 50 employees you can do that too, but if you’re a bootstrap startup and you’re trying to get to $10,000 or $50,000 or just trying to pay the bills, like you’re in such a different position that I would caution against taking that as advice or as something you should do as a business person because I think it can be dangerous.
You’ve heard the mentality of like, “Hey, you build a great product. That’s what we did.” and everyone uses it. I’m not saying Basecamp has said that but there are people who come out and say, “Look, I just built a great product and never marketed it and magic.” Everyone wants that to be the case and it almost never is, it’s the exception. That’s potential danger with coming out against that kind of stuff.
Jordan: We may be looking at it backwards because we are business people, and we build technology products, and we are looking at it from that point of view. In reality, it matters a lot less what is right for a business, and it matters a lot more to give the choice to the actual consumer, to the user. That’s really their perspective on it. I have an Amazon Alexa in my house, I have three of them. I have made the choice. I know what’s happening and I have made the decision that in the balance between privacy and convenience, that’s where I land on that product.
What they’re looking at in email is taking it back to the user’s control and saying, “If I don’t want tracking pixels, this is my inbox, not yours marketer. If I choose to degrade the experience of email with your company by blocking pixels, that’s my choice.” What Basecamp is kind of yelling about is it’s not okay that you don’t have the choice. It’s not okay that someone else decides what happens in your inbox because that’s not normally what happens other places in your life. In your home, you get to decide if you want an Alexa or not. People can make that choice once their right journalist do that work to uncover what was happening there. If looked at that perspective and it’s not a black and white tracking no tracking, it’s simply giving people the option, that’s tough to argue with.
Rob: That’s a good perspective. Tracy, do you feel like this blocking of tracking pixels will become a trend? Do you think it should become a trend?
Tracy: I think privacy, in general, is becoming a trend. I find it interesting you brought up Alexa because I feel like that was the start when people started realizing that this really great convenience in their homes could potentially be used for other reasons. I feel like those stories happened and then it evolved and some other internet communities are very privacy focused, almost to the extreme side of railing against all the things that are happening.
I personally had an Alexa and I ended up removing them from my house. That tells you a little bit about my own perspective. I want one, I want to have all these privacy tools but I personally have decided that the convenience is not worth it for me. I’m happy to see that it’s becoming a trend.
As the Internet has grown, I’m going to refer back to that word I used before, we have these superpowers. We start adding all these superpowers, all this technology, and all these things we could do. Now it’s like okay cool, we’ve reached this point where we need a lot of people to draw back a little bit and decide if it’s convenient for them.
Rob: Like a pendulum swinging different directions. That’s a good perspective.
Jordan: I was going to say you can see the email market has been around a long time and it’s mature. It’s gotten to the point that it’s so mature that this type of option makes sense. The in-home robot assistant isn’t very mature, but you can see how if someone came out with an Alexa-like device that you had more control over the privacy, that would be attractive.
It’s the same thing with the iPhone. People started freaking out where I just had a conversation in person about this topic and now I’m seeing ads on it, that’s creepy. The pendulum swung all the way toward maximum freedom and then we all realized, “Oh, I guess we’re the business model.” Now it’s coming back and that’s a healthy thing.
Rob: For the record, I have five Alexas in my house, maybe six. I think it’s hilarious that if you go to thisishey.com, it’s a business I presume has been around for a while. It’s an influencer marketplace, which is something I’m sure Basecamp would hate. What are the folks at This is Hey thinking right now? Where it’s like, “They just took our name and they have the dot-com.”
Let’s swing into our second story. Leadpages was acquired by Redbrick. By the way, all of these stories we will link up in the show notes. To clarify, because I actually had some people asking this, Leadpages was sold to Redbrick, which is like a software—it’s a holding company. I would almost phrase it as private equity, I don’t think they said that in the news story. You know with these private equity funds, they get together then they buy software companies and manage them. Leadpages was sold, Drip was not. In fact, to say that Leadpages acquired Drip is actually not technically accurate.
Leadpages and Drip are two products: Leadpages Landing Pages, and Drip is an ESP marketing automation. They were owned by a single holding company called The Avenue 81. Avenue 81, that’s the company that raised funding and stuff. It was synonymous with Leadpages but then it is what acquired Drip. Essentially, they’ve sold Leadpages. A quote from the CEO of Drip, John Tedesco, who I know personally, I actually worked for him before I left Drip a couple of years ago. He said, “The acquisition is allowing us to now ruthlessly focus on pursuing our markets. We have a clear capital base in which to execute. We’re flush with capital, so we’re going to use it with discretion. Use it intelligently.”
Obviously, the play here was to put dry powder in the coffers. If you have an asset, you can sell it in lieu of say raising a round of funding. It gives you not only the focus—I am conjecturing here, I will admit. I have not worked at Drip for two years and I have very, very little inside information at this point. If I were in Drip’s shoes, and I really see this marketing automation as a multi, many, many billion-dollar opportunity in the landing page market, it’s not; it’s a very small market.
That just kind of gives folks background. The first question I’d have for Tracy is MailChimp has launched free landing pages, in essence, with your email account. I know a few other providers that are making them very free or very cheap. Does it seem to you the landing page space is becoming commoditized?
Tracy: That’s an excellent question. The more options the better. I’m happy to hear that MailChimp is doing this. MailChimp has a really, really huge reach. Happy to hear that they’re making this stride because they also did—I can’t remember what happened with MailChimp but they had a controversy where they raised the prices or they took away their free tier. Do you recall what happened about a few months ago, six months ago?
Rob: I think it was if you unsubscribed, you were still charged for those subscribers because they’re moving a little more towards commerce.
Tracy: That came out and I think that kind of have hurt a lot of people’s usage of MailChimp. Now they have these free landing pages. You see that in ConvertKit as well. They have a whole landing page system and whatnot. It’s kind of a silly thing to say but I’m like, “I’m a fan.” Would love to hear what you guys say.
Rob: What do you think about this, Jordan?
Jordan: I think they’re commoditized. I think they’re lead gen. The business model is subscribers, so if landing pages help you get more subscribers, then the company whose pricing is based on the number of subscribers you have has a very vested interest in giving you the ability to add more subscribers. It makes sense with the business model, it’s also been commoditized. Just to clarify, the statement that you just quoted from the CEO, that’s the CEO of Avenue 81, the company that’s still-
Rob: Correct.
Jordan: Okay, cool. Just want to make sure of that.
I love this corporate-level strategy stuff. It’s my favorite. A lot of people are going to look at it and say, “Oh, Leadpages failed,” or, “It wasn’t able to do what it wanted to.” I think this is brilliant. This is an asset that will only decrease in value moving forward. They’re able to effectively raise money for their email marketing product, which is Drip. They don’t need to sell equity in it because they had this other asset. It’s great.
They basically just raised, I don’t know how much they’ve sold it for but my assumption is they raised tens of millions of dollars in non-dilutive capital to go after a much bigger email marketing. It’ll be interesting to see what they do and which playbook they run. Are they going to run upmarket and hire salespeople and go after the Marketo version of things, or are they going to go with quantity and long tail and go after MailChimp?
I’m going to assume they’re going to go high-end with an enterprise sales team and run that playbook. They have the money to do it. They didn’t need to sell any equity in it. It’s great. Acquiring Drip was a very smart move, it worked out nicely for you. It looks like it might work out really nicely for them also. Especially if they thought this through over the past few years, then it was brilliantly executed. Let’s bring in a product, let’s make it the focus of the company, let’s sell-off this asset then we have our coffers ready. Now we can go after a much bigger market. That’s an optimistic view of it, but that’s an exciting version of things.
Tracy: The CEO that gave that quote, that’s the new CEO because the one that was around when Drip was acquired, that was a different person, right?
Rob: Yeah. Clay Collins was around when we were acquired. About a year after we were acquired, he stepped down and John Tedesco, who was the COO at the time, took over as CEO.
Jordan: I was going to ask if we’d look at John Tedesco’s history and what playbook he has been able to run successfully in the past, that’s going to tell us a lot about the future. Because it was an internal hire, it’s less clear.
Rob: He’s been part of multiple startups. I would say they are in line with the enterprise approach that you’re talking about, very much sales folks and that type of stuff.
Tracy: When I was looking at this announcement and the change in CEO, it seems like they had a certain strategy when they had Leadpages and they acquired Drip. From what I was reading into it, it sounded like things would work a little more together, but the strategy changed. The new CEO came on and they’re making this change because the strategy changed. It seems like it all makes sense in terms of the direction of Avenue 81.
Rob: I’m curious, Tracy, when you hear about a SaaS app like this being sold, so the original owner doesn’t have it, it’s now a holding company. Would you be more or less likely to use a product that’s been sold like that or does it matter to you? Do you even care?
Tracy: Interesting. Do you even hear about it too?
Rob: We’ve heard about this now. If you were looking for landing pages, there’s obviously a bunch of competitors to Leadpages. I’m curious if that would impact your decision to sign up as a customer or not?
Tracy: I’m thinking of the average user of how much they follow acquisition news. I’m assuming that Leadpages is going to continue to grow under the company that acquired it. If I was thinking as an average user I would suspect a) they wouldn’t know about it, b) if they did know about it, it sounds like instead of Leadpages being sold, it sounds like Leadpages was acquired. It could be spun in that way. Leadpages is acquired by someone who is going to spend more time and effort or more focus on it, both of those things are positive to me.
Rob: I want to wrap this up with just a funny little story that involves Best Buy and Geek Squad. I don’t know if you guys recall but Best Buy acquired Geek Squad, which is the tech support people who run around in the cars to fix stuff at your home. Geek Squad is now the vast majority of their revenue and profit. They are one of the big drivers that has kept them in business. When Circuit City and everybody else went under, they had this thing.
The CEO of Geek Squad, the founder who sold it, when he does stand up in front and does talks now, he’ll say things like, “When Geek Squad acquired Best Buy,” and everyone laughs. That’s the first thing I thought of with this is like did Leadpages acquire Drip five years or four years ago or did Drip acquire Leadpages? It kind of struck me as funny.
Jordan: Sounds like Avenue 81 is making the best of their situation.
Tracy: Leadpages wasn’t shut down. They spun it out and it still continues to live. It sounds like a win-win situation for everybody.
Rob: Yeah, for sure.
Our next story is about how a two-person start-up already uses 28 other tools. This is from acrossapp.com, it’s from their blog. They’re basically a tiny little two-person startup and they have 28 different subscriptions. I’m curious, ten years ago we may have had one or two subscriptions. You paid for Photoshop as a big package, everything was you buy it once and then you get the upgrades every couple of years. Now, most of us have 20, 30, 40 subscriptions. Tracy, do you feel like this whole movement towards the SaaS subscription economy is a good thing or do you feel like it’s cumbersome and we’re potentially paying more now but than we would have 10 years ago?
Tracy: I have to laugh because this is kind of a Tiny Seeds thesis, right? We’re betting on these business-to-business SaaS apps. We love to see people building things for other businesses to use. We’re part of this trend that’s happening right now. There are lots of little apps that are doing lots of little things for you that you can pay for individually.
Overall, I love it. I love it. I love anything that helps me save time. Ideally, that subscription cost is going to save me as much time and hopefully money that it makes it totally worth it. I love that there’s people out there that are building lots of little things to support themselves as they can create their startup and maybe get into Tiny Seed and all that. Huge fan of the system. I have no problem paying for subscriptions. I just want to make sure I don’t forget which ones I’m paying for because that’s the problem.
Rob: Something you pointed out there is that there are so many tools that could not exist in a non-subscription economy. These tiny little utilities you pay $10 a month for, I just think it’s changed the game. You can’t look at it as, “Oh, I have too many subscriptions or I don’t,” or “I wish there weren’t subscriptions that we just paid one time,” because it’s a completely different system now. All these apps that we use and that we build wouldn’t exist under a non-subscription economy. What are your thoughts, Jordan?
Jordan: I see an analogy to what happened with television. We don’t pay less for television now. Between all the different streaming services: Netflix, YouTube, Hulu, Amazon, everything; I’m paying about the same but the service is far better because I’m in control and I get to choose. I don’t think it’s any cheaper to pay for all these different pieces of software, but you do get a lot better service overall because you’re getting very specific needs for your business addressed.
I have the Google Doc open right now that we just went through a pruning exercise. Every two-three months I ask my assistant, “Okay, give me all the recurring subscriptions that we have in the business.” My CTO and I look at them. I have it in front of me, it is 61 rows long and maybe 10 or 15 of those are not traditional SaaS. It’s a good 40-50 services, if you’ll just excuse me for a minute if I read through a few of them. They’re all very specific and very necessary.
Adobe Creative Cloud, AWS, Atlassian, Atlassian Statuspage, BrowserStack, Calendly, Canva, ClickFunnels, Cloudflare, DigitalOcean, Docker, Drip, Dropbox, Figma. That’s alphabetic order. I could just keep going down to Z. It’s a Frankenstein but it’s a beautiful one. It does ebb and flow in frustration depending on where the market is and where your business is.
At some point last year we said, “Okay, that’s enough of these different systems, let’s go to HubSpot. Let’s go all-in-one.” But in other areas, that doesn’t make sense. For bootstrappers, for people building businesses, it’s a great thing to be able to address one specific need, but you may be caught in that ebb and flow of a larger all-in-one or you might need to go there. I love it as long as the individual services are good. The nice thing about the subscription version of things is if they’re not good, you just leave them.
Rob: That’s a big difference. It’s not like you drop $300 on a piece of software and then you get two months and you stop using it. You still paid the $300 versus the monthly. I’ve also found that the all-in-ones tend to be, it’s like you said, it combines, everything works together. I don’t know if it’s a little more expensive but the tools aren’t as good, the individual pieces aren’t as good. It is what it is. I’m obviously a big fan of this world. Having been around long enough to have several of my early software products were not subscription, they were one-time download. I remember the struggles of the first day of each month, I had zero dollars in revenue for that month. It wasn’t like I had that baseline that I had last time. That’s the big difference that you forget if you’ve never run a non-subscription business is you’re just grinding it out.
In fact, during the financial crisis of 2008/2009, I had one product. It was doing maybe $4000 a month but it was part of my income, it was a chunk of it. Sales dropped 80% overnight, one month to the next. That’s the kind of business that’s going to be—I mean imagine if we were doing $4 million a month and had a bunch of employees and it dropped 80%. That’s where you start laying people off. It’s just such a big difference that the subscription is from our perspective as the business I think they are a safety net. I’m like you two, I don’t mind paying for subscriptions because I like not having to install software and maintain it and do all that. That’s the benefit we get from it.
Jordan: I want to add something. If this is a bit of a news show about things that are relevant right now, I just saw last week a company launched named pipe.com. I jumped on a call with the founder. The reason for bringing it up is because the downside of the subscription economy, and being a developer, and running a company based on subscriptions is that that lifetime value is stretched out. We’re all familiar with Gail Goodman’s Slow SaaS Ramp of Death and the math behind paying to acquire and then collecting over a longer period of time.
This company pipe.com that just launched, what they do is they take MRR, they take your monthly payments, and they will pay you annually. If I have a customer that pays us $500 a month, Pipe will look at that and say, “Okay, we understand your churn rate. We think this is a good bet. You can choose to sell us this customer, we will give you the whole annual amount of money upfront, then you just continue collecting monthly from them.”
The subscription economy is great in a lot of these ways but one of the tricky parts is cash flow, especially for younger companies that aren’t in the only annual, you must pay as an annual contract or you could do business with us. That strength comes later. It is tricky on cash flow but there are additional financing options like pipe.com that are starting to address that. We’ve seen revenue-based finance, we’ve seen other things. Pipe.com is not debt. It’s kind of like factoring but for SaaS. They charge you 15%, which is basically what you would charge people anyway because you would give them two months free. That’s kind of the default.
Rob: If the customer cancels in six months, they eat it, so they have a risk model.
Jordan: No. You pay back the remaining portion.
Rob: Got it. Okay.
Jordan: There’s literally an online portal and you can choose an individual customer. “I know that customer. They’ve been around for two years. They’re not going anywhere. I’ll sell that to you because I’m very confident that they’ll stick around.”
Rob: Fascinating.
Jordan: It’s fascinating. Or you can sign an annual contract, which is something that we do. Our annual contracts are paid monthly. We have annual contracts but we don’t have this big, large chunk so they sign it. That is even less risk. This is an annual contract, they’re paying monthly, and I’ll just choose. I’ll click that and hit sell. I’ll get the money for that entire thing upfront, minus the 15%.
Rob: I love the innovation, all the innovation that’s happening in the financial models around SaaS. You’re right, that is the biggest Achilles heel is the long slow ramp of death.
Jordan: It’s awesome. It’s just the relationship with you and your billing software.
Tracy: When you say sell the customer, is that they’re acquiring the customers’ information for use?
Jordan: They’re still in your Stripe account, you’re collecting money, and you’re charging their card every month like normal. But then they will see, “Oh, that customer paid in Stripe. Cool. We’ll take that much amount from your bank account.”
Rob: Pretty interesting if you need money in the short term. I know folks looking at raising around or doing debt kind of financing their SaaS revenue.
Jordan: I’m looking at the same thing. I looked at them and I’m like, “Oh, that’s basically just taking your MRR and creating a line of revenue off of the MRR, and then not actually putting any debt on the balance sheet and also not selling like equity.” I was like, “What is the catch here because that’s very attractive.”
Rob: I think the catch is like when you think about—
Jordan: Risk.
Rob: There is some risk but I also think you’re basically spending future earnings. It’s almost like when you put money on a credit card now that’s technically debt and this is not. When you put money on a credit card, you basically are spending future earnings before you have them. That’s what this is in essence. There is some danger. If you’re prudent at managing cash and you know where that cash is going to go or you’re in a spot where you do think you need some dry powder in the coffers, I think it’s certainly an interesting avenue to look at.
Wrapping us up for today, I’m curious from each of you what is your favorite podcast right now? I mean right now because sometimes I have a favorite podcast for two months and I binge them all and then I move on. Tracy, you want to go first?
Tracy: Gosh. Don’t go pick me first. I’m the worst at podcasts because I have a hard time with podcasts. I know some people are able to play something at 2x speed and then go through all their backlog. Then for me, it’s like, “Oh my gosh, I only have a certain amount of time. I can only do 1X.”
That said and it’s a dorky one, I’m still a big fan of Adventure Zone. It’s by My Brother, My Brother and Me. It’s their D&D podcast. Also, My Brother, My Brother and Me is another one I listen to. It’s just because I need to turn my brain off from work. I listen to a lot of work when I podcast, Startups for the Rest of Us, Out of Beta, a lot of other ones. It’s really nice to have something that’s just a bunch of people just in a room together having fun. I would say that my answer is the Adventure Zone and by extension My Brother, My Brother and Me.
Rob: How about you, Jordan?
Jordan: I’m just going to reject your premise entirely and mention several of my favorite podcasts.
Rob: I’m not picking five favorites, that’s cool.
Jordan: I need to be generic. I absolutely love the Joe Rogan podcast. It’s interesting, it is just really interesting. It challenges a lot of your thoughts, and assumptions, and is entertaining, it’s funny. There’s so much of it. You don’t have to listen to everyone and you’re fully entertained.
I also love the Dave Chang Show. Chef Dave Chang from Momofuku has a great podcast that is about food but also about creativity. He brings people on from his network in the Bill Simmons world. That’s a very interesting one. I like Brian Koppelman, The Moment. I absolutely love The Story Pirates. That podcast is so good, it’s for kids.
Rob: My kid knows about that.
Jordan: Oh my God. Look, I drive my four-year-old to school every day and it’s about a 20-minute ride. That’s what she wants to listen to and we just laugh our butt off about it. It is these extremely talented actors that take stories that were written by kids and dramatize them and turn them into a story and song and so on. It’s so brilliant and so entertaining. The kids all love it. You don’t mind listening to it. I don’t know how many more times I listen to the Descendants 3 soundtrack before I bang my head up against the wall. Story Pirates, big thumbs up.
Rob: Me as well. They’ve written books that my kids have. We actually saw them live. They came to Minneapolis and performed at the Parkway Theater. We went and saw them in there. They do a bunch of improv. They’re really talented improv actors.
Jordan: You saw Lee, Nimene, and Rachel?
Rob: Oh my gosh, we totally did.
For me, I listen to 40 podcasts so I’m not going to read through them. The one that I’m really digging right now is Reply All from Gimlet Media. You know you have a good podcast when every time I look at the title, typically I’m like, “That sounds totally not interesting. I don’t care about that.” I’ll read the description and by the time I’m three minutes in I’m like, “I care so much about this.” I’m sitting in my driveway waiting for it to finish before I walk in the house type thing. That’s been a big one. I’ve actually been listening—there’s an old D&D podcast that’s been around for 10 years. It’s not actual play. I can’t listen to people playing D&D. I can play it and I like it, but I cannot listen. I can’t do Adventure Zone. I tried and I just, I can’t get into.
There’s one where they talk about the lore and the history and they talk about the books and they talk about rules and how to be a better DM. Just all the stuff around at the meadow, which of course I’m always interested in the meadow. You can’t just start a company, you have to talk about starting companies. I can’t just play guitar I have to learn how they’re made. I can’t play D&D, I have to learn how to create it. Save or Die and Save for Half are the two that I’m really into. One has been around 10 years.
That’s going to wrap us up for today. If folks want to catch up with you, Jordan, you are @JordanGal on Twitter. Hey, do I pronounce your last name right? Is it Gal?
Jordan: It is Gal. Yes.
Rob: I used to call you Jordan Gal, but that’s not. That’s how it’s spelled, right?
Jordan: That’s right.
Rob: I heard you pronounce it differently. @JordanGal on Twitter and Tracy is @tracymakes on Twitter. Her website is tracyosborn.com.
Tracy: If I could get @tracyosborn on Twitter I would, but I did not. Some people might know my old Twitter username and that was a terrible idea and @tracymakes is better than what I had before. That’s what I have.
Rob: It’s all there. If you’re interested in podcasts, check out Jordan on Bootstrapped Web. Thanks so much for joining us today.
Jordan: Thank you, Rob.
Tracy: Thanks.
Rob: I have to be honest, it was a fun show to prep for and record. I hope you enjoyed it. Certainly feel free to reach out. You can reach out privately: questions@startupsfortherestofus.com. If you have constructive feedback, if you want to give some accolades, a thumbs up, hit me up on Twitter, @robwalling. I look forward to hearing from you.
If you have a question for us, you can leave a voicemail at 1-888-801-9690 or you can email it to us at questions@startupsfortherestofus.com. Visit startupsfortherestofus.com for full show notes, transcripts of each episode, all the links that we mentioned in each show. Of course, if you’re not subscribed, go into your podcatcher, search for startups. We should be in the top three or four. Thank you so much for listening. I’ll see you next week.
I’m excited about this week. I’m diving into this idea of a startup roundtable or a news discussion show. I discussed a few topics with Derek Rhymer a couple weeks ago, but going a little deeper, this is the first essentially roundtable where I invite two guests on and we talk through topics that are relevant to us in the MicroConf, the Startups for the Rest of Us, the self-funded, the indie funded community. I hope you enjoy the show and without further ado let’s dive right in.
Rob: Here we are at Startups for the Rest of Us inaugural startup roundtable discussion. I have some pretty interesting stories to discuss today. Before that, I have two interesting guests I’d like to introduce. First on my right, as no one can see, but we’re in a camera is Jordan Gal, he’s hosted the Bootstrapped Web podcast, as well as founder and CEO of CartHook.
Jordan: Thanks for having me on, Rob. I’m excited for this interesting new format. Let’s see where it goes.
Rob: I’m excited too. Above Jordan in my view is Tracy Osborn, founder of WeddingMarketplace, WeddingLovely that she shut down about a year or two ago, now the TinySeed Program Manager. How are you doing today, Tracy?
Tracy: Doing well, happy to be back. Always excited to join the podcast when I can.
Rob: That’s the cool part is each of you have been on the show now several times: interviews, Q&A episodes, all that kind of stuff. Hopefully, folks are familiar enough with where you come from. That’s what I wanted to do with the show is get different perspectives from different people coming from different directions. I’m pretty stoked to talk through a few of these things.
As you listen to this episode, if you have thoughts on whether I should do it again in a couple of months—what was interesting is I went back to a month’s worth of startup news and tried to pick out stuff that I think is interesting to our little space, kind of the MicroConf Startups for the Rest of Us community. There just aren’t that many stories that are interesting to talk about, and I think we can get going on.
Every month or two, or even two or three months, is what I consider doing. If you like the show, if you don’t like the show, please contact us at questions@startupsfortherestofus.com.
Our first story is about Basecamp watching Hey, it’s at hey.com. They’re essentially reinventing email, they are saying they’re not going to allow tracking pixels so people can track opens. I’m curious, Jordan, have you been following this? Is Basecamp basically potentially taking it too far by blocking tracking pixels? D and J said they’re going to shame people who send with tracking pixels.
Jordan: I have been following it. I think it’s very interesting. We saw Superhuman come out of the gate on fire. Everyone’s talking about how they’re going to be the biggest thing ever. I think that excitement has waned a little bit, they’re not that obsessed with it anymore. Then Basecamp taking on emails is super interesting, but like most things with Basecamp it’s very difficult to separate the people, and Basecamp, and the controversy they create from the actual product. They’re really close to the edge of making themselves too much of the story right now.
These guys are very clever. It’s starting to feel a touch manipulative on what they’re doing with Twitter to get attention. I love their ideological approach. I love that they are unique in their opinions. They take it strongly and they’re not afraid to say it. That’s all awesome, but I think they almost need to chill a little bit and then let the product speak for itself because there’s a lot of talk and it’s constant controversy. It’s a little bit grating.
The latest tweet that Jason put out, I forgot exactly what the context was, but he kind of felt that it went a little too far. I think he was making a comment on another company. People are starting to push back on it where they really have a huge halo effect to their products, but I think they’re right on the edge. Now it’s time to let the products start to speak for itself. I’m definitely interested, I want to see what they do. Because my email, that landing page and the copy that they wrote resonated. My email is an unhappy place. It didn’t used to be, but it’s been so long you forgot that it used to be this cool thing that you communicated with people on and it’s no longer that. They definitely nailed that part of it for me.
Rob: If you go to hey.com, you can read their manifesto where they say exactly that. I’m a big fan of their products, they’re genius product builders, they’re great content marketers. They wouldn’t call themselves that but they are exceptional, some of the best there are. They have this massive audience. It’s been fascinating to watch. What are your thoughts on this, Tracy?
Tracy: I find it funny that you mentioned the Twitter stuff. I feel like they’re using Twitter effectively. It’s how Twitter is meant to be used nowadays, which is annoying. It’s one of the reasons why I’m not on Twitter very often, but I feel like I can’t hate on them for doing this kind of launch because that’s marketing. That’s the way that they’re going to differentiate themselves from say Superhuman or these other ones that are very email marketer focused where Superhuman’s like, “Oh, you’re going to see the location. You’re going to see the tracking pixel. You’re going to track the people that open and close it. We’re giving you all those rates and data and whatnot.” They’re at the opposite end of the spectrum to Superhuman.
I’m personally very excited for it because I think that we do need to have more privacy-focused email clients. Gmail was the king for so long. The average user would use Gmail at a default. We’ve had, as email marketers, this superpower that we were able to see when people open their emails, we were able to see those open rates. I want to say it’s great for email marketers, but for the average person and privacy and whatnot, I want to give people more choice. I think that Basecamp is doing that.
It’s funny to think about email and the superpower and all this data that we had and how it’s hard to give up that data. If you look back to just paper marketing, pay per mail marketing, you didn’t know how many people opened up that envelope that you sent or how many people threw it right into the recycling. I agree that it’s going to hurt email marketers, but for the average user or at least the privacy focusing technologists who need those privacy features, I think it’s something that’s necessary. Basecamp is simply using Twitter the way it’s meant to be used.
Rob: I signed up when I first heard about hey.com. I am curious to use it. They have a list of 25 things that they are saying is wrong with email. I don’t understand how they could possibly fix all those things, but that would tend to be—it’s all these problems with email. You screen your calls, you can’t screen your emails. Some emails are worth your immediate attention, most are not. Files are attached to email rather than the other way around. You don’t need to be told to check your email. I don’t even know, that’s like 5 of the 25. I don’t even know how you go about fixing that. Like you said, Jordan, that’s when it’s time to think about getting into the product and watching it speak for itself.
My take on it, I built Drip. I like the idea and I’m going to be a user of the product, I assume, if it works and has unified inbox and has all the stuff I need, but I feel like railing against the open tracking is taking it a little too far. I like open rates, I think having aggregated open rates of an email is something that is just fine for a marketer to have. Knowing when and where and how many times people open an email could be taking it a little too far, I would admit.
Here’s the thing, they can come out and say, “We don’t use any tracking. We don’t use Google Analytics. We don’t track open rates.” If you have $100 million business throwing off tens of million a year in net profit with 50 employees you can do that too, but if you’re a bootstrap startup and you’re trying to get to $10,000 or $50,000 or just trying to pay the bills, like you’re in such a different position that I would caution against taking that as advice or as something you should do as a business person because I think it can be dangerous.
You’ve heard the mentality of like, “Hey, you build a great product. That’s what we did.” and everyone uses it. I’m not saying Basecamp has said that but there are people who come out and say, “Look, I just built a great product and never marketed it and magic.” Everyone wants that to be the case and it almost never is, it’s the exception. That’s potential danger with coming out against that kind of stuff.
Jordan: We may be looking at it backwards because we are business people, and we build technology products, and we are looking at it from that point of view. In reality, it matters a lot less what is right for a business, and it matters a lot more to give the choice to the actual consumer, to the user. That’s really their perspective on it. I have an Amazon Alexa in my house, I have three of them. I have made the choice. I know what’s happening and I have made the decision that in the balance between privacy and convenience, that’s where I land on that product.
What they’re looking at in email is taking it back to the user’s control and saying, “If I don’t want tracking pixels, this is my inbox, not yours marketer. If I choose to degrade the experience of email with your company by blocking pixels, that’s my choice.” What Basecamp is kind of yelling about is it’s not okay that you don’t have the choice. It’s not okay that someone else decides what happens in your inbox because that’s not normally what happens other places in your life. In your home, you get to decide if you want an Alexa or not. People can make that choice once their right journalist do that work to uncover what was happening there. If looked at that perspective and it’s not a black and white tracking no tracking, it’s simply giving people the option, that’s tough to argue with.
Rob: That’s a good perspective. Tracy, do you feel like this blocking of tracking pixels will become a trend? Do you think it should become a trend?
Tracy: I think privacy, in general, is becoming a trend. I find it interesting you brought up Alexa because I feel like that was the start when people started realizing that this really great convenience in their homes could potentially be used for other reasons. I feel like those stories happened and then it evolved and some other internet communities are very privacy focused, almost to the extreme side of railing against all the things that are happening.
I personally had an Alexa and I ended up removing them from my house. That tells you a little bit about my own perspective. I want one, I want to have all these privacy tools but I personally have decided that the convenience is not worth it for me. I’m happy to see that it’s becoming a trend.
As the Internet has grown, I’m going to refer back to that word I used before, we have these superpowers. We start adding all these superpowers, all this technology, and all these things we could do. Now it’s like okay cool, we’ve reached this point where we need a lot of people to draw back a little bit and decide if it’s convenient for them.
Rob: Like a pendulum swinging different directions. That’s a good perspective.
Jordan: I was going to say you can see the email market has been around a long time and it’s mature. It’s gotten to the point that it’s so mature that this type of option makes sense. The in-home robot assistant isn’t very mature, but you can see how if someone came out with an Alexa-like device that you had more control over the privacy, that would be attractive.
It’s the same thing with the iPhone. People started freaking out where I just had a conversation in person about this topic and now I’m seeing ads on it, that’s creepy. The pendulum swung all the way toward maximum freedom and then we all realized, “Oh, I guess we’re the business model.” Now it’s coming back and that’s a healthy thing.
Rob: For the record, I have five Alexas in my house, maybe six. I think it’s hilarious that if you go to thisishey.com, it’s a business I presume has been around for a while. It’s an influencer marketplace, which is something I’m sure Basecamp would hate. What are the folks at This is Hey thinking right now? Where it’s like, “They just took our name and they have the dot-com.”
Let’s swing into our second story. Leadpages was acquired by Redbrick. By the way, all of these stories we will link up in the show notes. To clarify, because I actually had some people asking this, Leadpages was sold to Redbrick, which is like a software—it’s a holding company. I would almost phrase it as private equity, I don’t think they said that in the news story. You know with these private equity funds, they get together then they buy software companies and manage them. Leadpages was sold, Drip was not. In fact, to say that Leadpages acquired Drip is actually not technically accurate.
Leadpages and Drip are two products: Leadpages Landing Pages, and Drip is an ESP marketing automation. They were owned by a single holding company called The Avenue 81. Avenue 81, that’s the company that raised funding and stuff. It was synonymous with Leadpages but then it is what acquired Drip. Essentially, they’ve sold Leadpages. A quote from the CEO of Drip, John Tedesco, who I know personally, I actually worked for him before I left Drip a couple of years ago. He said, “The acquisition is allowing us to now ruthlessly focus on pursuing our markets. We have a clear capital base in which to execute. We’re flush with capital, so we’re going to use it with discretion. Use it intelligently.”
Obviously, the play here was to put dry powder in the coffers. If you have an asset, you can sell it in lieu of say raising a round of funding. It gives you not only the focus—I am conjecturing here, I will admit. I have not worked at Drip for two years and I have very, very little inside information at this point. If I were in Drip’s shoes, and I really see this marketing automation as a multi, many, many billion-dollar opportunity in the landing page market, it’s not; it’s a very small market.
That just kind of gives folks background. The first question I’d have for Tracy is MailChimp has launched free landing pages, in essence, with your email account. I know a few other providers that are making them very free or very cheap. Does it seem to you the landing page space is becoming commoditized?
Tracy: That’s an excellent question. The more options the better. I’m happy to hear that MailChimp is doing this. MailChimp has a really, really huge reach. Happy to hear that they’re making this stride because they also did—I can’t remember what happened with MailChimp but they had a controversy where they raised the prices or they took away their free tier. Do you recall what happened about a few months ago, six months ago?
Rob: I think it was if you unsubscribed, you were still charged for those subscribers because they’re moving a little more towards commerce.
Tracy: That came out and I think that kind of have hurt a lot of people’s usage of MailChimp. Now they have these free landing pages. You see that in ConvertKit as well. They have a whole landing page system and whatnot. It’s kind of a silly thing to say but I’m like, “I’m a fan.” Would love to hear what you guys say.
Rob: What do you think about this, Jordan?
Jordan: I think they’re commoditized. I think they’re lead gen. The business model is subscribers, so if landing pages help you get more subscribers, then the company whose pricing is based on the number of subscribers you have has a very vested interest in giving you the ability to add more subscribers. It makes sense with the business model, it’s also been commoditized. Just to clarify, the statement that you just quoted from the CEO, that’s the CEO of Avenue 81, the company that’s still-
Rob: Correct.
Jordan: Okay, cool. Just want to make sure of that.
I love this corporate-level strategy stuff. It’s my favorite. A lot of people are going to look at it and say, “Oh, Leadpages failed,” or, “It wasn’t able to do what it wanted to.” I think this is brilliant. This is an asset that will only decrease in value moving forward. They’re able to effectively raise money for their email marketing product, which is Drip. They don’t need to sell equity in it because they had this other asset. It’s great.
They basically just raised, I don’t know how much they’ve sold it for but my assumption is they raised tens of millions of dollars in non-dilutive capital to go after a much bigger email marketing. It’ll be interesting to see what they do and which playbook they run. Are they going to run upmarket and hire salespeople and go after the Marketo version of things, or are they going to go with quantity and long tail and go after MailChimp?
I’m going to assume they’re going to go high-end with an enterprise sales team and run that playbook. They have the money to do it. They didn’t need to sell any equity in it. It’s great. Acquiring Drip was a very smart move, it worked out nicely for you. It looks like it might work out really nicely for them also. Especially if they thought this through over the past few years, then it was brilliantly executed. Let’s bring in a product, let’s make it the focus of the company, let’s sell-off this asset then we have our coffers ready. Now we can go after a much bigger market. That’s an optimistic view of it, but that’s an exciting version of things.
Tracy: The CEO that gave that quote, that’s the new CEO because the one that was around when Drip was acquired, that was a different person, right?
Rob: Yeah. Clay Collins was around when we were acquired. About a year after we were acquired, he stepped down and John Tedesco, who was the COO at the time, took over as CEO.
Jordan: I was going to ask if we’d look at John Tedesco’s history and what playbook he has been able to run successfully in the past, that’s going to tell us a lot about the future. Because it was an internal hire, it’s less clear.
Rob: He’s been part of multiple startups. I would say they are in line with the enterprise approach that you’re talking about, very much sales folks and that type of stuff.
Tracy: When I was looking at this announcement and the change in CEO, it seems like they had a certain strategy when they had Leadpages and they acquired Drip. From what I was reading into it, it sounded like things would work a little more together, but the strategy changed. The new CEO came on and they’re making this change because the strategy changed. It seems like it all makes sense in terms of the direction of Avenue 81.
Rob: I’m curious, Tracy, when you hear about a SaaS app like this being sold, so the original owner doesn’t have it, it’s now a holding company. Would you be more or less likely to use a product that’s been sold like that or does it matter to you? Do you even care?
Tracy: Interesting. Do you even hear about it too?
Rob: We’ve heard about this now. If you were looking for landing pages, there’s obviously a bunch of competitors to Leadpages. I’m curious if that would impact your decision to sign up as a customer or not?
Tracy: I’m thinking of the average user of how much they follow acquisition news. I’m assuming that Leadpages is going to continue to grow under the company that acquired it. If I was thinking as an average user I would suspect a) they wouldn’t know about it, b) if they did know about it, it sounds like instead of Leadpages being sold, it sounds like Leadpages was acquired. It could be spun in that way. Leadpages is acquired by someone who is going to spend more time and effort or more focus on it, both of those things are positive to me.
Rob: I want to wrap this up with just a funny little story that involves Best Buy and Geek Squad. I don’t know if you guys recall but Best Buy acquired Geek Squad, which is the tech support people who run around in the cars to fix stuff at your home. Geek Squad is now the vast majority of their revenue and profit. They are one of the big drivers that has kept them in business. When Circuit City and everybody else went under, they had this thing.
The CEO of Geek Squad, the founder who sold it, when he does stand up in front and does talks now, he’ll say things like, “When Geek Squad acquired Best Buy,” and everyone laughs. That’s the first thing I thought of with this is like did Leadpages acquire Drip five years or four years ago or did Drip acquire Leadpages? It kind of struck me as funny.
Jordan: Sounds like Avenue 81 is making the best of their situation.
Tracy: Leadpages wasn’t shut down. They spun it out and it still continues to live. It sounds like a win-win situation for everybody.
Rob: Yeah, for sure.
Our next story is about how a two-person start-up already uses 28 other tools. This is from acrossapp.com, it’s from their blog. They’re basically a tiny little two-person startup and they have 28 different subscriptions. I’m curious, ten years ago we may have had one or two subscriptions. You paid for Photoshop as a big package, everything was you buy it once and then you get the upgrades every couple of years. Now, most of us have 20, 30, 40 subscriptions. Tracy, do you feel like this whole movement towards the SaaS subscription economy is a good thing or do you feel like it’s cumbersome and we’re potentially paying more now but than we would have 10 years ago?
Tracy: I have to laugh because this is kind of a Tiny Seeds thesis, right? We’re betting on these business-to-business SaaS apps. We love to see people building things for other businesses to use. We’re part of this trend that’s happening right now. There are lots of little apps that are doing lots of little things for you that you can pay for individually.
Overall, I love it. I love it. I love anything that helps me save time. Ideally, that subscription cost is going to save me as much time and hopefully money that it makes it totally worth it. I love that there’s people out there that are building lots of little things to support themselves as they can create their startup and maybe get into Tiny Seed and all that. Huge fan of the system. I have no problem paying for subscriptions. I just want to make sure I don’t forget which ones I’m paying for because that’s the problem.
Rob: Something you pointed out there is that there are so many tools that could not exist in a non-subscription economy. These tiny little utilities you pay $10 a month for, I just think it’s changed the game. You can’t look at it as, “Oh, I have too many subscriptions or I don’t,” or “I wish there weren’t subscriptions that we just paid one time,” because it’s a completely different system now. All these apps that we use and that we build wouldn’t exist under a non-subscription economy. What are your thoughts, Jordan?
Jordan: I see an analogy to what happened with television. We don’t pay less for television now. Between all the different streaming services: Netflix, YouTube, Hulu, Amazon, everything; I’m paying about the same but the service is far better because I’m in control and I get to choose. I don’t think it’s any cheaper to pay for all these different pieces of software, but you do get a lot better service overall because you’re getting very specific needs for your business addressed.
I have the Google Doc open right now that we just went through a pruning exercise. Every two-three months I ask my assistant, “Okay, give me all the recurring subscriptions that we have in the business.” My CTO and I look at them. I have it in front of me, it is 61 rows long and maybe 10 or 15 of those are not traditional SaaS. It’s a good 40-50 services, if you’ll just excuse me for a minute if I read through a few of them. They’re all very specific and very necessary.
Adobe Creative Cloud, AWS, Atlassian, Atlassian Statuspage, BrowserStack, Calendly, Canva, ClickFunnels, Cloudflare, DigitalOcean, Docker, Drip, Dropbox, Figma. That’s alphabetic order. I could just keep going down to Z. It’s a Frankenstein but it’s a beautiful one. It does ebb and flow in frustration depending on where the market is and where your business is.
At some point last year we said, “Okay, that’s enough of these different systems, let’s go to HubSpot. Let’s go all-in-one.” But in other areas, that doesn’t make sense. For bootstrappers, for people building businesses, it’s a great thing to be able to address one specific need, but you may be caught in that ebb and flow of a larger all-in-one or you might need to go there. I love it as long as the individual services are good. The nice thing about the subscription version of things is if they’re not good, you just leave them.
Rob: That’s a big difference. It’s not like you drop $300 on a piece of software and then you get two months and you stop using it. You still paid the $300 versus the monthly. I’ve also found that the all-in-ones tend to be, it’s like you said, it combines, everything works together. I don’t know if it’s a little more expensive but the tools aren’t as good, the individual pieces aren’t as good. It is what it is. I’m obviously a big fan of this world. Having been around long enough to have several of my early software products were not subscription, they were one-time download. I remember the struggles of the first day of each month, I had zero dollars in revenue for that month. It wasn’t like I had that baseline that I had last time. That’s the big difference that you forget if you’ve never run a non-subscription business is you’re just grinding it out.
In fact, during the financial crisis of 2008/2009, I had one product. It was doing maybe $4000 a month but it was part of my income, it was a chunk of it. Sales dropped 80% overnight, one month to the next. That’s the kind of business that’s going to be—I mean imagine if we were doing $4 million a month and had a bunch of employees and it dropped 80%. That’s where you start laying people off. It’s just such a big difference that the subscription is from our perspective as the business I think they are a safety net. I’m like you two, I don’t mind paying for subscriptions because I like not having to install software and maintain it and do all that. That’s the benefit we get from it.
Jordan: I want to add something. If this is a bit of a news show about things that are relevant right now, I just saw last week a company launched named pipe.com. I jumped on a call with the founder. The reason for bringing it up is because the downside of the subscription economy, and being a developer, and running a company based on subscriptions is that that lifetime value is stretched out. We’re all familiar with Gail Goodman’s Slow SaaS Ramp of Death and the math behind paying to acquire and then collecting over a longer period of time.
This company pipe.com that just launched, what they do is they take MRR, they take your monthly payments, and they will pay you annually. If I have a customer that pays us $500 a month, Pipe will look at that and say, “Okay, we understand your churn rate. We think this is a good bet. You can choose to sell us this customer, we will give you the whole annual amount of money upfront, then you just continue collecting monthly from them.”
The subscription economy is great in a lot of these ways but one of the tricky parts is cash flow, especially for younger companies that aren’t in the only annual, you must pay as an annual contract or you could do business with us. That strength comes later. It is tricky on cash flow but there are additional financing options like pipe.com that are starting to address that. We’ve seen revenue-based finance, we’ve seen other things. Pipe.com is not debt. It’s kind of like factoring but for SaaS. They charge you 15%, which is basically what you would charge people anyway because you would give them two months free. That’s kind of the default.
Rob: If the customer cancels in six months, they eat it, so they have a risk model.
Jordan: No. You pay back the remaining portion.
Rob: Got it. Okay.
Jordan: There’s literally an online portal and you can choose an individual customer. “I know that customer. They’ve been around for two years. They’re not going anywhere. I’ll sell that to you because I’m very confident that they’ll stick around.”
Rob: Fascinating.
Jordan: It’s fascinating. Or you can sign an annual contract, which is something that we do. Our annual contracts are paid monthly. We have annual contracts but we don’t have this big, large chunk so they sign it. That is even less risk. This is an annual contract, they’re paying monthly, and I’ll just choose. I’ll click that and hit sell. I’ll get the money for that entire thing upfront, minus the 15%.
Rob: I love the innovation, all the innovation that’s happening in the financial models around SaaS. You’re right, that is the biggest Achilles heel is the long slow ramp of death.
Jordan: It’s awesome. It’s just the relationship with you and your billing software.
Tracy: When you say sell the customer, is that they’re acquiring the customers’ information for use?
Jordan: They’re still in your Stripe account, you’re collecting money, and you’re charging their card every month like normal. But then they will see, “Oh, that customer paid in Stripe. Cool. We’ll take that much amount from your bank account.”
Rob: Pretty interesting if you need money in the short term. I know folks looking at raising around or doing debt kind of financing their SaaS revenue.
Jordan: I’m looking at the same thing. I looked at them and I’m like, “Oh, that’s basically just taking your MRR and creating a line of revenue off of the MRR, and then not actually putting any debt on the balance sheet and also not selling like equity.” I was like, “What is the catch here because that’s very attractive.”
Rob: I think the catch is like when you think about—
Jordan: Risk.
Rob: There is some risk but I also think you’re basically spending future earnings. It’s almost like when you put money on a credit card now that’s technically debt and this is not. When you put money on a credit card, you basically are spending future earnings before you have them. That’s what this is in essence. There is some danger. If you’re prudent at managing cash and you know where that cash is going to go or you’re in a spot where you do think you need some dry powder in the coffers, I think it’s certainly an interesting avenue to look at.
Wrapping us up for today, I’m curious from each of you what is your favorite podcast right now? I mean right now because sometimes I have a favorite podcast for two months and I binge them all and then I move on. Tracy, you want to go first?
Tracy: Gosh. Don’t go pick me first. I’m the worst at podcasts because I have a hard time with podcasts. I know some people are able to play something at 2x speed and then go through all their backlog. Then for me, it’s like, “Oh my gosh, I only have a certain amount of time. I can only do 1X.”
That said and it’s a dorky one, I’m still a big fan of Adventure Zone. It’s by My Brother, My Brother and Me. It’s their D&D podcast. Also, My Brother, My Brother and Me is another one I listen to. It’s just because I need to turn my brain off from work. I listen to a lot of work when I podcast, Startups for the Rest of Us, Out of Beta, a lot of other ones. It’s really nice to have something that’s just a bunch of people just in a room together having fun. I would say that my answer is the Adventure Zone and by extension My Brother, My Brother and Me.
Rob: How about you, Jordan?
Jordan: I’m just going to reject your premise entirely and mention several of my favorite podcasts.
Rob: I’m not picking five favorites, that’s cool.
Jordan: I need to be generic. I absolutely love the Joe Rogan podcast. It’s interesting, it is just really interesting. It challenges a lot of your thoughts, and assumptions, and is entertaining, it’s funny. There’s so much of it. You don’t have to listen to everyone and you’re fully entertained.
I also love the Dave Chang Show. Chef Dave Chang from Momofuku has a great podcast that is about food but also about creativity. He brings people on from his network in the Bill Simmons world. That’s a very interesting one. I like Brian Koppelman, The Moment. I absolutely love The Story Pirates. That podcast is so good, it’s for kids.
Rob: My kid knows about that.
Jordan: Oh my God. Look, I drive my four-year-old to school every day and it’s about a 20-minute ride. That’s what she wants to listen to and we just laugh our butt off about it. It is these extremely talented actors that take stories that were written by kids and dramatize them and turn them into a story and song and so on. It’s so brilliant and so entertaining. The kids all love it. You don’t mind listening to it. I don’t know how many more times I listen to the Descendants 3 soundtrack before I bang my head up against the wall. Story Pirates, big thumbs up.
Rob: Me as well. They’ve written books that my kids have. We actually saw them live. They came to Minneapolis and performed at the Parkway Theater. We went and saw them in there. They do a bunch of improv. They’re really talented improv actors.
Jordan: You saw Lee, Nimene, and Rachel?
Rob: Oh my gosh, we totally did.
For me, I listen to 40 podcasts so I’m not going to read through them. The one that I’m really digging right now is Reply All from Gimlet Media. You know you have a good podcast when every time I look at the title, typically I’m like, “That sounds totally not interesting. I don’t care about that.” I’ll read the description and by the time I’m three minutes in I’m like, “I care so much about this.” I’m sitting in my driveway waiting for it to finish before I walk in the house type thing. That’s been a big one. I’ve actually been listening—there’s an old D&D podcast that’s been around for 10 years. It’s not actual play. I can’t listen to people playing D&D. I can play it and I like it, but I cannot listen. I can’t do Adventure Zone. I tried and I just, I can’t get into.
There’s one where they talk about the lore and the history and they talk about the books and they talk about rules and how to be a better DM. Just all the stuff around at the meadow, which of course I’m always interested in the meadow. You can’t just start a company, you have to talk about starting companies. I can’t just play guitar I have to learn how they’re made. I can’t play D&D, I have to learn how to create it. Save or Die and Save for Half are the two that I’m really into. One has been around 10 years.
That’s going to wrap us up for today. If folks want to catch up with you, Jordan, you are @JordanGal on Twitter. Hey, do I pronounce your last name right? Is it Gal?
Jordan: It is Gal. Yes.
Rob: I used to call you Jordan Gal, but that’s not. That’s how it’s spelled, right?
Jordan: That’s right.
Rob: I heard you pronounce it differently. @JordanGal on Twitter and Tracy is @tracymakes on Twitter. Her website is tracyosborn.com.
Tracy: If I could get @tracyosborn on Twitter I would, but I did not. Some people might know my old Twitter username and that was a terrible idea and @tracymakes is better than what I had before. That’s what I have.
Rob: It’s all there. If you’re interested in podcasts, check out Jordan on Bootstrapped Web. Thanks so much for joining us today.
Jordan: Thank you, Rob.
Tracy: Thanks.
Rob: I have to be honest, it was a fun show to prep for and record. I hope you enjoyed it. Certainly feel free to reach out. You can reach out privately: questions@startupsfortherestofus.com. If you have constructive feedback, if you want to give some accolades, a thumbs up, hit me up on Twitter, @robwalling. I look forward to hearing from you.
If you have a question for us, you can leave a voicemail at 1-888-801-9690 or you can email it to us at questions@startupsfortherestofus.com. Visit startupsfortherestofus.com for full show notes, transcripts of each episode, all the links that we mentioned in each show. Of course, if you’re not subscribed, go into your podcatcher, search for startups. We should be in the top three or four. Thank you so much for listening. I’ll see you next week.
Episode 486 | The Shocking Collapse of Zirtual and Maren Kate’s Next Act (plus How to Hire Well)
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Show Notes
In this episode Startups For The Rest Of Us Rob interviews Maren Kate of Avra Talent about her entrepreneurial journey. She talks about her first company that raised 5.5 million in funding, hit $1mil in MRR, had over 400 employees, but ultimately failed. She talks about how she recovered both mentally and professionally, and gives her system of hiring/vetting people for your company.
Items mentioned in this episode:
Rob: Welcome to Startups for the Rest of Us, I’m your host, Rob Walling. In this week’s show, we look at someone who bootstrapped her company for two years before raising $5.5 million over the next couple years, growing to 400 employees, and then having the company implode before her eyes. Maren Kate is an entrepreneur who’s been starting companies since she was 19 years old and she started her company Zirtual in the 2010-2011 time frame. Zirtual is essentially virtual assistants on a monthly retainer, so you pay a monthly price for a set number of dedicated hours from a virtual assistant. The company became quite successful.
She got to about $1 million monthly run rate, so almost $12 million a year. In 2015, they were burning a couple hundred thousand dollars a month. At a certain point, they weren’t able to raise that next round of funding and finances were screwed up. You’ll hear us talk about it in this interview but it’s a fascinating and frankly it’s a devastating story to hear how Zirtual did implode and to hear Maren recount what that felt like, but she bounced back and we hear how she then went out to start her next company AVRA Talent just a year later.
We dig into Maren’s expertise and experience in hiring people. She’s had so much experience doing this. You can imagine having 400 employees, although you don’t hire everyone yourself, as a CEO, you certainly have a lot of influence on that process. Now, AVRA Talent is a recruiting agency in essence. They have a really refined system of how to do this and how to vet candidates. We dig into that towards the latter half of the interview. Without further ado, let’s dive into my conversation with Maren Kate.
Maren Kate, thanks so much for joining me on the show.
Maren Kate: Hi, thanks for having me.
Rob: Absolutely. You folks have heard in the intro about this amazing growth story of Zirtual, but I want to go back to when you decided to raise money, because you bootstrapped Zirtual for two years and then made the choice to raise money. A lot of listeners to this podcast, if I were to break it down, I’d say 90% want to bootstrap or self fund and there’s around 10% in this MicroConf, Startups For The Rest Of Us community that do raise funding and they don’t tend to want to go on the VC track, but they do raise $500,000, $250,000 from Angels or from TinySeed. It’s not binary in our space. The funding is good and not funding is bad or anything like that, but I’m curious how that decision came about for you and why you decided to go that route.
Maren Kate: Yeah, I wish I had a more thoughtful answer but the honest answer is I decided to go that route because we were in a place where we were growing, we were profitable but by a slim margin just because we were supporting our team, we had bootstrapped from day one, we didn’t take on any external funding. I didn’t self fund because I didn’t have any money, so every dollar in was all we had.
We were in Silicon Valley in San Francisco, me and my co-founders Collin and Eric. Especially at the time, I think it was and in 2012, it was just a really frothy time. Everyone that we knew raised money instead of asking what your business is. You tell them instead of saying, “What do you do you?” or “Blah, blah, blah,” they would say, “How much will you raise and from who?” It was the kind of ecosystem we were in.
We got really lucky. I got connected to someone through a client of Zirtual who really liked our culture and kind of the vision of the company, and pretty quickly offered to lead our series A. That happens once in a million. I didn’t realize that because it was my first time fundraising, so it was epic. That really made the rest of the deal really easy to close out because in fundraising, if you have a well known need, everybody else would just be like, “Awesome, sounds good.”
The reason we fundraised is because we could, it wasn’t super difficult. At the moment, it seemed like it would solve all our problems because going from kind of hand-to-mouth bootstrapping, all of a sudden we had $2 million in the bank.
Rob: And then you went on to raise a total of $5.5 million over a few years. Did you later regret that given that venture capital often makes us want to grow faster and makes us burn money, because it’s there and that’s what it’s used for. But given how things turned out, did you or do you have regrets? Did you think it was the right call?
Maren Kate: It’s hard. All of the mistakes that I’ve made have been incredible learning experiences. They’ve been incredibly hard learning experiences, but I wouldn’t trade the learning I have now for anything. That being said, if I could keep that learning and make better choices, obviously I would, but that’s not how the world works. I’d say if I was and I hopped on this, I talk to people that are starting similar businesses and they always want to know about raising money. What I’ve said is we were not a venture backable business. We got venture backing, which happens often, but we are a services business. We had no technology component. Even over the three-and-a-half years after raising money, we built very little technology.
We grew really fast because part of the raising money and we had a really awesome product and we had pretty good word of mouth and if we had not raised money, we would’ve had to really restrict that growth. In the short term, that would have been hard, but in the long term it would’ve made for a much more sustainable company.
Zirtual is still around, it’s run by startups.com. They kind of bought the assets and restarted it, it’s doing well and I think they have re-birthed it in the way that we originally did with, “Hey, we’re going to make this profitable. We’re going to make this focused on a service to the customer.” For that type of business, I think that is the right way to go.
If you’re building new technology, if you have to raise money because that’s the only way it’s going to get built, that makes total sense. But if you have a services business and people are paying you money for it, often you don’t need to raise money. It seems nice in the short term, but it has a lot of long term ramifications that people who are raising money for the first time often don’t realize.
Rob: You grew from essentially zero employees to 400 in the span of three or four years depending on how you count. What was that like being, because you’re pretty young at the time, were you like early to mid-20s?
Maren Kate: Yeah, I was super young and I was very green.
Rob: What was that like basically having a company with that many employees at that age?
Maren Kate: It felt exciting in vanity metric terms but it was exhausting, it was super overwhelming being the CEO of a fast growing company when you don’t have the experience. Also, I think just emotional maturity. I would say it was both really fun and gratifying and awesome experience in some ways and it was very overwhelming in other ways.
Rob: Yeah. Could you talk about, was there a time you can think of where you were overwhelmed as it was growing?
Maren Kate: It goes back to impostor syndrome, so we didn’t grow up in a family that had a lot of money, didn’t go to a fancy school, I wasn’t raised around businessmen where I learned all these things. When I came to San Francisco and especially as we raised money, and started growing, and started getting a lot of press, and kind of tech-darling status, I felt like a giant impostor. I say I have a blue collared chip on my shoulder that has lessened over the years, but at that time, when I was 25 was very intact. Instead of asking for help and being vulnerable and open and saying, “Hey, what’s going on here?” I felt like I had to figure everything out on my own.
I think that was because I felt like if I asked for help, people would be like, “Ha, we knew you didn’t know what you are doing,” like, “Get out of here, heck.” But that actually made for a very lonely experience, where as a 25 year old who didn’t have a lot of practical real world experience, I made a bunch of mistakes and so many of the mistakes, when I look back, were things that now more seasoned, it’s not reinventing the wheel, there are solutions for that. I think that’s kind of one of the biggest pain points, at least, that I experienced.
Rob: Yeah, I feel you. I resonate with that phrase, blue-collar chip on your shoulder, because I’m also—what’s funny is I grew up in the East Bay area, but I had nothing to do with the start up scene. My dad worked construction, my mom raised us with four kids and I like to say, solidly working class. I had no ins with people in Silicon Valley. When I started doing start ups, it really is a thing that that kind of weighs on you.
I’m curious, part of the story that’s come up, I have an assistant producer now and she did some research and read some articles and listened to interviews that you’ve done. It sounds like there was a turning point with Zirtual when you switched from contractors to employees and that things started turning there, can you talk us through that? Was that a decision you made? Did you have to make it and what were the ramifications of that?
Maren Kate: We thought we had to make it. This was during that time where a lot of the on demand gig work companies were starting to get fined or have lawsuits from the Department of Labor. We talked to some lawyers, and at this point we maybe 100 contractors and the fear was that someone was going to say, “Hey, you’re misclassifying your workers.” We didn’t think we were but there’s a 20-point test that you can do on the IRS website and it’s incredibly strict. We were like, “Maybe we should rethink the way we classify our workers and go from contractors to employees.”
Another driving thing behind this was we had amazing people on our team and they loved our mission, they loved the vision. They used to say they bleed Zirtual blue and they wanted to be part of the “team”. They wanted to have the option to get stock, they wanted to be employees, they wanted to have the option to get benefits. We made a call that was based a lot more on what we thought was the “right” thing to do. We did that without thoroughly thinking through the financial ramifications over the next few years.
We were using an outsourced CFO firm that one of our investors recommended to us, and I think that was one of the biggest mistakes we made at Zirtual. They were really, really bad, and again when you go to this impostor syndrome, I was working with a partner who was a CFO and had his MBA and yada-yada and I was an English literature drop out. He was like 27 at the time.
He would send over the P&L’s and I would go through them in my apartment and I’ll be like, “These don’t make sense. I’m no genius but…” and so again, same things like that. I would be like, “Well, he must know what he’s doing.” he has this firm, this fancy investor suggested him, but finally at some point, I went to our board, I was like, “These don’t make sense. These don’t add up.”
They looked at them and they were like, “Oh, yeah.” Literally, he’s doing math wrong. I’m like, “****. Well, what do I do?” They’re like, “Well, you should get rid of him.” Here’s another interim CMO firm. That was a huge mistake and I mean, at the end of the day, I’ll tell you one thing, it taught me a lot about finance. It also taught me just because I can balance my checkbook, I kind of thought, “Well, it’s cool. I’ll be able to keep all the numbers,” deal with them myself, and that is tragically untrue.
We wanted to do the right thing and make people employees and we didn’t really think through those repercussions. In retrospect, if I had to do it again, I would have changed our business model so we could keep people as contractors. It would have allowed us to actually pay them more as contractors and it would have made us be able to keep that kind of 50% margin we originally had.
Rob: Yeah, that’s really tough. I’ve been talking to startup founders for years as I was starting my own stuff and I always say, “If you’re going to start a tech company, you don’t have to learn to code, but learn just enough that you know when someone’s bullshitting you.” I feel the exact same way about finance. Finance is the same thing. I never took a finance class in college, but I’ve read enough books that I can hopefully spot something, just like you’re saying, you knew you had a Spidey sense that something was off. It’s like, “I got to trust that founder instinct on that.”
Maren Kate: Absolutely. I think in terms of those core competencies, I think the way our education system sets us up is woefully inadequate. Instead of taking calculus, you should be understanding how to manage a household budget, how to manage a business budget. I think the amazing part is now no matter what your income level is, if you can get online, you have access to all the knowledge in the world.
As founders or would be founders, it’s really important to educate ourselves on the building blocks of whatever business we’re in. If you’re going into the construction business, you should know the bolts, understand what’s going on there. If you’re going to be in tech, you should get a working understanding of exactly knowing someone’s bullshitting you. No matter what kind of business you’re in, you always need to keep an eye on that bottom line.
Rob: Unfortunately, we know how this story ends, ritualistically, you went under and you sold the assets to startups.com, but can you take me to that moment when you realize that you had run out of money and you needed to lay everyone off and shut the company down.
Maren Kate: Yeah, it was pretty horrible. We realized when we kicked out the one firm, finally brought in a director of finance internally, she was amazing. Within three weeks, she came back to me and she was like, “We’re running out of money.” I was like, “Oh no.” I went to my board, I went to all of our investors, told them and they were like, “Okay, well you guys need to raise the bridge,” I was like, alright.
Got that all set up, did the back of the napkin figuring out once we brought in the director of finance, she kind of was like, “Listen, 70% of the plans will never really make enough money to justify them,” but 30% of them will be calling Zirtual for business. They are the winners. We need to do a massive restructuring. We need to get rid of all the personal plans, we need to focus on business. We had everything built out.
We went to the board, we’re like, “Alright, we need $1.5 million to do this. Here’s the timeline.” Everybody said okay and then one of the VC’s, the same one that recommended the fantastic CFO firm, they said, “Actually, instead of giving you the $750,000 we said, we’re going to tranche it in three segments and we’re going to wait till everybody else’s money hits the bank before we put it in.” One thing about investors, and actually I’m realizing this as a lot of life that people tend to—they’re signaling, you are less likely to go in a restaurant if there’s no one there. If there’s a line, you’re more likely to stand in it.
Investors are very similar, if not even more, than the way we see that in the rest of the world. The moment someone kind of got cold feet, some other investors are like, “Well, we’re not going to put our money until this firm’s money is in first.” It was a catch 22 and I talked to one of our biggest shareholders, the person that was the representative on the board who had no business being there and later actually kind of came to me and apologized. He said, “Yeah, you know what, we have just enough in the bank to pay out this final payroll, pay off the taxes. I think you should just shut everything down.”
At this point, I was so kind of shell shocked and just absolutely emotionally, mentally, spiritually exhausted. I was like, “Okay, well, again, he knows more than me, so this is what we’ll do,” and trying to do right by the people by making sure that we didn’t keep open any longer because if we did, we might not be able to pay them everything. That’s when I know we spent four days trying to figure something out, nothing came through and that’s when I had to send the layoff email at 11:00 PM Sunday or 01:00 AM, I forgot when it was. I remember being in the office.
We look back and if I had it to do over, I would tell the guy who gave me that suggestion that that was the stupidest thing I’ve ever heard. I probably still would have to lay most people off, but I want to spend that week actually going around to a bunch of different firms saying, “Here’s our number. Here’s our business, let’s do a down round and we’re going to fix the company and focus on business.”
Rob: Wow, that sounds devastating. It sounds like one of the low points of your life perhaps.
Maren Kate: Yeah, absolutely.
Rob: That sounds incredible and you had to lay off, you mentioned it somewhere, that you had to lay off your mom and brother? Is that true?
Maren Kate: Yeah, they worked with me. Luckily, we are a close knit family and got through that but it was super bad..
Rob: There was obviously a lot of negativity coming at you after that. I’m sure from employees and I even think more direct articles on TechCrunch and other places that were talking about the big flame out. How did you handle that? Obviously, that sucks, and it’s people dragging you through the mud or whatever, but did you just black out, go offline for months, did you fight it? What was that like?
Maren Kate: No. I definitely went offline, because my whole thing was it doesn’t benefit me to hear a bunch of people tell me I’m ******, I already feel that so I’m covered there. I think honestly, probably, it was just like self preservation kicked in. I went offline for several months after we laid everybody off. Me, my co founders, and my brother wasn’t getting paid, and a few other awesome OGs in the company spent the next few months trying to make the transference to startups.com as simple as possible.
We kept working, cleaning things up and doing the best we could, and that was how I handled it. After the three months were up, I laid on the floor of my house at the time and just didn’t do much. After a few months of that, I didn’t have any money and I was like, “Crap, I really have to get back to work,” so I peeled myself up and got back on the saddle so to speak, but it was very devastating. It was absolutely hands down one of the low points of my life.
I think the reason was because I knew how many people it impacted and that’s what just crushed me, the investors, everybody else. We were such a tight knit group, and the people that were part of Zirtual were like an extension of our family, that was the hardest part.
Rob: I can only imagine. I’m speechless because like I’ve gone through hard things, but I’ve never had to do that. So many people will never have to in their entire entrepreneurial career. You go offline, how do you even recover from that? Mentally, it sounds like you were just, even before it was happening, there were just loads and loads of stress, because you’re growing this company, loads of stress as it’s kind of going down, and then this whole big thing happens, you go offline, but there has to be a healing process of taking a year off. In off, I mean I know you’re working and stuff, but what did you do to try to heal yourself to be able to get back on that horse and start what you’re working on now which is AVRA?
Maren Kate: I did kind of a deep dive. I started reading a lot which is kind of how I approach most things. I knew that this was either going to break me or I was going to figure out a way through it. I didn’t want it to break me. I think one of the things that actually kept me going was the sense of I have to make this right at some point in the future, in my life, and I still actually feel that very strongly.
There were definitely times where I would be in the shower and I was just like I can just slit my wrist and then not have to deal with this anymore, but that good old Presbyterian guilt I was like, “Yeah, but then that would really hurt my family, and my friends, and some employees, so that wouldn’t be fair to do it to them. Let’s try to get through this, let’s try to figure out a way to make this up to people at some point.” It sounds very morbid, but I actually think it was helpful. I always tell myself, I’ve never lived abroad and I was like, “Just figure out how to pay the bills, figure out how to maybe make this up to some people, and then you never lived abroad, so you’ve got it going,” at least try those three things.
Worst case scenario, if you can’t do either of those, then you can always kill yourself after you lived abroad. That actually got me through the first few months. After the really dark part passes, then you start to see through the mist. After the news cycle passed, after whatever else happened, I don’t know who the next target was in Silicon Valley, I was super lucky. I went through a really bad break up a few months later which was amazing especially since we live together. I was like, “Awesome,” that point was almost funny. I literally laughed. I said, “This could not be any…” I kind of took it as a sign. I was like, “Alright, I don’t have a house anymore.”
San Francisco has been really good to me in some ways and also been terrible. I was like, “Well, I want to live abroad,” and I got super lucky. I randomly got an offer from this company called Roam to head up their operations and they had co living locations all over the country. They’re like, “Part of this, Maren, is you’ll have to go and live with these different co living places and improve their operational efficiency,” I was like, “Literally, I’m on the next flight.”
I paired all my belongings down to suitcases, flip San Francisco off as I was flying out, and went and lived abroad for about a year which was wonderful. I also think just getting to see that the world is a lot bigger than the place you’re in was pretty ground breaking to me. I didn’t travel a lot as a kid outside of the states. To actually see how big the world is, and see how different people are, and to see what real struggle looks like, I was like, “Oh my gosh, you snooty bee, how dare you complain about this stuff. Don’t feel sorry for yourself, you’ve got nothing to complain about.”
I think that was one of the most transformational parts of my life. It was actually shaking myself out a bit by being able to see how big the world is, and how much opportunity, and then also how much suffering, and it really puts your own drama into a contrast.
Rob: It sounds like a really powerful way to reset. I think that travel can be such a therapeutic thing in that respect.
Maren Kate: Absolutely.
Rob: You took this time to recover, and then you got back on the horse, and you started AVRA Talent. Folks can check it out avratalent.com. Hire the best talent, regardless of geography. We connect employers with the top 5% of remote professionals tested and vetted for your specific needs. When I read that, I think of it as a contingency recruiting service. I’ve used those at previous places that I’ve worked. Can you talk to me about how you’re different?
Maren Kate: Yes. After I kind of did a post mortem on what happened at Zirtual, one of the biggest things that came back was that we had, and I had made some poor hiring choices along the way. When I think of hiring or recruiting, I actually think it has to do with anyone that is on the bus with you. That includes investors, that includes advisors, that includes employees. Just out of greenness, we had brought on some people that weren’t working great.
One of the biggest reasons I went back thinking that was, we didn’t want a thorough process. We were really good at recruiting our virtual assistants with this incredibly thorough process I think only half a percent got through and were hired, but when it came to our COO, or the outsourced CFO firm, or some people in our tech team, the process I ran was nonexistent. After Zirtual, I talked to some people, some founders while I was traveling abroad. I did a head of operations stint at Calm, the meditation app. I talked to the guys there. I was like, “Yeah, I just must be an idiot. I don’t know how to hire,” and they were like, “No, everybody actually has the same problem, we did a bunch of bad hires too.”
I was like, “I wonder if I could take the process, the structure that we did with recruiting our virtual assistants and apply that across different rules.” I started doing that as a consultant and then I decided to spin up an agency which is AVRA Talent. The way we differ I would say from the contingency recruiter is kind of 2-fold. We’re very focused on alignment, we only work with startups and companies whose culture and mission we can get behind. We charge a percentage of a placement fee, but we also charge an upfront $5000 retainer.
I started this from day one because one of the biggest problems I’ve realized in contingency recruiting is incentives are misaligned. Contingent recruiters incentive is to get you someone who’s the highest paid as fast as possible, because if they don’t get you that person before you hire them somewhere else, then they don’t make any money. That’s kind of one of the reasons that industry was so fractured and can have such a negative connotation, versus the way I talked to when I talk to founders.
I was like, “Listen, we’re going to do the work. We’re going to act kind of like your internal recruiting team. Each search we put several hundred human hours into. We’re going to put this retainer down. If we need to find you the person that you hire, then you’re going to pay us let’s say 15% of their base, and that $5000 will roll into that. If we don’t, if you bump into the next hire on the subway, that’s amazing. We want you to find the right person. It doesn’t matter how you come about them, but you’re still going to pay us for the time we spent,” and that model has worked really well for us.
We have four core values and alignment being the first one. In the last three years as AVRA has grown, we’ve actually gotten more and more focused on helping companies recruit fully remote talent. These are fully remote employees from engineering, to digital marketing, to operations, to product, to customer support. I think that is where we are the best in the world. That’s really where our focus is.
Rob: You’ve talked a lot about hiring and you obviously had to hire a lot of people. You mentioned somewhere that you kind of have this system and way of thinking about building a great company and it’s to bring on the best people, connect them to something bigger than themselves, empower them to do their thing, hire and fire according to company values. I wanted to get into that first piece which is bring on the best people. How do you do that? People listening to this podcast, there’s a lot of founders out there who maybe are hiring their first ever salesperson, their first customer support rep, or maybe they’re hiring their 10th or 20th employee, what’s that the CliffsNotes version of how do you bring on the best people.
Maren Kate: This is one of the reasons that I love remote recruiting so much, because if you’re trying to bring on the best person in say, San Francisco, you are competing with some of the well best funded, highest paying companies in the world, you’re kind of fighting a war. Versus if you are hiring in Boise, it’s a little bit easier, but there’s not as much talent that you’re looking for maybe with specific skills, and obviously technology companies and startups.
With remote recruiting, and this goes with anything, you can run this whether you’re hiring in an office in San Francisco or remote. At the end of the day, you just have to think of it the exact same way you think of a sales funnel. You need to get enough at the top of the funnel, and you need to filter them effectively through several steps to get down to the 5-7 candidates who really matter, who then you run through a more detailed process which would include test projects, references, cultural interviews, yada-yada. My favorite way of hiring is casting a really, really wide net and then setting up 5-7 steps in that funnel, so that the best people can shine through.
An example would be in my new startup that I’m spinning out, I’ve been recruiting for a founding product person, and a founding growth person. I would say at the top of the funnel, we’ve probably gotten 5-600 applicants on both sides. We’ve set different tests so to speak at different parts of the funnel and these cover the core values that we hold important. They cover the skills both soft and hard skills that are important for this role. As people go through different stages, and the funnel gets smaller and smaller, the best people start to really shine through.
Rob: Can you give an example of one or two of those stages? Is it like a 90-second video of yourself taking that exam or something?
Maren Kate: The way I like to think about it is just thinking what hiring normally is and then doing the exact opposite. Most companies approach hiring, they post a role and people submit their resume, and then it’s up to the hiring manager to go through all these resumes, and resumes are literally a terrible way of assessing fit. It goes back a stage. You want to figure out what is the role, what matters the most. You don’t say, “I want to hire a digital marketing manager,” you say, “This is the job or jobs I want this person to do. I want them to own our ad spend, I want them to be able to write great copy. I want them to be able to hire and manage designers, and I want them to be very analytical and be able to create reports.”
You can actually test that in different stages of the funnel. One example would be we have people submit resumes, but we don’t even look at them until maybe stage five. Instead, we would have three paragraph style questions that would be the first stage of the recruitment process. The very first one which we include in all hiring is, “What are you looking for in a role and what honestly draws you to this company and this role?” If people don’t fill that out in a meaningful way, in an honest way, we immediately disqualify them. Because if you want people that actually care about your product and your vision, then they should be able to articulate that.
We also ask them a few other questions and then we actually look at their writing and their communication which is incredibly important for most roles, especially ones that are remote. But going back to the digital marketing example, you want someone who can write well. It doesn’t matter if I look at their resume and they used to work for Apple, or Postmates, or one of these darlings, I’m not like, “Oh, they worked at Airbnb, they must be good,” that is not an indicator of success.
Instead, I actually look at the work they do. After that, we would yay or nay then someone on interview, or just glance and push through the top 20%, and then they would go on to another question, and we test the responsiveness as a really big one, and then we’ll get them into a phone screen where we’re talking about specific examples to understand, do they actually understand the role? How have they performed in their previous roles? A lot of those open ended like, “Tell me about a time,” questions. After that, there’s another longer test project.
We always suggest to clients to do this themselves. Setup a paid test project, something that you actually need done. Be sure to pay for a person’s time, that’s really important. Nothing is more powerful than seeing how people work with you and how they engage with you. If they do well through that, we usually do a second layer of interviews which have to do with your team, with who would be their supervisor. After that, we always highly recommend references. Checking references both given references and back channel references. That’s the one thing I tell founders. “If you do anything, just check references,” that’s the only take away.
Some of the worst hires I ever made, years later talking to people who maybe have worked with them, there’s always a pattern where it was like, maybe they’ve gotten lucky and gotten some good jobs that had high name worth at the company, and they had floated on other people’s success, or maybe didn’t have the skills but they were great talkers.
If I haven’t just spoken to a few references, and the way we do references as we think of are people you worked for, people you worked with, and people who worked for you, because somebody can trick one of those subsets. Maybe your boss thinks you’re great, but the people who work with you and work under you think you’re terrible, and vice versa. It’s really important to get all three of those categories. From there, we usually start to get our preview of a good holistic view of a candidate.
Rob: Very cool. That’s kind of a mini clinic in the hiring process. I really like that. I like most of the stuff you said there, but the write well piece is something that I really focus on. Even when hiring developers, that was the thing I was super picky about.
Maren Kate: And following instructions, that’s a huge one too. It’s amazing how few people follow instructions. Also just somebody who really vibes with your company and your culture. This is why I say when you’re writing your job description, let your company, let your culture, let your flavor of weird shine through. The right job description, it will scare most people off, but it will really attract the people that are like minds, and that’s what you want, versus a generic, bland job description.
Rob: Awesome. You’re talking about this topic in a couple months in MicroConf Minneapolis. If you’re listening to this and you’re not coming to MicroConf Growth yet, you should think about getting a ticket to hear a 40-minute talk for Maren on this topic. If folks want to keep up with you in the meantime over the next couple of months, you’re MarenKate on Twitter, and AVRA Talent everywhere, avratalent.com.
Maren Kate: Yeah, absolutely.
Rob: Sounds great. Thanks again Maren. Thanks so much for joining me on the show.
Maren Kate: Absolutely.
Rob: If after listening to that you have a question for me, or you have a question for Maren Kate, I could invite her back on the show if you wanted to learn more about how she hires, thinks about hiring, really anything from her experience, you can email questions at startupsfortherestofus.com. We also have a voicemail line 888-801-9690, subscribe to us by searching for Startups in any Podcatcher, and of course, we have a full transcript of each episode available within a few weeks of the episode going live. Thanks so much for listening again this week. It’s great to have you here, see you next time.
She got to about $1 million monthly run rate, so almost $12 million a year. In 2015, they were burning a couple hundred thousand dollars a month. At a certain point, they weren’t able to raise that next round of funding and finances were screwed up. You’ll hear us talk about it in this interview but it’s a fascinating and frankly it’s a devastating story to hear how Zirtual did implode and to hear Maren recount what that felt like, but she bounced back and we hear how she then went out to start her next company AVRA Talent just a year later.
We dig into Maren’s expertise and experience in hiring people. She’s had so much experience doing this. You can imagine having 400 employees, although you don’t hire everyone yourself, as a CEO, you certainly have a lot of influence on that process. Now, AVRA Talent is a recruiting agency in essence. They have a really refined system of how to do this and how to vet candidates. We dig into that towards the latter half of the interview. Without further ado, let’s dive into my conversation with Maren Kate.
Maren Kate, thanks so much for joining me on the show.
Maren Kate: Hi, thanks for having me.
Rob: Absolutely. You folks have heard in the intro about this amazing growth story of Zirtual, but I want to go back to when you decided to raise money, because you bootstrapped Zirtual for two years and then made the choice to raise money. A lot of listeners to this podcast, if I were to break it down, I’d say 90% want to bootstrap or self fund and there’s around 10% in this MicroConf, Startups For The Rest Of Us community that do raise funding and they don’t tend to want to go on the VC track, but they do raise $500,000, $250,000 from Angels or from TinySeed. It’s not binary in our space. The funding is good and not funding is bad or anything like that, but I’m curious how that decision came about for you and why you decided to go that route.
Maren Kate: Yeah, I wish I had a more thoughtful answer but the honest answer is I decided to go that route because we were in a place where we were growing, we were profitable but by a slim margin just because we were supporting our team, we had bootstrapped from day one, we didn’t take on any external funding. I didn’t self fund because I didn’t have any money, so every dollar in was all we had.
We were in Silicon Valley in San Francisco, me and my co-founders Collin and Eric. Especially at the time, I think it was and in 2012, it was just a really frothy time. Everyone that we knew raised money instead of asking what your business is. You tell them instead of saying, “What do you do you?” or “Blah, blah, blah,” they would say, “How much will you raise and from who?” It was the kind of ecosystem we were in.
We got really lucky. I got connected to someone through a client of Zirtual who really liked our culture and kind of the vision of the company, and pretty quickly offered to lead our series A. That happens once in a million. I didn’t realize that because it was my first time fundraising, so it was epic. That really made the rest of the deal really easy to close out because in fundraising, if you have a well known need, everybody else would just be like, “Awesome, sounds good.”
The reason we fundraised is because we could, it wasn’t super difficult. At the moment, it seemed like it would solve all our problems because going from kind of hand-to-mouth bootstrapping, all of a sudden we had $2 million in the bank.
Rob: And then you went on to raise a total of $5.5 million over a few years. Did you later regret that given that venture capital often makes us want to grow faster and makes us burn money, because it’s there and that’s what it’s used for. But given how things turned out, did you or do you have regrets? Did you think it was the right call?
Maren Kate: It’s hard. All of the mistakes that I’ve made have been incredible learning experiences. They’ve been incredibly hard learning experiences, but I wouldn’t trade the learning I have now for anything. That being said, if I could keep that learning and make better choices, obviously I would, but that’s not how the world works. I’d say if I was and I hopped on this, I talk to people that are starting similar businesses and they always want to know about raising money. What I’ve said is we were not a venture backable business. We got venture backing, which happens often, but we are a services business. We had no technology component. Even over the three-and-a-half years after raising money, we built very little technology.
We grew really fast because part of the raising money and we had a really awesome product and we had pretty good word of mouth and if we had not raised money, we would’ve had to really restrict that growth. In the short term, that would have been hard, but in the long term it would’ve made for a much more sustainable company.
Zirtual is still around, it’s run by startups.com. They kind of bought the assets and restarted it, it’s doing well and I think they have re-birthed it in the way that we originally did with, “Hey, we’re going to make this profitable. We’re going to make this focused on a service to the customer.” For that type of business, I think that is the right way to go.
If you’re building new technology, if you have to raise money because that’s the only way it’s going to get built, that makes total sense. But if you have a services business and people are paying you money for it, often you don’t need to raise money. It seems nice in the short term, but it has a lot of long term ramifications that people who are raising money for the first time often don’t realize.
Rob: You grew from essentially zero employees to 400 in the span of three or four years depending on how you count. What was that like being, because you’re pretty young at the time, were you like early to mid-20s?
Maren Kate: Yeah, I was super young and I was very green.
Rob: What was that like basically having a company with that many employees at that age?
Maren Kate: It felt exciting in vanity metric terms but it was exhausting, it was super overwhelming being the CEO of a fast growing company when you don’t have the experience. Also, I think just emotional maturity. I would say it was both really fun and gratifying and awesome experience in some ways and it was very overwhelming in other ways.
Rob: Yeah. Could you talk about, was there a time you can think of where you were overwhelmed as it was growing?
Maren Kate: It goes back to impostor syndrome, so we didn’t grow up in a family that had a lot of money, didn’t go to a fancy school, I wasn’t raised around businessmen where I learned all these things. When I came to San Francisco and especially as we raised money, and started growing, and started getting a lot of press, and kind of tech-darling status, I felt like a giant impostor. I say I have a blue collared chip on my shoulder that has lessened over the years, but at that time, when I was 25 was very intact. Instead of asking for help and being vulnerable and open and saying, “Hey, what’s going on here?” I felt like I had to figure everything out on my own.
I think that was because I felt like if I asked for help, people would be like, “Ha, we knew you didn’t know what you are doing,” like, “Get out of here, heck.” But that actually made for a very lonely experience, where as a 25 year old who didn’t have a lot of practical real world experience, I made a bunch of mistakes and so many of the mistakes, when I look back, were things that now more seasoned, it’s not reinventing the wheel, there are solutions for that. I think that’s kind of one of the biggest pain points, at least, that I experienced.
Rob: Yeah, I feel you. I resonate with that phrase, blue-collar chip on your shoulder, because I’m also—what’s funny is I grew up in the East Bay area, but I had nothing to do with the start up scene. My dad worked construction, my mom raised us with four kids and I like to say, solidly working class. I had no ins with people in Silicon Valley. When I started doing start ups, it really is a thing that that kind of weighs on you.
I’m curious, part of the story that’s come up, I have an assistant producer now and she did some research and read some articles and listened to interviews that you’ve done. It sounds like there was a turning point with Zirtual when you switched from contractors to employees and that things started turning there, can you talk us through that? Was that a decision you made? Did you have to make it and what were the ramifications of that?
Maren Kate: We thought we had to make it. This was during that time where a lot of the on demand gig work companies were starting to get fined or have lawsuits from the Department of Labor. We talked to some lawyers, and at this point we maybe 100 contractors and the fear was that someone was going to say, “Hey, you’re misclassifying your workers.” We didn’t think we were but there’s a 20-point test that you can do on the IRS website and it’s incredibly strict. We were like, “Maybe we should rethink the way we classify our workers and go from contractors to employees.”
Another driving thing behind this was we had amazing people on our team and they loved our mission, they loved the vision. They used to say they bleed Zirtual blue and they wanted to be part of the “team”. They wanted to have the option to get stock, they wanted to be employees, they wanted to have the option to get benefits. We made a call that was based a lot more on what we thought was the “right” thing to do. We did that without thoroughly thinking through the financial ramifications over the next few years.
We were using an outsourced CFO firm that one of our investors recommended to us, and I think that was one of the biggest mistakes we made at Zirtual. They were really, really bad, and again when you go to this impostor syndrome, I was working with a partner who was a CFO and had his MBA and yada-yada and I was an English literature drop out. He was like 27 at the time.
He would send over the P&L’s and I would go through them in my apartment and I’ll be like, “These don’t make sense. I’m no genius but…” and so again, same things like that. I would be like, “Well, he must know what he’s doing.” he has this firm, this fancy investor suggested him, but finally at some point, I went to our board, I was like, “These don’t make sense. These don’t add up.”
They looked at them and they were like, “Oh, yeah.” Literally, he’s doing math wrong. I’m like, “****. Well, what do I do?” They’re like, “Well, you should get rid of him.” Here’s another interim CMO firm. That was a huge mistake and I mean, at the end of the day, I’ll tell you one thing, it taught me a lot about finance. It also taught me just because I can balance my checkbook, I kind of thought, “Well, it’s cool. I’ll be able to keep all the numbers,” deal with them myself, and that is tragically untrue.
We wanted to do the right thing and make people employees and we didn’t really think through those repercussions. In retrospect, if I had to do it again, I would have changed our business model so we could keep people as contractors. It would have allowed us to actually pay them more as contractors and it would have made us be able to keep that kind of 50% margin we originally had.
Rob: Yeah, that’s really tough. I’ve been talking to startup founders for years as I was starting my own stuff and I always say, “If you’re going to start a tech company, you don’t have to learn to code, but learn just enough that you know when someone’s bullshitting you.” I feel the exact same way about finance. Finance is the same thing. I never took a finance class in college, but I’ve read enough books that I can hopefully spot something, just like you’re saying, you knew you had a Spidey sense that something was off. It’s like, “I got to trust that founder instinct on that.”
Maren Kate: Absolutely. I think in terms of those core competencies, I think the way our education system sets us up is woefully inadequate. Instead of taking calculus, you should be understanding how to manage a household budget, how to manage a business budget. I think the amazing part is now no matter what your income level is, if you can get online, you have access to all the knowledge in the world.
As founders or would be founders, it’s really important to educate ourselves on the building blocks of whatever business we’re in. If you’re going into the construction business, you should know the bolts, understand what’s going on there. If you’re going to be in tech, you should get a working understanding of exactly knowing someone’s bullshitting you. No matter what kind of business you’re in, you always need to keep an eye on that bottom line.
Rob: Unfortunately, we know how this story ends, ritualistically, you went under and you sold the assets to startups.com, but can you take me to that moment when you realize that you had run out of money and you needed to lay everyone off and shut the company down.
Maren Kate: Yeah, it was pretty horrible. We realized when we kicked out the one firm, finally brought in a director of finance internally, she was amazing. Within three weeks, she came back to me and she was like, “We’re running out of money.” I was like, “Oh no.” I went to my board, I went to all of our investors, told them and they were like, “Okay, well you guys need to raise the bridge,” I was like, alright.
Got that all set up, did the back of the napkin figuring out once we brought in the director of finance, she kind of was like, “Listen, 70% of the plans will never really make enough money to justify them,” but 30% of them will be calling Zirtual for business. They are the winners. We need to do a massive restructuring. We need to get rid of all the personal plans, we need to focus on business. We had everything built out.
We went to the board, we’re like, “Alright, we need $1.5 million to do this. Here’s the timeline.” Everybody said okay and then one of the VC’s, the same one that recommended the fantastic CFO firm, they said, “Actually, instead of giving you the $750,000 we said, we’re going to tranche it in three segments and we’re going to wait till everybody else’s money hits the bank before we put it in.” One thing about investors, and actually I’m realizing this as a lot of life that people tend to—they’re signaling, you are less likely to go in a restaurant if there’s no one there. If there’s a line, you’re more likely to stand in it.
Investors are very similar, if not even more, than the way we see that in the rest of the world. The moment someone kind of got cold feet, some other investors are like, “Well, we’re not going to put our money until this firm’s money is in first.” It was a catch 22 and I talked to one of our biggest shareholders, the person that was the representative on the board who had no business being there and later actually kind of came to me and apologized. He said, “Yeah, you know what, we have just enough in the bank to pay out this final payroll, pay off the taxes. I think you should just shut everything down.”
At this point, I was so kind of shell shocked and just absolutely emotionally, mentally, spiritually exhausted. I was like, “Okay, well, again, he knows more than me, so this is what we’ll do,” and trying to do right by the people by making sure that we didn’t keep open any longer because if we did, we might not be able to pay them everything. That’s when I know we spent four days trying to figure something out, nothing came through and that’s when I had to send the layoff email at 11:00 PM Sunday or 01:00 AM, I forgot when it was. I remember being in the office.
We look back and if I had it to do over, I would tell the guy who gave me that suggestion that that was the stupidest thing I’ve ever heard. I probably still would have to lay most people off, but I want to spend that week actually going around to a bunch of different firms saying, “Here’s our number. Here’s our business, let’s do a down round and we’re going to fix the company and focus on business.”
Rob: Wow, that sounds devastating. It sounds like one of the low points of your life perhaps.
Maren Kate: Yeah, absolutely.
Rob: That sounds incredible and you had to lay off, you mentioned it somewhere, that you had to lay off your mom and brother? Is that true?
Maren Kate: Yeah, they worked with me. Luckily, we are a close knit family and got through that but it was super bad..
Rob: There was obviously a lot of negativity coming at you after that. I’m sure from employees and I even think more direct articles on TechCrunch and other places that were talking about the big flame out. How did you handle that? Obviously, that sucks, and it’s people dragging you through the mud or whatever, but did you just black out, go offline for months, did you fight it? What was that like?
Maren Kate: No. I definitely went offline, because my whole thing was it doesn’t benefit me to hear a bunch of people tell me I’m ******, I already feel that so I’m covered there. I think honestly, probably, it was just like self preservation kicked in. I went offline for several months after we laid everybody off. Me, my co founders, and my brother wasn’t getting paid, and a few other awesome OGs in the company spent the next few months trying to make the transference to startups.com as simple as possible.
We kept working, cleaning things up and doing the best we could, and that was how I handled it. After the three months were up, I laid on the floor of my house at the time and just didn’t do much. After a few months of that, I didn’t have any money and I was like, “Crap, I really have to get back to work,” so I peeled myself up and got back on the saddle so to speak, but it was very devastating. It was absolutely hands down one of the low points of my life.
I think the reason was because I knew how many people it impacted and that’s what just crushed me, the investors, everybody else. We were such a tight knit group, and the people that were part of Zirtual were like an extension of our family, that was the hardest part.
Rob: I can only imagine. I’m speechless because like I’ve gone through hard things, but I’ve never had to do that. So many people will never have to in their entire entrepreneurial career. You go offline, how do you even recover from that? Mentally, it sounds like you were just, even before it was happening, there were just loads and loads of stress, because you’re growing this company, loads of stress as it’s kind of going down, and then this whole big thing happens, you go offline, but there has to be a healing process of taking a year off. In off, I mean I know you’re working and stuff, but what did you do to try to heal yourself to be able to get back on that horse and start what you’re working on now which is AVRA?
Maren Kate: I did kind of a deep dive. I started reading a lot which is kind of how I approach most things. I knew that this was either going to break me or I was going to figure out a way through it. I didn’t want it to break me. I think one of the things that actually kept me going was the sense of I have to make this right at some point in the future, in my life, and I still actually feel that very strongly.
There were definitely times where I would be in the shower and I was just like I can just slit my wrist and then not have to deal with this anymore, but that good old Presbyterian guilt I was like, “Yeah, but then that would really hurt my family, and my friends, and some employees, so that wouldn’t be fair to do it to them. Let’s try to get through this, let’s try to figure out a way to make this up to people at some point.” It sounds very morbid, but I actually think it was helpful. I always tell myself, I’ve never lived abroad and I was like, “Just figure out how to pay the bills, figure out how to maybe make this up to some people, and then you never lived abroad, so you’ve got it going,” at least try those three things.
Worst case scenario, if you can’t do either of those, then you can always kill yourself after you lived abroad. That actually got me through the first few months. After the really dark part passes, then you start to see through the mist. After the news cycle passed, after whatever else happened, I don’t know who the next target was in Silicon Valley, I was super lucky. I went through a really bad break up a few months later which was amazing especially since we live together. I was like, “Awesome,” that point was almost funny. I literally laughed. I said, “This could not be any…” I kind of took it as a sign. I was like, “Alright, I don’t have a house anymore.”
San Francisco has been really good to me in some ways and also been terrible. I was like, “Well, I want to live abroad,” and I got super lucky. I randomly got an offer from this company called Roam to head up their operations and they had co living locations all over the country. They’re like, “Part of this, Maren, is you’ll have to go and live with these different co living places and improve their operational efficiency,” I was like, “Literally, I’m on the next flight.”
I paired all my belongings down to suitcases, flip San Francisco off as I was flying out, and went and lived abroad for about a year which was wonderful. I also think just getting to see that the world is a lot bigger than the place you’re in was pretty ground breaking to me. I didn’t travel a lot as a kid outside of the states. To actually see how big the world is, and see how different people are, and to see what real struggle looks like, I was like, “Oh my gosh, you snooty bee, how dare you complain about this stuff. Don’t feel sorry for yourself, you’ve got nothing to complain about.”
I think that was one of the most transformational parts of my life. It was actually shaking myself out a bit by being able to see how big the world is, and how much opportunity, and then also how much suffering, and it really puts your own drama into a contrast.
Rob: It sounds like a really powerful way to reset. I think that travel can be such a therapeutic thing in that respect.
Maren Kate: Absolutely.
Rob: You took this time to recover, and then you got back on the horse, and you started AVRA Talent. Folks can check it out avratalent.com. Hire the best talent, regardless of geography. We connect employers with the top 5% of remote professionals tested and vetted for your specific needs. When I read that, I think of it as a contingency recruiting service. I’ve used those at previous places that I’ve worked. Can you talk to me about how you’re different?
Maren Kate: Yes. After I kind of did a post mortem on what happened at Zirtual, one of the biggest things that came back was that we had, and I had made some poor hiring choices along the way. When I think of hiring or recruiting, I actually think it has to do with anyone that is on the bus with you. That includes investors, that includes advisors, that includes employees. Just out of greenness, we had brought on some people that weren’t working great.
One of the biggest reasons I went back thinking that was, we didn’t want a thorough process. We were really good at recruiting our virtual assistants with this incredibly thorough process I think only half a percent got through and were hired, but when it came to our COO, or the outsourced CFO firm, or some people in our tech team, the process I ran was nonexistent. After Zirtual, I talked to some people, some founders while I was traveling abroad. I did a head of operations stint at Calm, the meditation app. I talked to the guys there. I was like, “Yeah, I just must be an idiot. I don’t know how to hire,” and they were like, “No, everybody actually has the same problem, we did a bunch of bad hires too.”
I was like, “I wonder if I could take the process, the structure that we did with recruiting our virtual assistants and apply that across different rules.” I started doing that as a consultant and then I decided to spin up an agency which is AVRA Talent. The way we differ I would say from the contingency recruiter is kind of 2-fold. We’re very focused on alignment, we only work with startups and companies whose culture and mission we can get behind. We charge a percentage of a placement fee, but we also charge an upfront $5000 retainer.
I started this from day one because one of the biggest problems I’ve realized in contingency recruiting is incentives are misaligned. Contingent recruiters incentive is to get you someone who’s the highest paid as fast as possible, because if they don’t get you that person before you hire them somewhere else, then they don’t make any money. That’s kind of one of the reasons that industry was so fractured and can have such a negative connotation, versus the way I talked to when I talk to founders.
I was like, “Listen, we’re going to do the work. We’re going to act kind of like your internal recruiting team. Each search we put several hundred human hours into. We’re going to put this retainer down. If we need to find you the person that you hire, then you’re going to pay us let’s say 15% of their base, and that $5000 will roll into that. If we don’t, if you bump into the next hire on the subway, that’s amazing. We want you to find the right person. It doesn’t matter how you come about them, but you’re still going to pay us for the time we spent,” and that model has worked really well for us.
We have four core values and alignment being the first one. In the last three years as AVRA has grown, we’ve actually gotten more and more focused on helping companies recruit fully remote talent. These are fully remote employees from engineering, to digital marketing, to operations, to product, to customer support. I think that is where we are the best in the world. That’s really where our focus is.
Rob: You’ve talked a lot about hiring and you obviously had to hire a lot of people. You mentioned somewhere that you kind of have this system and way of thinking about building a great company and it’s to bring on the best people, connect them to something bigger than themselves, empower them to do their thing, hire and fire according to company values. I wanted to get into that first piece which is bring on the best people. How do you do that? People listening to this podcast, there’s a lot of founders out there who maybe are hiring their first ever salesperson, their first customer support rep, or maybe they’re hiring their 10th or 20th employee, what’s that the CliffsNotes version of how do you bring on the best people.
Maren Kate: This is one of the reasons that I love remote recruiting so much, because if you’re trying to bring on the best person in say, San Francisco, you are competing with some of the well best funded, highest paying companies in the world, you’re kind of fighting a war. Versus if you are hiring in Boise, it’s a little bit easier, but there’s not as much talent that you’re looking for maybe with specific skills, and obviously technology companies and startups.
With remote recruiting, and this goes with anything, you can run this whether you’re hiring in an office in San Francisco or remote. At the end of the day, you just have to think of it the exact same way you think of a sales funnel. You need to get enough at the top of the funnel, and you need to filter them effectively through several steps to get down to the 5-7 candidates who really matter, who then you run through a more detailed process which would include test projects, references, cultural interviews, yada-yada. My favorite way of hiring is casting a really, really wide net and then setting up 5-7 steps in that funnel, so that the best people can shine through.
An example would be in my new startup that I’m spinning out, I’ve been recruiting for a founding product person, and a founding growth person. I would say at the top of the funnel, we’ve probably gotten 5-600 applicants on both sides. We’ve set different tests so to speak at different parts of the funnel and these cover the core values that we hold important. They cover the skills both soft and hard skills that are important for this role. As people go through different stages, and the funnel gets smaller and smaller, the best people start to really shine through.
Rob: Can you give an example of one or two of those stages? Is it like a 90-second video of yourself taking that exam or something?
Maren Kate: The way I like to think about it is just thinking what hiring normally is and then doing the exact opposite. Most companies approach hiring, they post a role and people submit their resume, and then it’s up to the hiring manager to go through all these resumes, and resumes are literally a terrible way of assessing fit. It goes back a stage. You want to figure out what is the role, what matters the most. You don’t say, “I want to hire a digital marketing manager,” you say, “This is the job or jobs I want this person to do. I want them to own our ad spend, I want them to be able to write great copy. I want them to be able to hire and manage designers, and I want them to be very analytical and be able to create reports.”
You can actually test that in different stages of the funnel. One example would be we have people submit resumes, but we don’t even look at them until maybe stage five. Instead, we would have three paragraph style questions that would be the first stage of the recruitment process. The very first one which we include in all hiring is, “What are you looking for in a role and what honestly draws you to this company and this role?” If people don’t fill that out in a meaningful way, in an honest way, we immediately disqualify them. Because if you want people that actually care about your product and your vision, then they should be able to articulate that.
We also ask them a few other questions and then we actually look at their writing and their communication which is incredibly important for most roles, especially ones that are remote. But going back to the digital marketing example, you want someone who can write well. It doesn’t matter if I look at their resume and they used to work for Apple, or Postmates, or one of these darlings, I’m not like, “Oh, they worked at Airbnb, they must be good,” that is not an indicator of success.
Instead, I actually look at the work they do. After that, we would yay or nay then someone on interview, or just glance and push through the top 20%, and then they would go on to another question, and we test the responsiveness as a really big one, and then we’ll get them into a phone screen where we’re talking about specific examples to understand, do they actually understand the role? How have they performed in their previous roles? A lot of those open ended like, “Tell me about a time,” questions. After that, there’s another longer test project.
We always suggest to clients to do this themselves. Setup a paid test project, something that you actually need done. Be sure to pay for a person’s time, that’s really important. Nothing is more powerful than seeing how people work with you and how they engage with you. If they do well through that, we usually do a second layer of interviews which have to do with your team, with who would be their supervisor. After that, we always highly recommend references. Checking references both given references and back channel references. That’s the one thing I tell founders. “If you do anything, just check references,” that’s the only take away.
Some of the worst hires I ever made, years later talking to people who maybe have worked with them, there’s always a pattern where it was like, maybe they’ve gotten lucky and gotten some good jobs that had high name worth at the company, and they had floated on other people’s success, or maybe didn’t have the skills but they were great talkers.
If I haven’t just spoken to a few references, and the way we do references as we think of are people you worked for, people you worked with, and people who worked for you, because somebody can trick one of those subsets. Maybe your boss thinks you’re great, but the people who work with you and work under you think you’re terrible, and vice versa. It’s really important to get all three of those categories. From there, we usually start to get our preview of a good holistic view of a candidate.
Rob: Very cool. That’s kind of a mini clinic in the hiring process. I really like that. I like most of the stuff you said there, but the write well piece is something that I really focus on. Even when hiring developers, that was the thing I was super picky about.
Maren Kate: And following instructions, that’s a huge one too. It’s amazing how few people follow instructions. Also just somebody who really vibes with your company and your culture. This is why I say when you’re writing your job description, let your company, let your culture, let your flavor of weird shine through. The right job description, it will scare most people off, but it will really attract the people that are like minds, and that’s what you want, versus a generic, bland job description.
Rob: Awesome. You’re talking about this topic in a couple months in MicroConf Minneapolis. If you’re listening to this and you’re not coming to MicroConf Growth yet, you should think about getting a ticket to hear a 40-minute talk for Maren on this topic. If folks want to keep up with you in the meantime over the next couple of months, you’re MarenKate on Twitter, and AVRA Talent everywhere, avratalent.com.
Maren Kate: Yeah, absolutely.
Rob: Sounds great. Thanks again Maren. Thanks so much for joining me on the show.
Maren Kate: Absolutely.
Rob: If after listening to that you have a question for me, or you have a question for Maren Kate, I could invite her back on the show if you wanted to learn more about how she hires, thinks about hiring, really anything from her experience, you can email questions at startupsfortherestofus.com. We also have a voicemail line 888-801-9690, subscribe to us by searching for Startups in any Podcatcher, and of course, we have a full transcript of each episode available within a few weeks of the episode going live. Thanks so much for listening again this week. It’s great to have you here, see you next time.
Episode 485 | Catching Up with Rob (An Interview by Dr. Sherry Walling)
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In this episode of Startups For The Rest Of Us, the tables have turned as Rob is interviewed by Dr. Sherry Walling. They talk MicroConf, the podcast, state of independent SaaS report and TinySeed but also explore bigger themes like what Rob wants to accomplish with all of his businesses and a unifying theme he’s established across the board.
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Rob: Welcome to this week’s episode of Startups for the Rest of Us. I’m your host, Rob Walling. This week is a show we do about every three months. It’s a catch-up with me, my wife, Dr. Sherry Walling. She’s a clinical psychologist, a founder, and an executive coach. She comes on the show and interviews me about what I’ve been up to since the last interview. Tracy Osborn interviewed about three months ago. I hope you enjoy this episode as it continues to follow my story.
Sherry is (as I said) a clinical psychologist. She’s also built up a really nice personal brand in the space of helping founders succeed, and helping them stay the same while starting up. You can check her out at sherrywalling.com or @zenfounder on Twitter. With that, let’s dive in.
Sherry: All right. You feel ready?
Rob: Yup. I’m all good.
Sherry: You’re good to go? You’re focused? You’re here? You’re in the game?
Rob: Yup, I think so.
Sherry: It’s so much harder to talk about your own stuff than it is to interview other people.
Rob: I don’t know. Sometimes. I am on the interviewee side probably as much as I’m on the interviewer side. Maybe that’s not still true today, but I’m on it quite a bit, so I’m cool to chat.
Sherry: Do you tend to get the same questions over and over when people are interviewing you?
Rob: Yeah. If it’s a new audience, a new podcast, or someone’s who’s just doing a bunch of interviews with people that he or she doesn’t know. They kind of go with the surface stuff, and they have the same set of questions. They’re all pretty similar. But every once in a while, I go on a one called, What Works, I think it’s what it’s called, and she asked questions about values, imbuing things that you do with your values, and how you do it. It’s just a very different, whole different tact. Those can be interesting, or they catch off guard, frankly. They look at things from a different lens.
Sherry: What’s one of the most interesting questions that you’ve been asked recently?
Rob: That would probably be in that interview. She basically was saying, “How do you pass along your values?” or, “Which of your values do you want to be in the companies that you start and be delivered to the teams that you worked with?” and then, “How do you do that?” It was just a whole path of thinking about that. The reason it was interesting was because I had really not done a lot of thinking about it. I had to think on the spot what those things are and how I do those.
I listened to it today. It came out good. That’s actually the beauty of being asked the same questions over and over. You learn how you think about them. You learn how to answer them eloquently and in a way that’s succinct, not just you thinking out loud and trying to find your way to an answer.
Sherry: Okay. One of the things that I think is interesting about you is that you are working on three interrelated but separate businesses at the same time. The way in which those businesses are growing, they’re all growing and shifting right now. I’m curious how you direct that growth. Of course, we’ll talk about each of them separately. We’ll talk about MicroConf, we’ll talk about Startups for the Rest of Us, and of course, TinySeed. What’s the unifying thread? What are you trying to accomplish? What do you want out of these three businesses as they grow?
Rob: I realized this over the past two years after I left Drip. I was saying, “What should I do next?” I was looking at buying a tabletop gaming website. Just going completely off into a different direction, down a different path I had gone previously. But the more I looked at what I have done all these years for free (in essence), compared to the software products, the startups, and all that stuff that I had started, blogging, podcasting, and starting a conference are either completely revenue-neutral or rounding errors of revenue. But I did them, anyway.
That was a big sign to me that it should be the direction that I had. I realized that the things those had in common and that the three things you’re talking about—MicroConf, TinySeed, and the podcast—have in common is they help entrepreneurs. They help founders, they help us bring us strategies and tactics, but they also bring us together, and they inspire us to keep going.
Startups for the Rest of Us are free. It’s every week. There’s a little bit of community around it because you can tweet about it or be in the comments. You can hear other people answering questions and sending their questions in. But really, it’s a low level of engagement, and the cost is zero. If you take that up one notch, probably my first book Start Small, Stay Small is between $10-$25 depending on which version you buy. There’s no community there but there’s a lot of strategies, tactics, and some inspiration.
If you take it up another notch, then there’s MicroConf, which is our local events will be $99, and our growth is $1000 or $1100. There’s way more engagement. It’s super intense in terms of strategies, tactics, and inspiration, but they all do the same thing. They’re purely to help startup founders. One does it for free, one does it for cheap, and one does it for less cheap. Then there’s TinySeed. You can see the path, the thread that binds all those together. That’s really what I found of everything I’ve done in my life as a professional. That’s the most fun, and that’s the one that I’m most excited about. You can tell because I’ve been doing it for 15 years now. The same thing.
Sherry: But you’re a teacher. You’ve always been someone who learns something thoroughly, and then wants to explain it to someone else.
Rob: Yeah, there’s that element. That’s how it started with the blogging, the podcast, and the book (I guess). The interesting thing is it did not occur to me until a couple of years ago when it really hit me. I saw myself as a facilitator, getting people together to learn, and in the early days it was all about the tactics and the strategies. Then about (I’d say) seven years ago, we realized, “Boy, it’s much more about the relationships in the community,” and then a couple of years ago, I realized I really am bringing people together, like that’s the most important piece.
Sherry: It’s interesting to hear you say that as something that came to you later because in my life with you (which began 20 years ago), we identified ourselves as gatherers when we were in our early 20s. People would be at our house.
Rob: Yeah. That was always something we did, but you and I did that together. I didn’t know if I could do it on my own, if I should, or if I’m good at it. Then you looked at the track record of it. The interesting thing is when I actually looked at what I’ve done. There’s a certain amount of being successful, whether it’s as an entrepreneur or not, and it’s knowing myself. The more that I’ve learned about myself and removed those blind spots, the more I feel like I’m able to manage my own psychology, manage my own pros and cons, and strengths and weaknesses.
When I look back, I’ve had this blind spot of, I didn’t realize how much I wanted to get people together. You and I did it naturally (again) 20 years ago. One of my favorite parts of the podcast—which is a very unidirectional medium, is basically one or two people talking in the mic while everyone else was listening—are these Q&A episodes, where we get all the listener questions, feedback, and the voicemails. We can rally around that and feel like if you listened to five or six listener questions, you know, “Wow, it’s not just the two hosts that are answering this. It’s five or six other people.” Every month we do an episode. You hear they’re being people, even in the medium that is designed to not to be.
In my first book, I was going back and reading that, and I used a bunch of examples of Ruben Gomez, Ted and Harry from Moraware Software. I don’t remember who else, but even at that time when I didn’t need to do that, I realized that bringing other folks into the mix only benefits all of us. We are all smarter than me.
Then of course, MicroConf. Is that and TinySeed much more intense and much smaller scale? Having the batch of 10 founders is this super in-depth and intimate community.
Sherry: Let’s do a little bit of a deep dive into the podcast. There’s been some significant shifts lately. Mike is not on every week anymore, still part of the podcast but is not the weekly co-host. And you’ve made some other personnel changes by hiring an assistant producer. How’s that going?
Rob: It was touch and go at first. It’s just kind of scary to be on a show that has had a certain format for 450 episodes. Then there’s suddenly turned that over and say, “Can I do this? Can I really keep this going at a level that it deserves (given the audience), and just giving all the stuff we put out there?” Right now, it feels like since then, there were some touch and go moments, but pretty much everything feels up and to the right. I feel really positive about it.
I have a renewed energy around it, and I think people can feel that. I’m also, every week, thinking, what can I do differently this week? What can I mix up? The novelty of that, of even trying different formats, I’ve tried some that just don’t work out well, but people were like, “That was an interesting experiment. Have you thought about doing it this way?” It’s almost like customer development. Try something new and try something new, and just keep the variety going.
The interesting thing is when you do that, it takes a lot of time. You just don’t show up every week and talk for 30 minutes like we used to. That’s where the assistant producer comes in. I find myself spending more and more time each week just going guest research, writing questions, trying to find folks, and just doing all the stuff—calendaring, moving MP3 files from here to there, et cetera. It’s just all stuff someone else can be doing, so that’s really where I started looking for someone to help out and take that burden off because I wanted to keep doing it.
This is why podcasts stop. People can come up with great ideas and want to do them, but real life gets in the way. Running MicroConf and TinySeed, then having this podcast as well, there’s a lot going on in doing day-to-day stuff.
Sherry: Just a lot of admin, too. Moving files around is not that fun. You tried this discussion format. Did you enjoy that? Was it fun? What were the pros and cons of that?
Rob: Yeah. It was a news discussion show-type thing. It kind of worked. It mostly worked. It was super fun to record, but I think I want to put some tighter reins on the couple of the topics, and try to make them more current events. I also think that having three of us on the mic or even four at once and doing round-table on topics, I think it could be really interesting. I know a couple of other shows that do that. They focus on news topics like startup news or tech news. You hear a variety of voices from a variety of perspectives. It’s really interesting.
Again, that’s logistically a lot of work, to find those people, to find the time that works for everybody, then get all that audio files. Just get everything together. Writing the show notes, finding the topics, on and on and on. The shows I’m talking about are either the people who literally do them full time or they have full time staff doing them. That’s what I’m looking at. I’m expanding into that one because there’s no one doing that in our space. They do it more in the Silicon Valley or in the tech news space.
Sherry: Did you try a show format that you weren’t such a fan of? That you didn’t like? Or you didn’t feel like working well?
Rob: I don’t know. I did a couple of hot seats. I got mixed reviews or really I would ask people, “What’d you think of the hot seat?” They’re like, “Oh, you did a hot seat?” I was like, “Yeah. I went through this, this, and that.” Someone’s like, “Yeah, I don’t remember that episode,” which tells me it probably wasn’t memorable.
Sherry: It felt like an interview, maybe?
Rob: Yeah, I don’t know. I’ve also heard people say, “The ones where you go through with an entrepreneur, your troubleshooting things, and trying to think through, those are the most interesting ones,” which essentially are the ones with Mike and the ones that are hotseats. That’s always the issue. You only have a handful of data points in any of these things.
Even when I call for feedback and say, “I’m going to try this interview, call everybody back for a Q&A, and try this thing out. Give me your feedback.” I will get 5 or 6 people who sent me an email or tweet me out, or maybe it’s 10 or 12. But it’s not so many data points, that it’s not an end of 100 or 1000. I will often get two that say, “Yeah. That was really good.” And two that say, “I was kind of bored.” What do you do with that, at that point?
Sherry: You keep going.
Rob: Yeah, no doubt.
Sherry: Which is what you’ve done for 10 years now. The 10-year anniversary of the podcast is next month. Is that true? Is it really 10 years? That’s crazy long!
Rob: Yeah. March of 2010 was our first episode.
Sherry: Wow. Almost 500 episodes.
Rob: Yeah, that’ll be in June, that 500th episode.
Sherry: Dude, you’re an old podcaster.
Rob: It’s just really ancient in podcast years, yeah.
Sherry: In podcast years, that’s OG for sure.
Rob: Yeah. It’s a trip. To me, the 500th episode is a big milestone. 10 years and still super interesting. I don’t know if I’ll do anything fancy for that but 500th episode, I’m trying to wrap my brain of like, what do you do to celebrate that? What do you do that’s different not just the same episode that hasn’t been done before?
Sherry: What are you going to do?
Rob: I don’t know yet. I’m still thinking about it. I have some ideas.
Sherry: If you could live podcast while skydiving.
Rob: I could do that. I think the audio quality would probably not be great. Imagine that. “I’m your host Rob Walling.”
Sherry: It’s just like a long scream.
Rob: That’s the thing. A bunch of the formats that I do here, Mike and I did a live podcast recording at MicroConf Europe for our 300th episode. It’s okay. As a podcast, live podcasts are not that interesting. They’re always my least favorite. If I’m listening to a series and I do a live show, I’m sure they’re great fun to be there in person. There’s that energy, but it’s not as interesting. People are either… I don’t know. I don’t even want to conjecture why that is. I just know that I’ve listened to 10–15 live episodes from different podcasts that normally record in a studio. They’re just off their game. I can’t think of a single one that was better than just the normal episode that I normally record.
Sherry: I’m curious what the audience would recommend or would want to do with the 500th episode.
Rob: Yeah. I’d be happy to take suggestions either at Twitter @robwalling or questions@startupsfortherestofus.com. Definitely open to ideas and ask a few close friends of mine who listen to a lot of podcasts, what are the best episodes you’ve heard. Again, I have some ideas. I’m just trying to whittle it down and figure out what. I can come up with ideas that are really, really, a lot of work, and I’m trying to figure out how to either pair that down or make it happen or whatever.
Sherry: If work, money, time, and resources were no option, what would you do?
Rob: No limit, I would have 500 startups experts, founders, or people we respect answer a question, ask me a question, or something outrageous.
Sherry: That’s a really long podcast.
Rob: Well, that’s the problem. I can’t do that.
Sherry: 24 hours of Startups for the Rest of Us.
Rob: Right. Wouldn’t that be a stunt? Wouldn’t that be crazy?
Sherry: It would be a stunt, that’s for sure.
Rob: A three to four hour podcast. Maybe don’t do 500. Maybe just do 10. You can just see where it goes. I have to arrange that and figure out who to ask, get the files back, and all of that. And it has been done. I kind of have enjoyed some of those episodes we’ve done it ourselves. Our 100th episode was basically asking a bunch of people a question. We’ve got, I don’t remember, it was like Shawn Ellison, Andrew Warner, and a bunch of people answering questions that we tied in. That was a fun one. But, do that again for 500?
Sherry: I don’t know. I just know that the need to do something novel or new with that big pizzazz is maybe the best way to celebrate 500 episodes. I mean, 500 episodes is just relentless execution which is the Rob Walling theme. I don’t know about this pressure to do something new.
Rob: It’s possible. We did it for 400. We have a lot of these out. Four hundred was just an episode Mike and I recorded about being consistent. That was the whole thing. We looked back, and we talked about our metrics changes, audience listenership, and how we have shown up every week, why we show up every week, just all that stuff. We have done that, I’ll say, but I certainly could revisit that theme for sure.
Sherry: Well, that would be consistent.
Rob: Indeed.
Sherry: Right alongside this monster anniversary for Startups for the Rest of Us, you also have a new little baby podcast, the TinySeed Tales. I have to tell you, every time I see that title, I think about the DuckTales, a Disney show that existed when I was a kid.
Rob: That was an awesome show. That show holds up.
Sherry: It had this really cool song. So TinySeed Tales. How’s that going? You launched season one.
Rob: Yeah, season one went out. It was a podcast I wanted to do for years, but it took a lot of time and a lot of money because we have to pay a producer who’s producing it at a pretty high level, voiceovers, scriptwriting, and all that stuff. That was a cool experience to see how that’s done. You haven’t heard any episodes right?
Sherry: No. Confessions of the wife.
Rob: I know you don’t listen to my podcast and I listen to yours. Let’s put that for the record. If you listen to nothing else, you should listen to TinySeed Tales. It’s 8 episodes, they’re 20 minutes each.
Sherry: Why should I listen to it, Rob?
Rob: Because it’s good radio. It’s really good.
Sherry: What makes it good radio. I know it’s not just the production value, the money, and the time. Why is it good?
Rob: One part is you talk for 40 minutes then you take the best 15 minutes of all that audio. You pack it together, write five minutes of voice-overs. That is inherently going to be more interesting than a 40 minutes interview. You just get better tape. In addition, I really started doubling down in my interviewing skills right before that because I didn’t want it to suck. You know me when I’m new to something or feel like I’m not good at something, I dive in pretty deep.
Probably some of my best interviews I’ve given are in TinySeed Tales. The first season was with Craig from Castos. He’s also very thoughtful, he’s really good on the mic, it was a very natural fit for him to do. He wasn’t nervous. I could imagine doing it with somebody who hasn’t podcasted before, and I think it would have been a lot more challenging. Then there’s cool music, too.
Sherry: Oh, as long as there’s cool music. Is it the Tiny Tales theme song like DuckTales?
Rob: No, but we should’ve done that now that you said that. Dude, you’re mocking it. DuckTales holds up. It’s one of the cartoons from the 80s that’s considered to be very good.
Sherry: I’m not mocking it. I am singing along. You misunderstand me, sir. I’m not mocking it.
Rob: They’re redone it; Disney just redid it. The new one has Chucks, too.
Sherry: Have you been watching Disney Plus at night while I’m sleeping?
Rob: No. Maybe Finn has.
Sherry: Okay. One last question about the podcast. I know there’s lots of other things that you’ve been working on that I want to ask you about. What is your growth area in podcasting?
Rob: What do you mean? What growth area?
Sherry: You’ve been doing this for 10 years. What are you working on getting better at? What are you continuing to learn about and press into as someone who is guiding Startups for the Rest of Us?
Rob: Two things, you’ve heard me do intros and outros or solo episodes. I want to be able to do those almost without editing. When you and I are here talking, I’m not starting and stopping 20 times for five minutes of response. It’s just a natural conversation that flows. When I sit down to intro and outro this episode, Josh, our editor, is cringing right now thinking of how much he has to edit those two minute or three minute intros. Something about it when someone else’s not in the mic, I get stuck. It’s weird. I’m trying to work through that.
The other thing that’s more visible to the listeners is every interview I do, I’m trying to become a better interviewer. I’m trying to get better asking the right questions, asking them in a way that brings out the interesting answers, that touches on the emotions, but also brings out tactics and learnings. There’s a lot to be learned there. That’s what’s still exciting for me about the podcast. I think once I peek at anything, most of us, once you peak and you’re like, “That’s it. I’m the best there is,” it’s only downhill from there. That still feels like I can see a lot of mountains up ahead of me that I haven’t climbed here with podcasting. I think I can only get better in a lot of ways.
Sherry: Are you going to be doing this in 10 years?
Rob: I don’t know. I would say yes because that’s my personality, to just do things forever. I said that on purpose. I said it on purpose because I knew you’d laugh. Every software company I ever started I have not done forever.
Sherry: I know. That is absolutely not true, Rob Walling.
Rob: That’s the opposite, yeah. The Interesting thing is with books, blogs, podcasts, conferences, that stuff, I have done for a very long time. That was the signal a couple of years ago where I was, “I keep coming back to these things,” and podcasting is one. TinySeed Tales, while it’s been on this feed, I’m setting up another feed for it, and it’s going to be in seasons. But really, I have two podcasts now, and I could see having another. I enjoy it that much. I enjoy consuming podcasts that much, and I enjoy creating them a lot.
Do I think I will be podcasting in 10 years? I do. I think it might be Startups for the Rest of Us, but who knows? So much can change. If you think back 10 years ago, I hadn’t started Drip. I hadn’t bought HitTail. I hadn’t started this podcast. So much was different, so when I think 10 years ahead from now, where could that lead?
Sherry: Speaking of things leading places, let’s shift gears, move down the funnel a little bit, and talk about MicroConf. It has been a huge year for MicroConf already. You did this big announcement talking about reorganizing the schedule and structure of MicroConf. We are getting ready for MicroConf here in Minneapolis in just a few months, which I’m very excited about. So, 2020 compared to 2019, what are the significant changes that you’re implementing with MicroConf?
Rob: As you said, it’s a huge change. In 2019, we did three in-person events.
Sherry: Which was Growth Starter in Europe. Now, what’s 2020 looking like?
Rob: We’re doing seven in-person events. It’s Growth Starter in Europe, and then four were local events.
Sherry: You just sent me all the calendar invites in these events yesterday, and I was like, “Holy crap, you’re basically gone most of the month of October traveling around doing the MicroConf Roadshow.” It’s what I’m going to affectionately call it.
Rob: Yup. That’s exactly a good name for it. We went to seven of those, then we were doing the State of Independent SaaS reports. I’ll say we’re doing it. We did the survey, issued the report, did a live stream, which is I’ve talked about was quite an endeavor and a little bit nerve-wracking.
Sherry: A little bit nerve-wracking? Are you kidding me? You were sweating that for weeks. I haven’t seen you that stressed about something. Maybe the Drip sale or the decision to leave Drip, but you were like, “Which outfit should I wear?” It was really occupying a lot of space. Why do you think it was so challenging?
Rob: Probably because I wrote this blog post here years ago called Terror of First. I said that the first time you do anything, it terrifies you. Then, you just do it until you get numb to it. Pretty soon you’ll get better at it, and you’ll get more comfortable with it. First time I ever published a blog post, I was freaking out. First time I ever published a podcast episode, I was freaking out. First time I ever did a talk in front of people, I was freaking out. On and on and on. Each of those I have become more comfortable with. I think most of us do, and that this was one.
Doing a 30-minute live stream where you are standing, looking at a camera and nothing else, is not the same as standing on a stage at a conference and talking to 500 or 1000 people. It’s crazy how different it is. The energy is different. It’s a skill and it’s something that, if you’d ask me what’s my personal development this year, a lot of it is that it’s getting better in front of a camera. I’m not nervous. I don’t get the sweaty palms, hair standing up at the back of my neck, and throat closing. I don’t get that. You just get awkward naturally. The camera just doesn’t feel like a natural conversation because you’re talking to no one. You’re […] an abyss and trying to have a personality, and I don’t think it’s a natural thing for us to do, at least for me. I’ll speak for myself.
Sherry: Oh, no. It goes against every part of our brains that’s geared towards interactive communication.
Rob: Yeah. No one’s nodding. No one’s saying, “Uh-huh.” You’re not getting any positive feedback, which in an event, I can be nervous, get up, start doing a talk, I start talking about things, I see people in the audience are going with it, they’re smiling, and I’m like, “Yeah, yeah.” You feed off that energy. You know that feeling.
Sherry: Oh, yeah.
Rob: And you don’t get that with the thing. That’s where, standing for 30 minutes with no script, no cue cards, talking, and knowing that there’s really no cutaways, even to get a drink, there was not enough time for me to stop and get a drink of water in the middle of that. I could have, but people would literally be waiting on a live stream while you do that. That’s a new experience for me. I’m sure over time, it will become more comfortable just like now on stage. If I need to stop and get a drink, the deafening silence that you hear…
Remember the first time you did a talk whenever you were quiet? It sounded deafening like you should be feeling the silence. Everyone was waiting for you to say the next word. Then, the 10th or the 20th talk you do, you’re like, “The silence helps.” It gives people space.
Sherry: Yeah, the silence is fine.
Rob: Yup. That’s where doing a live stream like that, I was like, “Which rules apply? Which don’t? What do I have to adjust here? How do I get in front of this many people?” It got recorded and now it’s on YouTube. I think it’s 2500 or 3000 views. I’m going to be seen by 3000 people on the camera. How do I make that interesting for them? How do I make it provide that value of 3000 people giving me 30 minutes of their time?
Sherry: Why was it so important for you to do this State of Independence SaaS? To do the report, to do the study, then to do a live stream? Why is that significant?
Rob: The report for me is like a passion project that I’ve been wanting to do for years because there just hasn’t been data in our space. We see all these reports about venture capital raising companies, their stats, and their benchmarks. I’ve just been so curious because people asked me, “How many people go to MicroConf have raised some kind of funding?” I was like, “I think about 10% but I don’t know.” I was super curious to hear that. I have all these rules of thumb like what your churn should be, what’s good, bad, and great churn, trial-to-paid conversion ratio, just all these metrics that I have developed the rules of thumb over the years, but it’s just from seeing a bunch of apps. It’s beyond anecdotal. It’s not that I had an end of one, but I had an end of dozens, I’ll say, that I’ve combined, and I wanted to see how those held up.
It wasn’t just a personal thing. I want this whole space. I think this is the future. I believe that this space is the future because venture capital can only be invested. It’s like 1 in every 100 startups or something; it’s a really small number. We’re “for the rest of us.” We’re startups for the rest of us. We’re the other 99%. I believed as we move forward (and had believed this for a long time), we are the long tail of startups, so where’s the data on us? Where’s the stuff to help us? Where’s the stuff to give us some type of benchmarks?
Sherry: How do you see the information in this report and in the live stream impacting an individual founder?
Rob: The live stream was 22 minutes, plus Q&A of me just walking through some high-level findings, and it was to get people interested enough in it to read the report. The report itself is 65-80 pages, depending on which version you get. There’s a lot more in the report. You can think of the live stream almost as an advertisement to download the report. Just to be like, “Hey, look at this thing. This is interesting and these are my thoughts about it.”
Sherry: It’s an abstract.
Rob: It is, that’s a good point. An abstract, like an academic paper. Whereas the report, if I was the founder, I would be looking, “Oh, where am I? What percentile am I at with my churn, with my trial-to-paid, and with my hours worked per week? With how many years I’ve been in the business versus growth?” There were just all types of findings in there that I think it depends on your situation that we can benchmark ourselves to. In addition, there were some interesting findings with which marketing approaches, which advertising approaches, are working best for you right now.
We now have a ranking on that in our space. We have payback periods for Facebook and Google Ads. You can see it. My gut was always, “1–3 or 1–4 months is where we want to be as bootstrappers, indie-funded, self-funded, founders.” That was the majority (I think) or maybe it was 40% or 50%. Again, it reinforces some stuff that I already knew. If I hadn’t already known that or if you’re just coming new to the space, you’re just trying to figure stuff out, you can just look through, and be like, “Okay. This is the sanity check range of where most people are.”
Sherry: And on some really, really, concrete things that affect choices that founders make every day. What’s this MicroConf Connect? More Slack channels for me to deal with? Oh my God, why would I do that?
Rob: Yay. I’m totally going to invite you. That’s another thing. It’s the State of Independence SaaS live stream. We’re doing a MicroConf Remote, which is a remote event here in (I think it’s) July or August. I don’t know if we have the date nailed down yet. Then, we have long been asked like, “I want to stay in touch with folks from MicroConf year round; there’s no way to do that,” because would set up a Slack channel for an event, use that as a communication method, then we shut it down 30 days later. The reason we did it is because managing a Slack channel is a lot of work. You need to moderate it, keep it healthy, and there’s all kind of stuff to be done.
We now have the resources to do that. So, that’s what it is. It’s connecting founders, it’s an online home for the MicroConf community, founders and aspiring founders who want to build these ambitious startups, as I often say in the intro of this podcast.
Sherry: All of this stuff and change that’s going on with MicroConf in it, it is all rebranded and packaged in a great website now. You have that all redesigned and redone.
Rob: That feels really good.
Sherry: It looks so much better.
Rob: It was a side project. That’s the thing. The podcast and the MicroConf were literally side projects of Mike and I. We both felt like these should get more do. These are good things that should be treated better, look better. It feels good to finally have a logo that (I think) will last us a long time on a website and all that stuff. That’s been the big push since we brought Sander on full- time here about six months ago. It’s just getting your ducks in a row, how these all fit together, and how do we expand this in a way that helps more founders.
It comes back to that whole thing, why am I doing this? Because it excites me. I want to be in the space. I want to help founders. So, how do you help more founders? You do stuff that’s hopefully cheaper because a lot of people are bootstrapping, and you try to reach more people. That’s where you get the remote and local events where we roadshow out to folks, so they don’t have to travel.
It’s been a fun experience to try to brainstorm how to do that, how to accomplish that.
Sherry: What founders need.
Rob: Yeah, and how to do it in a way that’s economically viable. If you think about MicroConf being three in-person events per year, you can’t just expand that infinitely. It doesn’t scale. You can’t do 100 events per year. You can’t easily switch to that. How do you do that and expand it in a way that’s intelligent? Intelligent but somewhat scalable. That’s a balance we’re trying to strike. Some online stuff, some in-person.
Sherry: You just need to see it grow up. I think Startups for the Rest of Us, MicroConf, as you said, they were side projects. They were things that you did on the evenings and weekends when you were running your real company. Now that you have more time and energy to devote to them, they really are starting to look like that, and reflect that this is some of the core of what you’re doing, what you’re working on, and the ways that you’re serving the founder community. I love how they look. Both the Startups for the Rest of Us and the MicroConf websites are looking good.
Let’s talk a little bit about TinySeed. Since that is (I guess) your “real business” now.
Rob: Yeah, for sure.
Sherry: You’ve closed the batch two, right?
Rob: Almost there. We’ve made offers. We’ve had verbal yeses if everything goes through. You never know what’s going to happen when you get due diligence and paperwork, and we’ve basically in the midst of that right now, so sending docs, getting some stuff signed.
Sherry: Is that the least fun part?
Rob: For me, yes. The due diligence. I think for everybody, probably. It’s the due diligence, trying to get docs signed, and just all the questions.
Sherry: Paperwork.
Rob: Totally. Papers and paychecks. It’s been really nice to have Tracy around because she’s spending a lot of time that I spent last batch. She’s focusing on that and then Einar’s, working with her on that. Given the podcast expansion and the MicroConf expansion. It was like, “I can’t do that again.” You can only do so many things at once. That’s been the reason I haven’t been able to focus more on these other things.
Sherry: Is it the hope to bring batch one and batch two together in Minneapolis right around MicroConf time? Just everything converges?
Rob: Yeah, it does, which is kind of cool. That was by design and it will be by design. Since we are remote, there’s not a ton of overlap between the batches. It’s neat to be able to have the batch two meet batch one, and hang out. There’s the alumni association, so to speak. That’s a big factor in a lot of these accelerators. It will be in TinySeed, where the alumni help the next batch get acclimated, and can offer some mentorship or some guidance on a number of fronts. I think that’s the value.
Sherry: Yeah. They become mentors of sorts.
Rob: Exactly. That’s such a big part of the value of being an accelerator and not just being a fund. When you have a fund, you write checks to companies. Oftentimes, they never meet. They don’t really know each other. They’ll know of each other but they won’t hang out together. The batch part brings people together in such a tight community, and even across batches, being able to propagate that, and to have—by the time you get to batch three, four, or five—them reaching back to batch one who (a lot of those companies) will be wildly successful at that point. I’m willing to wager and have been willing to wager. They’re able to then continue to learn from them and also get introductions and work on the networks. The network of TinySeed founders will expand naturally each year.
Sherry: What changes have you made between batch one and batch two?
Rob: The process for batch two, the application process was more streamlined. It was just a better process. Of course, we tweak the application questions a lot. It was good to have three people who weren’t just myself. Actually, you were involved more on the first one because I have someone off questions. This time, Tracy took a lot of the third person role to weigh in on things. That was helpful.
We did change the funding amounts. We tweaked them very minorly. The version two terms, I believe, are the same. I don’t think we changed that term at all. Then batch two, we’ll tweak some stuff with the calls. We’re going to do fewer retreats. We did four retreats this year and our feedback was…
Sherry: Too much time in Florida?
Rob: One, too many retreats. Yeah. We’re going to move to three in-person gatherings which feels good.
Sherry: It’s nice to have some space to implement all of that retreat content between time.
Rob: Yeah, that’s the idea. What we found is you learn a ton in the first couple of months, let’s say, 3–5 months, 3–6 months. Then you really know where you’re headed after that. You have some small questions beyond that but it’s not the huge directional shift. Like in the first two months, we had multiple people that needed to completely redo pieces of their business. You’re charging three times too little or your on-boarding is no good. Your entire pricing structure is off. Let’s help you figure out how to tweak that or your copy is this. There’s some major changes. While those continue to happen in some former fashion, it’s not to the extent of the first few months of a program like this. There’s actually less of a need as you get through the program.
There’s a reason why a lot of accelerators are three months. You can provide a lot of value in that time. Of course, their goals to raise around haven’t really raised funding. That’s not our goal. We do think that SaaS, we know that takes a lot longer. We do want it to be longer than 3 months, but we also think that a call every week for 12 months is probably the initial hypothesis. It starts to feel a little heavy as you get further and further in. It’s like, “Do we really need two mentor calls a month still?” Even if there were 8, 9, 10, months into this. Or, am I just focusing on needing to implement right now? It’s almost accountability mode. I need someone to keep me accountable to sanity checks and stuff, to just keep me accountable to continue to implement these plans that I’m trying to get done by month 12.
We really have seen a shift in a lot of the thought process and the stages these companies are at, which is good. It shows there are emotions. A lot of folks came in relatively early stage and you hit a point where you don’t need all that anymore. You’re just plowing forward, blocking, and tackling, as they say. Just implementing.
Sherry: What are you most excited about a new batch, another round?
Rob: I think that with any startup founder (which I still consider myself), we’re implementing some things differently. I’m excited to see how that works out and don’t work out. I’m excited to get to know everyone. The relationships that I’ve had with batch 1 founders are truly valuable to me. And I don’t mean monetarily. I mean, I would call so many of these folk friends. Certainly, deep acquaintances but people that I enjoy hanging out with that I truly wish a lot of success on. I truly wish that they have a lot of success, purely because I think they’ve worked hard. Building new relationships is probably the best way to say it. That feels exciting. It’s exciting to me to be able to help people. It’s another group of folks.
Sherry: Yeah. It’s a deep investment in humans.
Rob: That’s what it is. That’s the part that excited me the most. Just in general, investing deeply.
Sherry: Well, you have a big year. Has it been two years since you left Drip? Almost two years?
Rob: Yeah, almost two years.
Sherry: There’s been phenomenal change in growth, the development, the inception of TinySeed, all the way to now, your second batch. It’s amazing to see the pace which you’ve moved, but also, you’ve been executing on these ideas and these materials for many years, at least 10 with the podcast. Again, we have that dichotomy of 20 years to overnight success.
Rob: Yeah, that’s how it feels. It’s that thing of showing up every day. It’s relentless execution, but what’s funny is that it makes it sound like you work to the bone constantly and work 60 hours a week. That’s not what I do. Not really what I’ve ever done for any stretch of time. You can build it up, as you’re saying, but you do anything consistently for 10 years. You’re going to make some progress. You’re going to get better at it. You’re going to build something.
Sherry: Thanks for letting me take over your podcast today.
Rob: Yeah, it was great. I enjoyed the conversation. It’s cool to be interviewed by different people because they think about things along different axes, lands in different questions, and looks at progress along different axes, I guess, to say again. Yeah, I really appreciate you taking the time to come on the show.
If the folks want to keep up with you, you have your own podcast called ZenFounder. You are @zenfounder on Twitter and sherrywalling.com on the Interwebs. Thanks again to Sherry for coming in the show and look for another Rob catch-up episode here in about three months.
In the meantime, if you have questions for me or other guests who appeared on the show, please send me an email at questions@startupsfortherestofus.com. We also have a voicemail line people use from time to time, (888) 801-9690. As always, voicemails and audio files go to the top of the stack. If you’re not already subscribed to Startups for the Rest of Us, head to your podcatcher, search for startups. We’re typically in the top five. Thanks for listening. I’ll see you next week.
Sherry is (as I said) a clinical psychologist. She’s also built up a really nice personal brand in the space of helping founders succeed, and helping them stay the same while starting up. You can check her out at sherrywalling.com or @zenfounder on Twitter. With that, let’s dive in.
Sherry: All right. You feel ready?
Rob: Yup. I’m all good.
Sherry: You’re good to go? You’re focused? You’re here? You’re in the game?
Rob: Yup, I think so.
Sherry: It’s so much harder to talk about your own stuff than it is to interview other people.
Rob: I don’t know. Sometimes. I am on the interviewee side probably as much as I’m on the interviewer side. Maybe that’s not still true today, but I’m on it quite a bit, so I’m cool to chat.
Sherry: Do you tend to get the same questions over and over when people are interviewing you?
Rob: Yeah. If it’s a new audience, a new podcast, or someone’s who’s just doing a bunch of interviews with people that he or she doesn’t know. They kind of go with the surface stuff, and they have the same set of questions. They’re all pretty similar. But every once in a while, I go on a one called, What Works, I think it’s what it’s called, and she asked questions about values, imbuing things that you do with your values, and how you do it. It’s just a very different, whole different tact. Those can be interesting, or they catch off guard, frankly. They look at things from a different lens.
Sherry: What’s one of the most interesting questions that you’ve been asked recently?
Rob: That would probably be in that interview. She basically was saying, “How do you pass along your values?” or, “Which of your values do you want to be in the companies that you start and be delivered to the teams that you worked with?” and then, “How do you do that?” It was just a whole path of thinking about that. The reason it was interesting was because I had really not done a lot of thinking about it. I had to think on the spot what those things are and how I do those.
I listened to it today. It came out good. That’s actually the beauty of being asked the same questions over and over. You learn how you think about them. You learn how to answer them eloquently and in a way that’s succinct, not just you thinking out loud and trying to find your way to an answer.
Sherry: Okay. One of the things that I think is interesting about you is that you are working on three interrelated but separate businesses at the same time. The way in which those businesses are growing, they’re all growing and shifting right now. I’m curious how you direct that growth. Of course, we’ll talk about each of them separately. We’ll talk about MicroConf, we’ll talk about Startups for the Rest of Us, and of course, TinySeed. What’s the unifying thread? What are you trying to accomplish? What do you want out of these three businesses as they grow?
Rob: I realized this over the past two years after I left Drip. I was saying, “What should I do next?” I was looking at buying a tabletop gaming website. Just going completely off into a different direction, down a different path I had gone previously. But the more I looked at what I have done all these years for free (in essence), compared to the software products, the startups, and all that stuff that I had started, blogging, podcasting, and starting a conference are either completely revenue-neutral or rounding errors of revenue. But I did them, anyway.
That was a big sign to me that it should be the direction that I had. I realized that the things those had in common and that the three things you’re talking about—MicroConf, TinySeed, and the podcast—have in common is they help entrepreneurs. They help founders, they help us bring us strategies and tactics, but they also bring us together, and they inspire us to keep going.
Startups for the Rest of Us are free. It’s every week. There’s a little bit of community around it because you can tweet about it or be in the comments. You can hear other people answering questions and sending their questions in. But really, it’s a low level of engagement, and the cost is zero. If you take that up one notch, probably my first book Start Small, Stay Small is between $10-$25 depending on which version you buy. There’s no community there but there’s a lot of strategies, tactics, and some inspiration.
If you take it up another notch, then there’s MicroConf, which is our local events will be $99, and our growth is $1000 or $1100. There’s way more engagement. It’s super intense in terms of strategies, tactics, and inspiration, but they all do the same thing. They’re purely to help startup founders. One does it for free, one does it for cheap, and one does it for less cheap. Then there’s TinySeed. You can see the path, the thread that binds all those together. That’s really what I found of everything I’ve done in my life as a professional. That’s the most fun, and that’s the one that I’m most excited about. You can tell because I’ve been doing it for 15 years now. The same thing.
Sherry: But you’re a teacher. You’ve always been someone who learns something thoroughly, and then wants to explain it to someone else.
Rob: Yeah, there’s that element. That’s how it started with the blogging, the podcast, and the book (I guess). The interesting thing is it did not occur to me until a couple of years ago when it really hit me. I saw myself as a facilitator, getting people together to learn, and in the early days it was all about the tactics and the strategies. Then about (I’d say) seven years ago, we realized, “Boy, it’s much more about the relationships in the community,” and then a couple of years ago, I realized I really am bringing people together, like that’s the most important piece.
Sherry: It’s interesting to hear you say that as something that came to you later because in my life with you (which began 20 years ago), we identified ourselves as gatherers when we were in our early 20s. People would be at our house.
Rob: Yeah. That was always something we did, but you and I did that together. I didn’t know if I could do it on my own, if I should, or if I’m good at it. Then you looked at the track record of it. The interesting thing is when I actually looked at what I’ve done. There’s a certain amount of being successful, whether it’s as an entrepreneur or not, and it’s knowing myself. The more that I’ve learned about myself and removed those blind spots, the more I feel like I’m able to manage my own psychology, manage my own pros and cons, and strengths and weaknesses.
When I look back, I’ve had this blind spot of, I didn’t realize how much I wanted to get people together. You and I did it naturally (again) 20 years ago. One of my favorite parts of the podcast—which is a very unidirectional medium, is basically one or two people talking in the mic while everyone else was listening—are these Q&A episodes, where we get all the listener questions, feedback, and the voicemails. We can rally around that and feel like if you listened to five or six listener questions, you know, “Wow, it’s not just the two hosts that are answering this. It’s five or six other people.” Every month we do an episode. You hear they’re being people, even in the medium that is designed to not to be.
In my first book, I was going back and reading that, and I used a bunch of examples of Ruben Gomez, Ted and Harry from Moraware Software. I don’t remember who else, but even at that time when I didn’t need to do that, I realized that bringing other folks into the mix only benefits all of us. We are all smarter than me.
Then of course, MicroConf. Is that and TinySeed much more intense and much smaller scale? Having the batch of 10 founders is this super in-depth and intimate community.
Sherry: Let’s do a little bit of a deep dive into the podcast. There’s been some significant shifts lately. Mike is not on every week anymore, still part of the podcast but is not the weekly co-host. And you’ve made some other personnel changes by hiring an assistant producer. How’s that going?
Rob: It was touch and go at first. It’s just kind of scary to be on a show that has had a certain format for 450 episodes. Then there’s suddenly turned that over and say, “Can I do this? Can I really keep this going at a level that it deserves (given the audience), and just giving all the stuff we put out there?” Right now, it feels like since then, there were some touch and go moments, but pretty much everything feels up and to the right. I feel really positive about it.
I have a renewed energy around it, and I think people can feel that. I’m also, every week, thinking, what can I do differently this week? What can I mix up? The novelty of that, of even trying different formats, I’ve tried some that just don’t work out well, but people were like, “That was an interesting experiment. Have you thought about doing it this way?” It’s almost like customer development. Try something new and try something new, and just keep the variety going.
The interesting thing is when you do that, it takes a lot of time. You just don’t show up every week and talk for 30 minutes like we used to. That’s where the assistant producer comes in. I find myself spending more and more time each week just going guest research, writing questions, trying to find folks, and just doing all the stuff—calendaring, moving MP3 files from here to there, et cetera. It’s just all stuff someone else can be doing, so that’s really where I started looking for someone to help out and take that burden off because I wanted to keep doing it.
This is why podcasts stop. People can come up with great ideas and want to do them, but real life gets in the way. Running MicroConf and TinySeed, then having this podcast as well, there’s a lot going on in doing day-to-day stuff.
Sherry: Just a lot of admin, too. Moving files around is not that fun. You tried this discussion format. Did you enjoy that? Was it fun? What were the pros and cons of that?
Rob: Yeah. It was a news discussion show-type thing. It kind of worked. It mostly worked. It was super fun to record, but I think I want to put some tighter reins on the couple of the topics, and try to make them more current events. I also think that having three of us on the mic or even four at once and doing round-table on topics, I think it could be really interesting. I know a couple of other shows that do that. They focus on news topics like startup news or tech news. You hear a variety of voices from a variety of perspectives. It’s really interesting.
Again, that’s logistically a lot of work, to find those people, to find the time that works for everybody, then get all that audio files. Just get everything together. Writing the show notes, finding the topics, on and on and on. The shows I’m talking about are either the people who literally do them full time or they have full time staff doing them. That’s what I’m looking at. I’m expanding into that one because there’s no one doing that in our space. They do it more in the Silicon Valley or in the tech news space.
Sherry: Did you try a show format that you weren’t such a fan of? That you didn’t like? Or you didn’t feel like working well?
Rob: I don’t know. I did a couple of hot seats. I got mixed reviews or really I would ask people, “What’d you think of the hot seat?” They’re like, “Oh, you did a hot seat?” I was like, “Yeah. I went through this, this, and that.” Someone’s like, “Yeah, I don’t remember that episode,” which tells me it probably wasn’t memorable.
Sherry: It felt like an interview, maybe?
Rob: Yeah, I don’t know. I’ve also heard people say, “The ones where you go through with an entrepreneur, your troubleshooting things, and trying to think through, those are the most interesting ones,” which essentially are the ones with Mike and the ones that are hotseats. That’s always the issue. You only have a handful of data points in any of these things.
Even when I call for feedback and say, “I’m going to try this interview, call everybody back for a Q&A, and try this thing out. Give me your feedback.” I will get 5 or 6 people who sent me an email or tweet me out, or maybe it’s 10 or 12. But it’s not so many data points, that it’s not an end of 100 or 1000. I will often get two that say, “Yeah. That was really good.” And two that say, “I was kind of bored.” What do you do with that, at that point?
Sherry: You keep going.
Rob: Yeah, no doubt.
Sherry: Which is what you’ve done for 10 years now. The 10-year anniversary of the podcast is next month. Is that true? Is it really 10 years? That’s crazy long!
Rob: Yeah. March of 2010 was our first episode.
Sherry: Wow. Almost 500 episodes.
Rob: Yeah, that’ll be in June, that 500th episode.
Sherry: Dude, you’re an old podcaster.
Rob: It’s just really ancient in podcast years, yeah.
Sherry: In podcast years, that’s OG for sure.
Rob: Yeah. It’s a trip. To me, the 500th episode is a big milestone. 10 years and still super interesting. I don’t know if I’ll do anything fancy for that but 500th episode, I’m trying to wrap my brain of like, what do you do to celebrate that? What do you do that’s different not just the same episode that hasn’t been done before?
Sherry: What are you going to do?
Rob: I don’t know yet. I’m still thinking about it. I have some ideas.
Sherry: If you could live podcast while skydiving.
Rob: I could do that. I think the audio quality would probably not be great. Imagine that. “I’m your host Rob Walling.”
Sherry: It’s just like a long scream.
Rob: That’s the thing. A bunch of the formats that I do here, Mike and I did a live podcast recording at MicroConf Europe for our 300th episode. It’s okay. As a podcast, live podcasts are not that interesting. They’re always my least favorite. If I’m listening to a series and I do a live show, I’m sure they’re great fun to be there in person. There’s that energy, but it’s not as interesting. People are either… I don’t know. I don’t even want to conjecture why that is. I just know that I’ve listened to 10–15 live episodes from different podcasts that normally record in a studio. They’re just off their game. I can’t think of a single one that was better than just the normal episode that I normally record.
Sherry: I’m curious what the audience would recommend or would want to do with the 500th episode.
Rob: Yeah. I’d be happy to take suggestions either at Twitter @robwalling or questions@startupsfortherestofus.com. Definitely open to ideas and ask a few close friends of mine who listen to a lot of podcasts, what are the best episodes you’ve heard. Again, I have some ideas. I’m just trying to whittle it down and figure out what. I can come up with ideas that are really, really, a lot of work, and I’m trying to figure out how to either pair that down or make it happen or whatever.
Sherry: If work, money, time, and resources were no option, what would you do?
Rob: No limit, I would have 500 startups experts, founders, or people we respect answer a question, ask me a question, or something outrageous.
Sherry: That’s a really long podcast.
Rob: Well, that’s the problem. I can’t do that.
Sherry: 24 hours of Startups for the Rest of Us.
Rob: Right. Wouldn’t that be a stunt? Wouldn’t that be crazy?
Sherry: It would be a stunt, that’s for sure.
Rob: A three to four hour podcast. Maybe don’t do 500. Maybe just do 10. You can just see where it goes. I have to arrange that and figure out who to ask, get the files back, and all of that. And it has been done. I kind of have enjoyed some of those episodes we’ve done it ourselves. Our 100th episode was basically asking a bunch of people a question. We’ve got, I don’t remember, it was like Shawn Ellison, Andrew Warner, and a bunch of people answering questions that we tied in. That was a fun one. But, do that again for 500?
Sherry: I don’t know. I just know that the need to do something novel or new with that big pizzazz is maybe the best way to celebrate 500 episodes. I mean, 500 episodes is just relentless execution which is the Rob Walling theme. I don’t know about this pressure to do something new.
Rob: It’s possible. We did it for 400. We have a lot of these out. Four hundred was just an episode Mike and I recorded about being consistent. That was the whole thing. We looked back, and we talked about our metrics changes, audience listenership, and how we have shown up every week, why we show up every week, just all that stuff. We have done that, I’ll say, but I certainly could revisit that theme for sure.
Sherry: Well, that would be consistent.
Rob: Indeed.
Sherry: Right alongside this monster anniversary for Startups for the Rest of Us, you also have a new little baby podcast, the TinySeed Tales. I have to tell you, every time I see that title, I think about the DuckTales, a Disney show that existed when I was a kid.
Rob: That was an awesome show. That show holds up.
Sherry: It had this really cool song. So TinySeed Tales. How’s that going? You launched season one.
Rob: Yeah, season one went out. It was a podcast I wanted to do for years, but it took a lot of time and a lot of money because we have to pay a producer who’s producing it at a pretty high level, voiceovers, scriptwriting, and all that stuff. That was a cool experience to see how that’s done. You haven’t heard any episodes right?
Sherry: No. Confessions of the wife.
Rob: I know you don’t listen to my podcast and I listen to yours. Let’s put that for the record. If you listen to nothing else, you should listen to TinySeed Tales. It’s 8 episodes, they’re 20 minutes each.
Sherry: Why should I listen to it, Rob?
Rob: Because it’s good radio. It’s really good.
Sherry: What makes it good radio. I know it’s not just the production value, the money, and the time. Why is it good?
Rob: One part is you talk for 40 minutes then you take the best 15 minutes of all that audio. You pack it together, write five minutes of voice-overs. That is inherently going to be more interesting than a 40 minutes interview. You just get better tape. In addition, I really started doubling down in my interviewing skills right before that because I didn’t want it to suck. You know me when I’m new to something or feel like I’m not good at something, I dive in pretty deep.
Probably some of my best interviews I’ve given are in TinySeed Tales. The first season was with Craig from Castos. He’s also very thoughtful, he’s really good on the mic, it was a very natural fit for him to do. He wasn’t nervous. I could imagine doing it with somebody who hasn’t podcasted before, and I think it would have been a lot more challenging. Then there’s cool music, too.
Sherry: Oh, as long as there’s cool music. Is it the Tiny Tales theme song like DuckTales?
Rob: No, but we should’ve done that now that you said that. Dude, you’re mocking it. DuckTales holds up. It’s one of the cartoons from the 80s that’s considered to be very good.
Sherry: I’m not mocking it. I am singing along. You misunderstand me, sir. I’m not mocking it.
Rob: They’re redone it; Disney just redid it. The new one has Chucks, too.
Sherry: Have you been watching Disney Plus at night while I’m sleeping?
Rob: No. Maybe Finn has.
Sherry: Okay. One last question about the podcast. I know there’s lots of other things that you’ve been working on that I want to ask you about. What is your growth area in podcasting?
Rob: What do you mean? What growth area?
Sherry: You’ve been doing this for 10 years. What are you working on getting better at? What are you continuing to learn about and press into as someone who is guiding Startups for the Rest of Us?
Rob: Two things, you’ve heard me do intros and outros or solo episodes. I want to be able to do those almost without editing. When you and I are here talking, I’m not starting and stopping 20 times for five minutes of response. It’s just a natural conversation that flows. When I sit down to intro and outro this episode, Josh, our editor, is cringing right now thinking of how much he has to edit those two minute or three minute intros. Something about it when someone else’s not in the mic, I get stuck. It’s weird. I’m trying to work through that.
The other thing that’s more visible to the listeners is every interview I do, I’m trying to become a better interviewer. I’m trying to get better asking the right questions, asking them in a way that brings out the interesting answers, that touches on the emotions, but also brings out tactics and learnings. There’s a lot to be learned there. That’s what’s still exciting for me about the podcast. I think once I peek at anything, most of us, once you peak and you’re like, “That’s it. I’m the best there is,” it’s only downhill from there. That still feels like I can see a lot of mountains up ahead of me that I haven’t climbed here with podcasting. I think I can only get better in a lot of ways.
Sherry: Are you going to be doing this in 10 years?
Rob: I don’t know. I would say yes because that’s my personality, to just do things forever. I said that on purpose. I said it on purpose because I knew you’d laugh. Every software company I ever started I have not done forever.
Sherry: I know. That is absolutely not true, Rob Walling.
Rob: That’s the opposite, yeah. The Interesting thing is with books, blogs, podcasts, conferences, that stuff, I have done for a very long time. That was the signal a couple of years ago where I was, “I keep coming back to these things,” and podcasting is one. TinySeed Tales, while it’s been on this feed, I’m setting up another feed for it, and it’s going to be in seasons. But really, I have two podcasts now, and I could see having another. I enjoy it that much. I enjoy consuming podcasts that much, and I enjoy creating them a lot.
Do I think I will be podcasting in 10 years? I do. I think it might be Startups for the Rest of Us, but who knows? So much can change. If you think back 10 years ago, I hadn’t started Drip. I hadn’t bought HitTail. I hadn’t started this podcast. So much was different, so when I think 10 years ahead from now, where could that lead?
Sherry: Speaking of things leading places, let’s shift gears, move down the funnel a little bit, and talk about MicroConf. It has been a huge year for MicroConf already. You did this big announcement talking about reorganizing the schedule and structure of MicroConf. We are getting ready for MicroConf here in Minneapolis in just a few months, which I’m very excited about. So, 2020 compared to 2019, what are the significant changes that you’re implementing with MicroConf?
Rob: As you said, it’s a huge change. In 2019, we did three in-person events.
Sherry: Which was Growth Starter in Europe. Now, what’s 2020 looking like?
Rob: We’re doing seven in-person events. It’s Growth Starter in Europe, and then four were local events.
Sherry: You just sent me all the calendar invites in these events yesterday, and I was like, “Holy crap, you’re basically gone most of the month of October traveling around doing the MicroConf Roadshow.” It’s what I’m going to affectionately call it.
Rob: Yup. That’s exactly a good name for it. We went to seven of those, then we were doing the State of Independent SaaS reports. I’ll say we’re doing it. We did the survey, issued the report, did a live stream, which is I’ve talked about was quite an endeavor and a little bit nerve-wracking.
Sherry: A little bit nerve-wracking? Are you kidding me? You were sweating that for weeks. I haven’t seen you that stressed about something. Maybe the Drip sale or the decision to leave Drip, but you were like, “Which outfit should I wear?” It was really occupying a lot of space. Why do you think it was so challenging?
Rob: Probably because I wrote this blog post here years ago called Terror of First. I said that the first time you do anything, it terrifies you. Then, you just do it until you get numb to it. Pretty soon you’ll get better at it, and you’ll get more comfortable with it. First time I ever published a blog post, I was freaking out. First time I ever published a podcast episode, I was freaking out. First time I ever did a talk in front of people, I was freaking out. On and on and on. Each of those I have become more comfortable with. I think most of us do, and that this was one.
Doing a 30-minute live stream where you are standing, looking at a camera and nothing else, is not the same as standing on a stage at a conference and talking to 500 or 1000 people. It’s crazy how different it is. The energy is different. It’s a skill and it’s something that, if you’d ask me what’s my personal development this year, a lot of it is that it’s getting better in front of a camera. I’m not nervous. I don’t get the sweaty palms, hair standing up at the back of my neck, and throat closing. I don’t get that. You just get awkward naturally. The camera just doesn’t feel like a natural conversation because you’re talking to no one. You’re […] an abyss and trying to have a personality, and I don’t think it’s a natural thing for us to do, at least for me. I’ll speak for myself.
Sherry: Oh, no. It goes against every part of our brains that’s geared towards interactive communication.
Rob: Yeah. No one’s nodding. No one’s saying, “Uh-huh.” You’re not getting any positive feedback, which in an event, I can be nervous, get up, start doing a talk, I start talking about things, I see people in the audience are going with it, they’re smiling, and I’m like, “Yeah, yeah.” You feed off that energy. You know that feeling.
Sherry: Oh, yeah.
Rob: And you don’t get that with the thing. That’s where, standing for 30 minutes with no script, no cue cards, talking, and knowing that there’s really no cutaways, even to get a drink, there was not enough time for me to stop and get a drink of water in the middle of that. I could have, but people would literally be waiting on a live stream while you do that. That’s a new experience for me. I’m sure over time, it will become more comfortable just like now on stage. If I need to stop and get a drink, the deafening silence that you hear…
Remember the first time you did a talk whenever you were quiet? It sounded deafening like you should be feeling the silence. Everyone was waiting for you to say the next word. Then, the 10th or the 20th talk you do, you’re like, “The silence helps.” It gives people space.
Sherry: Yeah, the silence is fine.
Rob: Yup. That’s where doing a live stream like that, I was like, “Which rules apply? Which don’t? What do I have to adjust here? How do I get in front of this many people?” It got recorded and now it’s on YouTube. I think it’s 2500 or 3000 views. I’m going to be seen by 3000 people on the camera. How do I make that interesting for them? How do I make it provide that value of 3000 people giving me 30 minutes of their time?
Sherry: Why was it so important for you to do this State of Independence SaaS? To do the report, to do the study, then to do a live stream? Why is that significant?
Rob: The report for me is like a passion project that I’ve been wanting to do for years because there just hasn’t been data in our space. We see all these reports about venture capital raising companies, their stats, and their benchmarks. I’ve just been so curious because people asked me, “How many people go to MicroConf have raised some kind of funding?” I was like, “I think about 10% but I don’t know.” I was super curious to hear that. I have all these rules of thumb like what your churn should be, what’s good, bad, and great churn, trial-to-paid conversion ratio, just all these metrics that I have developed the rules of thumb over the years, but it’s just from seeing a bunch of apps. It’s beyond anecdotal. It’s not that I had an end of one, but I had an end of dozens, I’ll say, that I’ve combined, and I wanted to see how those held up.
It wasn’t just a personal thing. I want this whole space. I think this is the future. I believe that this space is the future because venture capital can only be invested. It’s like 1 in every 100 startups or something; it’s a really small number. We’re “for the rest of us.” We’re startups for the rest of us. We’re the other 99%. I believed as we move forward (and had believed this for a long time), we are the long tail of startups, so where’s the data on us? Where’s the stuff to help us? Where’s the stuff to give us some type of benchmarks?
Sherry: How do you see the information in this report and in the live stream impacting an individual founder?
Rob: The live stream was 22 minutes, plus Q&A of me just walking through some high-level findings, and it was to get people interested enough in it to read the report. The report itself is 65-80 pages, depending on which version you get. There’s a lot more in the report. You can think of the live stream almost as an advertisement to download the report. Just to be like, “Hey, look at this thing. This is interesting and these are my thoughts about it.”
Sherry: It’s an abstract.
Rob: It is, that’s a good point. An abstract, like an academic paper. Whereas the report, if I was the founder, I would be looking, “Oh, where am I? What percentile am I at with my churn, with my trial-to-paid, and with my hours worked per week? With how many years I’ve been in the business versus growth?” There were just all types of findings in there that I think it depends on your situation that we can benchmark ourselves to. In addition, there were some interesting findings with which marketing approaches, which advertising approaches, are working best for you right now.
We now have a ranking on that in our space. We have payback periods for Facebook and Google Ads. You can see it. My gut was always, “1–3 or 1–4 months is where we want to be as bootstrappers, indie-funded, self-funded, founders.” That was the majority (I think) or maybe it was 40% or 50%. Again, it reinforces some stuff that I already knew. If I hadn’t already known that or if you’re just coming new to the space, you’re just trying to figure stuff out, you can just look through, and be like, “Okay. This is the sanity check range of where most people are.”
Sherry: And on some really, really, concrete things that affect choices that founders make every day. What’s this MicroConf Connect? More Slack channels for me to deal with? Oh my God, why would I do that?
Rob: Yay. I’m totally going to invite you. That’s another thing. It’s the State of Independence SaaS live stream. We’re doing a MicroConf Remote, which is a remote event here in (I think it’s) July or August. I don’t know if we have the date nailed down yet. Then, we have long been asked like, “I want to stay in touch with folks from MicroConf year round; there’s no way to do that,” because would set up a Slack channel for an event, use that as a communication method, then we shut it down 30 days later. The reason we did it is because managing a Slack channel is a lot of work. You need to moderate it, keep it healthy, and there’s all kind of stuff to be done.
We now have the resources to do that. So, that’s what it is. It’s connecting founders, it’s an online home for the MicroConf community, founders and aspiring founders who want to build these ambitious startups, as I often say in the intro of this podcast.
Sherry: All of this stuff and change that’s going on with MicroConf in it, it is all rebranded and packaged in a great website now. You have that all redesigned and redone.
Rob: That feels really good.
Sherry: It looks so much better.
Rob: It was a side project. That’s the thing. The podcast and the MicroConf were literally side projects of Mike and I. We both felt like these should get more do. These are good things that should be treated better, look better. It feels good to finally have a logo that (I think) will last us a long time on a website and all that stuff. That’s been the big push since we brought Sander on full- time here about six months ago. It’s just getting your ducks in a row, how these all fit together, and how do we expand this in a way that helps more founders.
It comes back to that whole thing, why am I doing this? Because it excites me. I want to be in the space. I want to help founders. So, how do you help more founders? You do stuff that’s hopefully cheaper because a lot of people are bootstrapping, and you try to reach more people. That’s where you get the remote and local events where we roadshow out to folks, so they don’t have to travel.
It’s been a fun experience to try to brainstorm how to do that, how to accomplish that.
Sherry: What founders need.
Rob: Yeah, and how to do it in a way that’s economically viable. If you think about MicroConf being three in-person events per year, you can’t just expand that infinitely. It doesn’t scale. You can’t do 100 events per year. You can’t easily switch to that. How do you do that and expand it in a way that’s intelligent? Intelligent but somewhat scalable. That’s a balance we’re trying to strike. Some online stuff, some in-person.
Sherry: You just need to see it grow up. I think Startups for the Rest of Us, MicroConf, as you said, they were side projects. They were things that you did on the evenings and weekends when you were running your real company. Now that you have more time and energy to devote to them, they really are starting to look like that, and reflect that this is some of the core of what you’re doing, what you’re working on, and the ways that you’re serving the founder community. I love how they look. Both the Startups for the Rest of Us and the MicroConf websites are looking good.
Let’s talk a little bit about TinySeed. Since that is (I guess) your “real business” now.
Rob: Yeah, for sure.
Sherry: You’ve closed the batch two, right?
Rob: Almost there. We’ve made offers. We’ve had verbal yeses if everything goes through. You never know what’s going to happen when you get due diligence and paperwork, and we’ve basically in the midst of that right now, so sending docs, getting some stuff signed.
Sherry: Is that the least fun part?
Rob: For me, yes. The due diligence. I think for everybody, probably. It’s the due diligence, trying to get docs signed, and just all the questions.
Sherry: Paperwork.
Rob: Totally. Papers and paychecks. It’s been really nice to have Tracy around because she’s spending a lot of time that I spent last batch. She’s focusing on that and then Einar’s, working with her on that. Given the podcast expansion and the MicroConf expansion. It was like, “I can’t do that again.” You can only do so many things at once. That’s been the reason I haven’t been able to focus more on these other things.
Sherry: Is it the hope to bring batch one and batch two together in Minneapolis right around MicroConf time? Just everything converges?
Rob: Yeah, it does, which is kind of cool. That was by design and it will be by design. Since we are remote, there’s not a ton of overlap between the batches. It’s neat to be able to have the batch two meet batch one, and hang out. There’s the alumni association, so to speak. That’s a big factor in a lot of these accelerators. It will be in TinySeed, where the alumni help the next batch get acclimated, and can offer some mentorship or some guidance on a number of fronts. I think that’s the value.
Sherry: Yeah. They become mentors of sorts.
Rob: Exactly. That’s such a big part of the value of being an accelerator and not just being a fund. When you have a fund, you write checks to companies. Oftentimes, they never meet. They don’t really know each other. They’ll know of each other but they won’t hang out together. The batch part brings people together in such a tight community, and even across batches, being able to propagate that, and to have—by the time you get to batch three, four, or five—them reaching back to batch one who (a lot of those companies) will be wildly successful at that point. I’m willing to wager and have been willing to wager. They’re able to then continue to learn from them and also get introductions and work on the networks. The network of TinySeed founders will expand naturally each year.
Sherry: What changes have you made between batch one and batch two?
Rob: The process for batch two, the application process was more streamlined. It was just a better process. Of course, we tweak the application questions a lot. It was good to have three people who weren’t just myself. Actually, you were involved more on the first one because I have someone off questions. This time, Tracy took a lot of the third person role to weigh in on things. That was helpful.
We did change the funding amounts. We tweaked them very minorly. The version two terms, I believe, are the same. I don’t think we changed that term at all. Then batch two, we’ll tweak some stuff with the calls. We’re going to do fewer retreats. We did four retreats this year and our feedback was…
Sherry: Too much time in Florida?
Rob: One, too many retreats. Yeah. We’re going to move to three in-person gatherings which feels good.
Sherry: It’s nice to have some space to implement all of that retreat content between time.
Rob: Yeah, that’s the idea. What we found is you learn a ton in the first couple of months, let’s say, 3–5 months, 3–6 months. Then you really know where you’re headed after that. You have some small questions beyond that but it’s not the huge directional shift. Like in the first two months, we had multiple people that needed to completely redo pieces of their business. You’re charging three times too little or your on-boarding is no good. Your entire pricing structure is off. Let’s help you figure out how to tweak that or your copy is this. There’s some major changes. While those continue to happen in some former fashion, it’s not to the extent of the first few months of a program like this. There’s actually less of a need as you get through the program.
There’s a reason why a lot of accelerators are three months. You can provide a lot of value in that time. Of course, their goals to raise around haven’t really raised funding. That’s not our goal. We do think that SaaS, we know that takes a lot longer. We do want it to be longer than 3 months, but we also think that a call every week for 12 months is probably the initial hypothesis. It starts to feel a little heavy as you get further and further in. It’s like, “Do we really need two mentor calls a month still?” Even if there were 8, 9, 10, months into this. Or, am I just focusing on needing to implement right now? It’s almost accountability mode. I need someone to keep me accountable to sanity checks and stuff, to just keep me accountable to continue to implement these plans that I’m trying to get done by month 12.
We really have seen a shift in a lot of the thought process and the stages these companies are at, which is good. It shows there are emotions. A lot of folks came in relatively early stage and you hit a point where you don’t need all that anymore. You’re just plowing forward, blocking, and tackling, as they say. Just implementing.
Sherry: What are you most excited about a new batch, another round?
Rob: I think that with any startup founder (which I still consider myself), we’re implementing some things differently. I’m excited to see how that works out and don’t work out. I’m excited to get to know everyone. The relationships that I’ve had with batch 1 founders are truly valuable to me. And I don’t mean monetarily. I mean, I would call so many of these folk friends. Certainly, deep acquaintances but people that I enjoy hanging out with that I truly wish a lot of success on. I truly wish that they have a lot of success, purely because I think they’ve worked hard. Building new relationships is probably the best way to say it. That feels exciting. It’s exciting to me to be able to help people. It’s another group of folks.
Sherry: Yeah. It’s a deep investment in humans.
Rob: That’s what it is. That’s the part that excited me the most. Just in general, investing deeply.
Sherry: Well, you have a big year. Has it been two years since you left Drip? Almost two years?
Rob: Yeah, almost two years.
Sherry: There’s been phenomenal change in growth, the development, the inception of TinySeed, all the way to now, your second batch. It’s amazing to see the pace which you’ve moved, but also, you’ve been executing on these ideas and these materials for many years, at least 10 with the podcast. Again, we have that dichotomy of 20 years to overnight success.
Rob: Yeah, that’s how it feels. It’s that thing of showing up every day. It’s relentless execution, but what’s funny is that it makes it sound like you work to the bone constantly and work 60 hours a week. That’s not what I do. Not really what I’ve ever done for any stretch of time. You can build it up, as you’re saying, but you do anything consistently for 10 years. You’re going to make some progress. You’re going to get better at it. You’re going to build something.
Sherry: Thanks for letting me take over your podcast today.
Rob: Yeah, it was great. I enjoyed the conversation. It’s cool to be interviewed by different people because they think about things along different axes, lands in different questions, and looks at progress along different axes, I guess, to say again. Yeah, I really appreciate you taking the time to come on the show.
If the folks want to keep up with you, you have your own podcast called ZenFounder. You are @zenfounder on Twitter and sherrywalling.com on the Interwebs. Thanks again to Sherry for coming in the show and look for another Rob catch-up episode here in about three months.
In the meantime, if you have questions for me or other guests who appeared on the show, please send me an email at questions@startupsfortherestofus.com. We also have a voicemail line people use from time to time, (888) 801-9690. As always, voicemails and audio files go to the top of the stack. If you’re not already subscribed to Startups for the Rest of Us, head to your podcatcher, search for startups. We’re typically in the top five. Thanks for listening. I’ll see you next week.
Episode 484 | Marketing That’s Working Today, Moving from 5 to 10 Employees, SaaS Longevity, and More Listener Questions
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In this episode of Startups For The Rest Of Us, Rob along with guest Ruben Gamez answer a number of listener questions on topics including current marketing tactics, scaling from 5 to 10 employees, SaaS longevity and more.
Items mentioned in this episode:
- Docsketch
- Bidsketch
- MicroConf Connect
- Peldi’ s article about profit sharing
- Quiet Light Brokerage
- FE International
- Empire Flippers
Rob: In this week’s episode of Startups for the Rest of Us, I’m joined by Ruben Gomez as we run through listener questions covering topics like marketing approaches that are working today, moving from 5–10 employees, SaaS longevity, and several other questions. This is Startups for the Rest of Us Episode 484.
Welcome to Startups for the Rest of Us, the podcast that helps developers, designers, and entrepreneurs be awesome in building, launching, and growing startups. Whether you’ve built your fifth startup, or you’re thinking about your first. I’m Rob and today with Ruben Gomez, we’re here to share our experiences to help you avoid the mistakes we’ve made.
It’s a Q&A episode, one of the listener favorites. We’ve got a bunch of really good questions today, and I’m happy to welcome Ruben Gomez back on the show. You may remember him from an interview we did a couple of months back, but he started BidSketch, which is a proposal software. It’s a SaaS app. He started that back in (I believe it was) 2009. He was one of the early SaaS bootstrappers, and over the past couple of years, he’s been building another product called DocSketch, which is electronic signatures. He’s experiencing quite a bit of success with that as well.
Ruben is a wealth of knowledge. He’s a very thoughtful founder, and he is just meticulous and disciplined. I say that in some of the intros here. He is almost the definition of those things. He’s detail-oriented, he’s very thoughtful about the direction and the moves that he takes with his companies, and he is someone who I would bet on any day because he does things in such a repeatable fashion and has a wealth of experience under his belt. I’m super excited to have him on the show today.
Before we dive into our conversation where we answer a handful of listener questions including several voicemails—I think we had three voicemails today—I want to remind you again about MicroConf Connect. Go to microconfconnect.com. It is MicroConf’s year-round always on Slack channel. We’re currently accepting applicants. It’s for founders, aspiring founders, and folks who want to be in the self-funded and indie-funded community.
In addition, we’ve had several new reviews over the past couple of months. I won’t bore you by reading them on the show right now, but if you have yet to give us a five-star review or to leave a comment, if the show has been helpful for you, if you feel like you’ve gotten value over the past many years we’ve been doing it, we would really appreciate a five-star or a couple of sentences. It helps us stay motivated and keep cracking the show up. With that, let’s dive into listener questions.
Ruben, thanks so much for coming back on the show.
Ruben: Thanks for the invite.
Rob: It’s going to be fun. I think you have some good insight on a lot of these questions today. Our first question is from Will, and it’s actually a question that I don’t think you and I have a lot of insight into, so I’ve called in a remote correspondence to help us out with that. The question is, “Are there any good places that you know of to pick up more stuff on affiliate marketing? One thing that came out of this past year is that I can write a lot faster and more effectively than I thought. I’m not convinced that writing code is even my strong suit even though lots of people tell me it is. I’d like to explore options in this area a bit more but I’d like to borrow your BS filter for a minute. The trouble with people teaching affiliate marketing is that they’re also affiliate marketers, and the signal-to-noise ratio is brutal. Thanks, Will.”
That’s been my experience as well, Ruben. Before we recorded, you mentioned that you haven’t been in the affiliate marketing area for a while.
Ruben: No, but I like that comment that most of the people selling courses are affiliate marketers as well, so it’s really hard to know what’s legit.
Rob: Exactly, I think you’re dead on, Will, so what I did is I tapped a friend and TinySeed mentor, MicroConf speaker, Taylor Hendrickson, who does exist in that space, a lot B2C stuff and affiliate space, and let’s turn it over to Taylor.
Taylor: Hey, thanks for the question, Will. Again, my name’s Taylor, and I’ve been doing affiliate marketing in one form or another since before the Panda update in Google, which for you non-nerds out there, it’s almost 10 years now. You’re completely right and that most people out there who are “teaching” affiliate marketing actually aren’t good at it themselves or just regurgitating the same information they’ve seen or have posted billions of times, that doesn’t actually help anything or anybody.
For that reason, I actually really don’t have any good courses or resources to point to on affiliate marketing, who aren’t just hawking the same stuff everybody else is, but one of us did provide a little bit more perspective or way of thinking about affiliate marketing that I think will help guide you in the right direction you’re looking for.
The main core of affiliate marketing is the same main core as normal business you get into. It’s solving a defined set of problems for a defined audience. When you look at who’s doing that well in affiliate marketing, look at places like Wirecutter, all they’re doing is recommending the best version of whatever the problem people were coming to the website for in exchange for the commission. They know that the only reason they have an audience (were bought for untold millions of dollars by The New York Times) is because they provide amazing value to the people coming there, looking for solutions to their specific problems. I’d recommend the same thing for anybody looking to get into affiliate marketing.
How can you provide value to a very specific audience with very specific problems? By recommending things that you would actually recommend to a friend or a loved one, not just what pays the highest affiliate commission or just random things you’re trying to do to make a quick buck. People see through that really quick.
If anybody is promising those one-click riches, anything that seems a little too good to be true, or actually doesn’t stand the test of, “Will this last for another five years?” completely run the other direction because they are probably a charlatan. I know this doesn’t quite answer the question you are asking, but hopefully gives some perspective as to how to think about this industry better. Now back to you, Rob.
Rob: Thank you so much, Taylor, for being our on-site correspondent for the affiliate marketing question. Our next question is a voicemail around new modes and methods of marketing.
Donald: Hey Rob, waves to Mike. My name’s Donald, a long time listener. You both kept me going through tough times, so I really appreciate that. I’m a recent returnee to my home country of Ireland, but I’ve been in tech networks and security for a long time back at […]. I built my first self-funded SaaS app in 2018. It did live technical screening of engineering skills and engineer skills, but have failed to get traction for a ton of reasons. I somewhat intentionally did things backwards like built it first, as I was new to Rails and web apps, so is learning as I went. I failed at marketing, failed to get paying customers, albeit I did demo for some large and small orgs and experimented with a whole host of cold and warm methods to get leads.
After nearly giving up, I ended up pivoting pansift.com a few months ago to a SaaS GitHub app in the detection tech space. It now automatically honey tokens your deployed branches. Effectively, it’s kind of like a breach detection app for SaaS and infrastructure codes that enables the attacker detection in minutes rather than months. There is some customer education required for both security teams or engineering teams, and I’m trying to figure out positioning in pricing, but my traffic is currently almost nonexistent. As I restart my marketing efforts, I’m struck by the recent vibe I’m hearing on the podcast and elsewhere that an email list and existing audience doesn’t really cut it for SaaS any longer.
Apart from one-to-one, hand-to-hand combat, customer-by-customer, are there any other new or nontraditional avenues I should or could be exploring for marketing rather than content marketing SEO, PPC, giving talks, doing podcasts, or going to conferences, any help or guidance, much appreciated. I love what you’re both doing. Thank you.
Rob: Thanks so much for the question. I think I want to chime in real quick, Ruben, before I throw it over to you, I’ve heard a couple of people quote back to me that on the podcast, I’ve said that having an existing audience doesn’t help. I want to really want to clarify that because if you have an existing audience that is a B2B-focused audience, and they could potentially be a customer of your SaaS app, I think there’s a huge value in that, specialty of 10,000 or 30,000 on an email list.
When I talk about this audience thing not being the end-all-be-all of SaaS is that I’ve seen the kind of B2C marketers have a large audience of kind of wannapreneurs or folks who are just looking for that opportunity to make a million, to make money online crowd. They try to launch a SaaS app for them, and they realize that none of them want to pay. The churn is through the roof and it’s a bunch of mess with it. SaaS is really hard. It’s a lot harder than selling info products.
That’s more what I’m saying or trying to say. If you have an info product audience, you’re making hundreds of thousands a year, and you think that you can switch to SaaS and make hundreds of thousands a year, I’ve never seen anyone do that well. Does that make sense, and do you agree or disagree with that?
Ruben: Yeah, I completely agree. That sort of the Internet marketing space where basically most of it is usually info products where it happens a lot. Selling in that way, selling to people, they’re trying to buy education courses and other info products is different from selling a SaaS. So yeah, I’ve never seen it. I’ve known several people have tried to do it that had big audiences that were successful with info products, and really usually struggle when it comes to selling SaaS just because it’s different.
Rob: Yeah, I agree. I think the one example that I can think of that work was click-on with Leadpages, but it was all annual plans, it was pretty high pressure sales if you went to their webinars. It was really marketed in a very specific way, and frankly, they struggled with that longer term. That’s the day they got big quickly but that had its own drag on the business.
Ruben: Yeah, there are a couple that have done it. It’s not everyone, but most people are not going to be able to do it. The other one that I can think of is ClickFunnels, what’s his name, Brunson something.
Rob: Russell Brunson.
Ruben: Yeah.
Rob: So, Donald mentioned a bunch of stuff. He was saying content marketing, SEO, pay per click, one-on-one, I think he was meaning like cold email, speaking at conferences, going on podcasts. All that stuff still works, right?
Ruben: It does. Some of it is harder than it used to be, like paid ads are generally more expensive across the board, content marketing back in the day you could do a volume thing, just publish two, three, four, five posts a week. The more you published, the more traffic you got. In some ways, it used to be easier, but things have changed. I’m not sure that I’d say that it’s a lot harder. It’s a little bit harder, but it’s also different. It’s about just getting educated about what’s working nowadays, I think it’s part of it.
I think one of the things that he mentioned was that he was trying to figure out positioning and pricing, and things like that. I don’t know about you, but when I hear something like that, I’d be kind of hesitant to start looking at channels that a lot of people aren’t using, that aren’t proven because in my mind, I would need to figure out that I can sell this product, who the customer is, how does a customer buy, that this is going to work, that I have a funnel that works before I start exploring other channels, channels that are a little unusual or something like that. What do you think about that?
Rob: I think you’re right. It sounds like he’s in customer development almost. Maybe his product is to the point people can use it, but if you don’t have positioning and pricing down, I really wouldn’t start marketing yet. I would be doing a lot of sales. A lot of people equate the two as the same, but they’re very different. I see sales is really a one-on-one act even if you draw in all the leads through marketing techniques, then the sales becomes conversations, and that’s where in his case, I’d be looking to have a lot of conversations and try to pick out their language to figure out positioning.
Ruben: Yeah. You learn so much from those conversations that later help you do marketing in a better way. Otherwise, you’re just guessing. I don’t know this category, so maybe if this category has a lot of competitors, they’re doing really well, it’s pretty established, and you know that this type of product works, I think that’s a different situation where you can have a little bit more confidence. But it still pays to do that up front work, I think.
Rob: Right, and this is where if I were in Donald’s shoes a year ago, I would’ve been building an email list. I would have been trying to build that launch list of people who are interested in this product everywhere I went. I would speak about it when it’s a podcast, speaking in front of an audience or whatever. Whether that list is 200 or 2000 people, that’s your easy farm for customer development where you just have tons of conversations.
If he’s starting from a cold stop, that’s definitely not where I would want to be. But almost everything he listed still works today. Cold email, content marketing, SEO, pay-per-click, podcast tour, speaking, it’s less scalable, but it can get you in front of the right people. The only two others that I would throw in that are in my mental shortlist, and that I see working with MicroConf and TinySeed folks are integrations. Integration marketing where you get both sides to promote, which you were the first person I ever saw do that well way back in the day, probably a decade ago now.
The other one is (and it really depends on your space) is to be higher priced, be the enterprise, but its trade shows. It’s going and being in a booth. I know that a lot of us roll our eyes at that when we want to be self-service SaaS, but I will say there’s more than one company I am deeply involved with that is killing it with trade shows, and they’re absolutely worth every dollar they spend.
Ruben: I’ve always known people that have apps or that serve customers that are a little bit older school (I would say), and they do really well on those. I could hear that those are still doing good.
Rob: I know, and there are obviously many others. I have a long list in a Google Doc, but I also refer people to the book traction by Justin Mares and Gabriel Weinberg for just a list. I think there’s 20 in there. The tactics that are in the book are a few years old now. They may or may not work specifically, but that’s a laundry list that I would start from if I had nothing in the chambers.
Ruben: One thing that I would mention for him, given that his product is technical, maybe looking at what some people are calling engineering as marketing. Free tools is a big one. We’ve had some success with that where we get a lot of traffic doing that. I’ve known other people that have done really well with that. The only thing that I would say about that is that a lot of developers might get excited about those and think that all you have to do is build a calculator or a free tool, put it out there, and you’re just going to get traffic from it.
It’s a product. Building the tools is maybe 20% of it, and then 80% is promoting and marketing. You have to figure out how you’re going to get traffic with it. For us, it was SEO. First figure out the keywords that we’re targeting, this is the traffic that we’re going to get from it, build out the tool, and promote it to start getting that traffic.
Bryan Harris from this company called Growth Tools—it used to be called Videofruit—has a lot of free tools. His approach is very different from mine. His approach is partnerships and paid acquisition to promote the free tools. It’s working really well. He’s written a lot about it. I recommend checking out his stuff.
Rob: That’s a good suggestion. If you are marketing to engineers, then working in public ala […] Derrick Reimer, basically on Twitter posting stuff once a day or twice a week with code snippets—developers love that kind of stuff—recording a short screencast if you’re you actually coding something up. I think that uniquely works in that space and almost nowhere else, maybe with designers or something.
Ruben: I think related to that, something that probably works with almost any product in any space, is basically look at who’s doing a good job attracting that type of customer. It doesn’t have to be just related products. I really like looking at things that are just different. I have a SaaS, but maybe I’ll look at somebody who’s running a podcast, who does a really good job of attracting that type of audience or somebody who’s running a downloadable tool, or a different type of SaaS that’s not competitive in any way, and see what they’re doing. It’s always amazing what you’ll learn from it.
Rob: Thanks for the question. I hope that was helpful. Our next question is a voicemail about the most common employment arrangements in early stage startups.
Sean: Hey, My name’s Sean. I’ve been listening to your stuff for a little while now. I’m not a founder yet, but I love everything you guys do on the podcast and through MicroConf. I’m hoping to find a project to start soon, but for the meantime, I’ll keep listening and thinking. Anyway, my question is, and you may have quoted this before so my apologies. If you haven’t, what are the most common employment arrangements with early stage, no or low funding startups that you typically see?
Rob: Good question, Sean. I believe we have discussed this before, but it is likely hundreds of episodes ago. Ruben, you have thoughts on this?
Ruben: Generally, when you’re starting off, you don’t have a lot of money. Most people that I know (including myself) start off with contractors, part-time then full-time, no equity even when you bring on full-time people, no health insurance early on. It’s being really efficient with the money that you have. Later on, a little bit later, when you start growing a team and stuff but still no equity, I think the thing that I’ve been hearing a little bit more nowadays is that some people are exploring profit sharing a little bit more. At some point, you had health insurance there.
Rob: Right, when you have enough money to think about it. I think for us, it was when we were maybe 3-4 employees. I agree with you, it was part-time contractors for me for years and then you hit a certain point where everyone’s full-time and it kind of makes sense to bring them onboard, they have a bunch of institutional knowledge. Start paying them W-2, it’s more expensive, and you do start offering some benefits. I think the profit sharing is what I’ve seen done most in the bootstrap space just because some bootstrappers are really averse to giving away equity or it just complicates things to have anyone else on the cap table.
Ruben: If I have an LLC, if I wanted to do that for my company, I’d have to change that, wouldn’t I?
Rob: No, you can giveaway units. You can give units. You can do an RS user to restricted stock units. I believe there’s restricted units of LLCs and the vesting just isn’t as straightforward as a thing. That’s the other thing, I really haven’t seen people who haven’t taken any funding. I haven’t seen anyone who’s done stock options versus just an equity grant that vest over a few years. Even though that’s pretty rare and most of it has just been either nothing or it’s been profit sharing, I think it is the general rule in our space versus with Silicon Valley. With a venture-funded startup, there are options everywhere. That’s the currency.
Ruben: Back in the day, and it’s still pretty good, Peldi wrote a good post about profit sharing. If anyone ever wants to explore that, I know a lot of people have used that as a model or the way that they’re doing their profit sharing.
Rob: That’s the one I refer everyone to as well. It’s kind of the best write up I’ve seen. Thanks for that question, Sean. I know you had another one, and we’re going to roll that right here.
Sean: Another question. I’d love to see what the number of hours per week worked is sliced by company maturity or age. I have some assumption about what curve for what that might look like, founders who are in the MicroConf community trying to also double lifestyle and maintainable business? Again, thanks for everything you guys do. I love listening to the podcast. I know you already said you get this a lot, but I love the variety. The variety is great. Thanks a lot. All right. Bye.
Rob: That’s a good question. In fact, I have asked the statistician and data scientist who analyze the data to do that analysis. Hopefully, maybe next week or in the next few weeks, I will have that data, discuss it on the show, and address it then.
Daniel: Hi, this is Daniel. I’m a long-time listener, first time caller. My question is about the transition from being a small team where I run everything to a still small team where I simply can’t do that anymore. I’ve been selling a Word add-in since 2009, took on the first employee in 2015, but this year we’ve completed our transition from being a one-off permanent license to being an annual license. Suddenly, in a space of 6 months, we’re going from a team of 5 to a team of 10, and this just changes everything.
We suddenly have a staff manual and suddenly it’s crazy that people send me leave requests, which they always did before, but now they have line managers now. It seems crazy that I’m still processing expenses and a dozen other small things like that. I’m finding it quite hard to get helpful guidance because everything I see is written for companies that are either smaller than us or larger than us.
My question to you is, knowing that this transition is hard (and you’ve mentioned on the show several times that it is a hard transition), what are the things you see that are mostly likely to break? What systems should I be looking to put in place? And how do I avoid just becoming a glorified admin person? Thanks for your help.
Rob: Thanks for that question, Daniel. Daniel also sent an email where he said, of the ten people on the team, the breakdown is him, six engineers, one customer success, one part-time QA, one part-time growth marketer, and one admin. With that, I’m curious to hear your thoughts.
Ruben: I know a lot of people struggle with the people side. It’s not something that I struggled with a lot. Maybe because before I had my product, I managed a group of people and I went through all the stages from it just being myself to 3 people, 5 people, 10, all the way up to past 30 people. And I studied a lot throughout all of those stages.
Thinking about it more, I think it can be a little bit tricky when you get (let’s say) from 5–10 versus 5–15 or 5–20. When you’re at 15–20 people, it’s a lot more clear that you can’t do everything yourself. You can’t be as involved yourself. You have to depend on others. When you’re in that 8, 9, 10 zone, maybe it’s a little tricky because you can technically do it. You can have most of those people reporting to you directly, but it gets tricky because you’re so busy feeling like an admin doing all the stuff and just managing people.
I would probably say, mindset is one of those things that I would think about your team being bigger than it actually is because it probably will be bigger soon, and the things that you need to do to manage effectively, to have it, you can’t be managing everybody directly. Breaking your people up into small teams, having other people on your team lead and own their positions, are really big. It’s hard to run a team of that size without doing that, and then be having time to do other things. Those are just some of the things that I’d think about.
Also, read. I see a lot of people in our space, it feels like they’re constantly figuring this out for the first time, but there are decades of information about managing teams and a lot of it is useful. It doesn’t have to be specific to startups or a certain size. A couple of books—Traction—I forgot the other author. Not the marketing one. I’ve heard it’s pretty practical and a lot of people seem to like it.
Rob: […] I forgot that author, too, but here it’s the Entrepreneurial OS or EOS. If you search that on Amazon, it’ll get you to the book.
Ruben: Right, and just from talking to people that have read it, a lot of the stuff that they’ve implemented based off that book is stuff that I’ve implemented over the years. It sounds really in line with a lot of the way that people (especially in our space) operate their businesses at these sizes, so check that out. I also like One Minute Manager. That one is one that I really like and I read every once in a while.
Rob: And it’s Traction by Gino Wickman. I agree with everything you said. Actually, I made notes as I was listening to the voicemail, and one of the first ones I said when he said, “What systems should I put in place?” is to have managers that are not just you because you cannot have 12 direct reports. Right now, you have nine or maybe you do have line managers, I don’t know. A mistake that I made with Drip is that everyone reported to me the whole time. There were a bunch of reasons. There were excuses why I didn’t do it, is really the bottom line. It took a toll on me and it’s something that I wouldn’t do again.
I think something else that I noticed is that when I look at your line-up, it’s very product-heavy. You have no sales people and you only have a part-time marketer out of 10 people. To me, that feels off. I would consider, can you grow the business a little faster if that growth marketer was full-time or if you had a salesperson?
The reason leads are still coming to you is because you don’t have anyone else doing sales. I would consider (in a short-term) typically customer success people are often pretty good at sales. Without a quota and all the stuff, they may not be as good as if you went the full process, but customer success people know your product. They know how to talk to people. That is what we did when we only had one customer success person. She did both those roles, and I think that was a good move we made.
Another I would think about, specifically to the phrase of, “How do I avoid becoming a glorified admin,” I would seriously consider at what point here do you need to hire even a part-time Director of Operations or Director of HR? It seems really early to that, but if you’re running your own payroll, you’re thinking about your own books and your accounting, you’re dealing with the state or local governments with the taxes, there’s always unemployment, there’s like three different accounts in every state where you hire someone, and it’s so hard to outsource. It’s like Gusto or any of these payroll providers. They say they do a lot of it, but they don’t do that stuff. You need a PEO (at least in the US) to do that, and that becomes very expensive.
Another mistake I made is that I wished I hired someone to handle a lot more of the day-to-day ops. In the old days, they called them an office manager. They did all of that stuff, kept the personnel files and did a lot of the payroll, the bookkeeping, the accounting, the invoicing, accounts payable, accounts receivable, all of that. Everything was under their purview.
We don’t have all those things necessarily if you’re selling software, but I do think finding someone really competent, who you can hand that off and completely delegate it. Not someone you’re telling what to do day-to-day because you already have an admin, but is that admin competent or experienced enough to really come in and take charge or do you need to go out and find that ops person to get yourself out of that role?
Thanks again for the questions, Daniel. Hope that was helpful.
Our next question is from long-time listener, Mr. James Kennedy. He’s also spoken at a couple of MicroConfs. He says, “It’s clear from the number of people writing into the show with a million-dollar or more SaaS businesses that the community has really come a long way.” I’d like to hear your thoughts on where to go after you’ve replaced the day job. If it’s become a grind, then selling your apps seems obvious, but it’s not a grind, what’s next? There’s always the fear that it all goes south. Most are probably over-invested in a single startup that works. Who have you seen that has handled managing this risk while still running their company and how do they do it? James.”
And he says, “PS, the podcast has never been stronger. It’s still great to hear from Mike, but the extra TinySeed tales and variety of new guests has invigorated the whole thing.” Thanks for that, James. To his question, your thoughts on that, Ruben?
Ruben: Yeah. He said after quitting the day job. I’m assuming it’s way after because right after you quit the day job, it’s still pretty early, and it’s basically at that point, grow the company. But after growing the company maybe for a couple of more years, good revenue, getting people on board (or not, depending on that company). Some people sell, and this has really always been interesting to me. People run their companies, like they’re going to be around forever.
It’s really interesting to me that there’s that mindset in our space where things are changing all of the time and companies are dying. Like in that question, I don’t remember exactly how it was phased, but something about that it can all go away at some point. I have that. I know a lot of people that also have that thought, but I do know other people that it’s not even a thought for them, which I find really interesting.
I think that’s not so good. It’s cool if you want to run the company for a long time but at some point, I think it’s really important for the founder to take some money off the table in some way, shape, or form. If you don’t sell, then sell part of the company or what I’ve done at periods of time is basically use the company almost like a cash machine. If it’s really profitable and you’re efficient with how you’re acquiring customers and all that stuff, I know a couple of people that are currently doing that as well.
I think being in that stage where you’re not that profitable, you have a lot of employees for the amount of revenue that you’re bringing in, running that company in that way for a long time, and expecting it to be around forever and not taking any money off the table, it’s a really risky way of doing things. What do you think?
Rob: I was going to say the same thing. There’s selling. It used to be that it was really hard to sell these small apps. There was no market for them. There was no Quiet Light, FE International, Empire Flippers. It was person-to-person. You’d go on a website and you’d get 1X your annual revenue of something. It was great for buyers, but really bad if you wanted to exit. But there’s so much money coming into the space now. Both through these brokers but also just strategic acquirers where they actually do come in. Strategic or private equity buyers if you’re over a million, where they will pay you revenue in multiples now. You sell a business doing a million dollars for $2 million or $3 million, that’s crazy.
It’s doing a million dollars, and after payroll and all your expenses, you’re making $100,000 or something because you’re growing so fast, and yet, you sell that for $2 million or $3 million, I have seen this happen now. Josh with Baremetrics. We talked an episode or two ago about how he got an offer for 3.75 revenue. It was a $5 million offer. That certainly doesn’t happen every day, but it’s a lot more common than people would believe, I’ll put it that way.
Soon as you go above north $1 million is where that happens. Obviously, I’ve sold a bunch of companies. I’ve either sold or shut down every company I’ve ever had, so I’m not saying you should or shouldn’t sell, but it wasn’t an option. Then it became an option, and now, we know what you just said is selling part of your company, selling 20%. Obviously, look for similar evaluation to a partner who is still a minority partner, doesn’t have control, and it’s not venture capital. It’s for you to literally take the money off the table.
A founder running a million-dollar app that (let’s say) is worth “someone might be willing to pay $2½ million for it.” If you could sell 20% for half a million dollars and put that half a million in the bank, personally, I would’ve slept way better at night when I was running any of my companies, and I wish that that have been more of an option. It is now becoming more of an option. There are folks who have set up funds. Now, there’s only a handful. It’s still an emerging thing. Much like into that VC tiny seed stuff, that’s still this emerging frontier. There’s also this partial cash-out equity that I’m seeing happens. I think it’s an intriguing idea.
Ruben: Yeah. It makes a lot of sense and I’m glad that those types of options are available nowadays. This is still good for people who are in the VC space, getting funding at ridiculous amounts. Mainly because the founder is taking money off the table as well.
Rob: Yup. Typically, it’s like oftentimes, the second round, the Series B founders will take money off the table to be able to sleep better at night. It over-invested in one startup is a good way to think about it.
The last thing that we haven’t discussed is—I’ve seen some folks—find a CEO to run the thing. You couldn’t do that in the stages but if you’re north of a million, is there a budget there? If you decided you did want to step away, can you find someone who is really good enough that you trust to keep the company going while you step away to do something else? I think this is a little bit like the model.
When we look at the folks who have run SaaS apps for really long periods of time, like the Basecamp guys, they’re not still working on that first product. They would be bored out of their mind. We get too bored with stuff. They’re rewritten it multiple times now. They’ve launched Haystack. They launched a bunch of stuff over the years, so that’s how they stay invested. If you think about it, they’re just starting a bunch of companies, but really, they’re not. They’re just starting a bunch of products under the umbrella, the company.
That’s a dream scenario, and I think most of us can’t do that, but if that’s what you need, if you feel like, “Well, I have these companies running really well, and I can find someone good to run it,” there’s obviously huge risk here, right? You find the wrong person and the company tanks. Maybe you sell part of it to take money off the table, you find someone to replace you, and then go on to do your next act. Is that something of interest?
Ruben: Yeah, I’ve known several that have done this. I’ve actually known people that have had success doing it, then basically ended up with the wrong person and had to come back.
Rob: Yeah, and it’s something I have never done. It always seems really scary to me, like I couldn’t find the right person and on, and on, and on. Insert a bunch of excuses here about why I didn’t do it, but it is something I wish I had potentially evaluated earlier with some of the apps that I’ve had. Thanks for that question, James. I hope that was helpful.
Our next question is about starting with no audience and selling at higher price points. The person says, “In two previous podcast episodes, I’ve heard you talk about startups having no audiences and selling their product with significant MRR. I’d love to hear more about this. I started my own SaaS product early this year and I’m doing the cold outreach route with some success. However, apart from what Steli Efti writes, there are very few other resources as to how to get going when you’re first starting out.”
This was another one where I wasn’t saying don’t start with no audience. I was saying taking that B2C audience and trying to transition. Yeah, we already covered this, but the idea is I think having an audience would be great but if you don’t, how do you start selling at higher price points? To me, it’s like cold email is the one that everyone does because it’s worth doing.
I think AdWords is another one that’s really expensive, but if you have any type of cash to pour into it, you don’t need that many leads if you are selling at higher price points. It is going to be so consultative anyway, that you’re going to be getting in demos and conversations with folks. What are your thoughts on this, Ruben?
Ruben: I’m wondering what people mean when they say “no audience.” You covered it a little bit, but are they thinking just any sort of audience at all or more like the personal brand type of thing?
Rob: I think she means no reach, really no audience.
Ruben: Nothing? Starting from the ground?
Rob: Yeah, kind of like no launch email lists, because if you have an email list that was interested in hearing about the product when it launches, then you would just do that, but I think she does mean like, “I’ve made a traditional developer mistake. I built some stuff maybe, I was having conversations, but I did know marketing.” Start marketing the day you start quoting. Start marketing before you start quoting. Just take my advice, please, so that you don’t wind up in this position, but it’s obviously very common for people to wind up in that position.
Ruben: Yeah. Even if you’re not in that position by the time that you launch, everybody starts off that way or most people do. You start with nothing then you build it up. Really, it’s just marketing. It’s just in the earliest stages when you don’t have anything, kind of going back to the first question. It’s about figuring out who your target customer is. How do they buy? Where do they hang out? Then, doing things that will lit up their work that take time to build up. Some things are a little bit faster, like paid acquisition if you can make that work.
Most people that I know don’t make that work very early on. Maybe there are just too many unknowns at that point. Partnerships which work really well at any stage, I’ve seen a lot of people make those work. They’re good because you can get in front of a big audience really quickly. It does take some work but I like those. And I really like SEO, which takes time. I tend to start SEO and content marketing before launching the product because I have experience with it, and I’m confident that I can do the research to get the right keywords and do the work to start ranking for terms.
By the time that the product is released, I think for a lot of people, before investing a lot of time in SEO and content marketing, I probably just get more confidence in the product, in what I’m selling, and that it’s going to work before really investing heavily in that. Investing some time in that is always good but I’d probably start with some of the other things first.
Rob: I think that’s a really good answer. I don’t have much to add to that. Ruben, thanks again for coming on the show.
Ruben: Thanks for the invite. These are fun. I like the Q&A. I once listened to them, and now actually participating in one.
Rob: That’s great. Folks want to find out more about what you’re up to, they can go to docsketch.com, which is an electronic signature app—you’re killing it over there—as well as bidsketch.com, which is proposal software for everyone now. I think back. You did such a good lead and expand. Proposal software made for designers. That was the first year or something, and then the next 9 or 10 years has been proposal software.
Ruben: Yeah, now that’s like 10% of the customer base.
Rob: Yeah, but I got you traction in the early days.
Ruben: Yup.
Rob: Thanks again. Talk to you soon.
Ruben: All right, thanks.
Rob: Thanks again to Ruben for coming on the show. If you want to find him on Twitter, his username is @earthlingworks.
We only have a handful of questions for our next Q&A show, so if you have a question for us, you can leave a voicemail at (888) 801-9690 or email questions@startupsfortherestofus.com, and you can attach a voicemail. Voicemails always go to the top of the stack or send a text question and I’ll read it out for you.
Our theme music is an excerpt from We’re Outta Control by MoOt. It’s used under Creative Commons. You can subscribe to us in any podcatcher. Visit startupsfortherestofus.com for a full transcript of each episode. Thank you for listening. I’ll see you next time.
Welcome to Startups for the Rest of Us, the podcast that helps developers, designers, and entrepreneurs be awesome in building, launching, and growing startups. Whether you’ve built your fifth startup, or you’re thinking about your first. I’m Rob and today with Ruben Gomez, we’re here to share our experiences to help you avoid the mistakes we’ve made.
It’s a Q&A episode, one of the listener favorites. We’ve got a bunch of really good questions today, and I’m happy to welcome Ruben Gomez back on the show. You may remember him from an interview we did a couple of months back, but he started BidSketch, which is a proposal software. It’s a SaaS app. He started that back in (I believe it was) 2009. He was one of the early SaaS bootstrappers, and over the past couple of years, he’s been building another product called DocSketch, which is electronic signatures. He’s experiencing quite a bit of success with that as well.
Ruben is a wealth of knowledge. He’s a very thoughtful founder, and he is just meticulous and disciplined. I say that in some of the intros here. He is almost the definition of those things. He’s detail-oriented, he’s very thoughtful about the direction and the moves that he takes with his companies, and he is someone who I would bet on any day because he does things in such a repeatable fashion and has a wealth of experience under his belt. I’m super excited to have him on the show today.
Before we dive into our conversation where we answer a handful of listener questions including several voicemails—I think we had three voicemails today—I want to remind you again about MicroConf Connect. Go to microconfconnect.com. It is MicroConf’s year-round always on Slack channel. We’re currently accepting applicants. It’s for founders, aspiring founders, and folks who want to be in the self-funded and indie-funded community.
In addition, we’ve had several new reviews over the past couple of months. I won’t bore you by reading them on the show right now, but if you have yet to give us a five-star review or to leave a comment, if the show has been helpful for you, if you feel like you’ve gotten value over the past many years we’ve been doing it, we would really appreciate a five-star or a couple of sentences. It helps us stay motivated and keep cracking the show up. With that, let’s dive into listener questions.
Ruben, thanks so much for coming back on the show.
Ruben: Thanks for the invite.
Rob: It’s going to be fun. I think you have some good insight on a lot of these questions today. Our first question is from Will, and it’s actually a question that I don’t think you and I have a lot of insight into, so I’ve called in a remote correspondence to help us out with that. The question is, “Are there any good places that you know of to pick up more stuff on affiliate marketing? One thing that came out of this past year is that I can write a lot faster and more effectively than I thought. I’m not convinced that writing code is even my strong suit even though lots of people tell me it is. I’d like to explore options in this area a bit more but I’d like to borrow your BS filter for a minute. The trouble with people teaching affiliate marketing is that they’re also affiliate marketers, and the signal-to-noise ratio is brutal. Thanks, Will.”
That’s been my experience as well, Ruben. Before we recorded, you mentioned that you haven’t been in the affiliate marketing area for a while.
Ruben: No, but I like that comment that most of the people selling courses are affiliate marketers as well, so it’s really hard to know what’s legit.
Rob: Exactly, I think you’re dead on, Will, so what I did is I tapped a friend and TinySeed mentor, MicroConf speaker, Taylor Hendrickson, who does exist in that space, a lot B2C stuff and affiliate space, and let’s turn it over to Taylor.
Taylor: Hey, thanks for the question, Will. Again, my name’s Taylor, and I’ve been doing affiliate marketing in one form or another since before the Panda update in Google, which for you non-nerds out there, it’s almost 10 years now. You’re completely right and that most people out there who are “teaching” affiliate marketing actually aren’t good at it themselves or just regurgitating the same information they’ve seen or have posted billions of times, that doesn’t actually help anything or anybody.
For that reason, I actually really don’t have any good courses or resources to point to on affiliate marketing, who aren’t just hawking the same stuff everybody else is, but one of us did provide a little bit more perspective or way of thinking about affiliate marketing that I think will help guide you in the right direction you’re looking for.
The main core of affiliate marketing is the same main core as normal business you get into. It’s solving a defined set of problems for a defined audience. When you look at who’s doing that well in affiliate marketing, look at places like Wirecutter, all they’re doing is recommending the best version of whatever the problem people were coming to the website for in exchange for the commission. They know that the only reason they have an audience (were bought for untold millions of dollars by The New York Times) is because they provide amazing value to the people coming there, looking for solutions to their specific problems. I’d recommend the same thing for anybody looking to get into affiliate marketing.
How can you provide value to a very specific audience with very specific problems? By recommending things that you would actually recommend to a friend or a loved one, not just what pays the highest affiliate commission or just random things you’re trying to do to make a quick buck. People see through that really quick.
If anybody is promising those one-click riches, anything that seems a little too good to be true, or actually doesn’t stand the test of, “Will this last for another five years?” completely run the other direction because they are probably a charlatan. I know this doesn’t quite answer the question you are asking, but hopefully gives some perspective as to how to think about this industry better. Now back to you, Rob.
Rob: Thank you so much, Taylor, for being our on-site correspondent for the affiliate marketing question. Our next question is a voicemail around new modes and methods of marketing.
Donald: Hey Rob, waves to Mike. My name’s Donald, a long time listener. You both kept me going through tough times, so I really appreciate that. I’m a recent returnee to my home country of Ireland, but I’ve been in tech networks and security for a long time back at […]. I built my first self-funded SaaS app in 2018. It did live technical screening of engineering skills and engineer skills, but have failed to get traction for a ton of reasons. I somewhat intentionally did things backwards like built it first, as I was new to Rails and web apps, so is learning as I went. I failed at marketing, failed to get paying customers, albeit I did demo for some large and small orgs and experimented with a whole host of cold and warm methods to get leads.
After nearly giving up, I ended up pivoting pansift.com a few months ago to a SaaS GitHub app in the detection tech space. It now automatically honey tokens your deployed branches. Effectively, it’s kind of like a breach detection app for SaaS and infrastructure codes that enables the attacker detection in minutes rather than months. There is some customer education required for both security teams or engineering teams, and I’m trying to figure out positioning in pricing, but my traffic is currently almost nonexistent. As I restart my marketing efforts, I’m struck by the recent vibe I’m hearing on the podcast and elsewhere that an email list and existing audience doesn’t really cut it for SaaS any longer.
Apart from one-to-one, hand-to-hand combat, customer-by-customer, are there any other new or nontraditional avenues I should or could be exploring for marketing rather than content marketing SEO, PPC, giving talks, doing podcasts, or going to conferences, any help or guidance, much appreciated. I love what you’re both doing. Thank you.
Rob: Thanks so much for the question. I think I want to chime in real quick, Ruben, before I throw it over to you, I’ve heard a couple of people quote back to me that on the podcast, I’ve said that having an existing audience doesn’t help. I want to really want to clarify that because if you have an existing audience that is a B2B-focused audience, and they could potentially be a customer of your SaaS app, I think there’s a huge value in that, specialty of 10,000 or 30,000 on an email list.
When I talk about this audience thing not being the end-all-be-all of SaaS is that I’ve seen the kind of B2C marketers have a large audience of kind of wannapreneurs or folks who are just looking for that opportunity to make a million, to make money online crowd. They try to launch a SaaS app for them, and they realize that none of them want to pay. The churn is through the roof and it’s a bunch of mess with it. SaaS is really hard. It’s a lot harder than selling info products.
That’s more what I’m saying or trying to say. If you have an info product audience, you’re making hundreds of thousands a year, and you think that you can switch to SaaS and make hundreds of thousands a year, I’ve never seen anyone do that well. Does that make sense, and do you agree or disagree with that?
Ruben: Yeah, I completely agree. That sort of the Internet marketing space where basically most of it is usually info products where it happens a lot. Selling in that way, selling to people, they’re trying to buy education courses and other info products is different from selling a SaaS. So yeah, I’ve never seen it. I’ve known several people have tried to do it that had big audiences that were successful with info products, and really usually struggle when it comes to selling SaaS just because it’s different.
Rob: Yeah, I agree. I think the one example that I can think of that work was click-on with Leadpages, but it was all annual plans, it was pretty high pressure sales if you went to their webinars. It was really marketed in a very specific way, and frankly, they struggled with that longer term. That’s the day they got big quickly but that had its own drag on the business.
Ruben: Yeah, there are a couple that have done it. It’s not everyone, but most people are not going to be able to do it. The other one that I can think of is ClickFunnels, what’s his name, Brunson something.
Rob: Russell Brunson.
Ruben: Yeah.
Rob: So, Donald mentioned a bunch of stuff. He was saying content marketing, SEO, pay per click, one-on-one, I think he was meaning like cold email, speaking at conferences, going on podcasts. All that stuff still works, right?
Ruben: It does. Some of it is harder than it used to be, like paid ads are generally more expensive across the board, content marketing back in the day you could do a volume thing, just publish two, three, four, five posts a week. The more you published, the more traffic you got. In some ways, it used to be easier, but things have changed. I’m not sure that I’d say that it’s a lot harder. It’s a little bit harder, but it’s also different. It’s about just getting educated about what’s working nowadays, I think it’s part of it.
I think one of the things that he mentioned was that he was trying to figure out positioning and pricing, and things like that. I don’t know about you, but when I hear something like that, I’d be kind of hesitant to start looking at channels that a lot of people aren’t using, that aren’t proven because in my mind, I would need to figure out that I can sell this product, who the customer is, how does a customer buy, that this is going to work, that I have a funnel that works before I start exploring other channels, channels that are a little unusual or something like that. What do you think about that?
Rob: I think you’re right. It sounds like he’s in customer development almost. Maybe his product is to the point people can use it, but if you don’t have positioning and pricing down, I really wouldn’t start marketing yet. I would be doing a lot of sales. A lot of people equate the two as the same, but they’re very different. I see sales is really a one-on-one act even if you draw in all the leads through marketing techniques, then the sales becomes conversations, and that’s where in his case, I’d be looking to have a lot of conversations and try to pick out their language to figure out positioning.
Ruben: Yeah. You learn so much from those conversations that later help you do marketing in a better way. Otherwise, you’re just guessing. I don’t know this category, so maybe if this category has a lot of competitors, they’re doing really well, it’s pretty established, and you know that this type of product works, I think that’s a different situation where you can have a little bit more confidence. But it still pays to do that up front work, I think.
Rob: Right, and this is where if I were in Donald’s shoes a year ago, I would’ve been building an email list. I would have been trying to build that launch list of people who are interested in this product everywhere I went. I would speak about it when it’s a podcast, speaking in front of an audience or whatever. Whether that list is 200 or 2000 people, that’s your easy farm for customer development where you just have tons of conversations.
If he’s starting from a cold stop, that’s definitely not where I would want to be. But almost everything he listed still works today. Cold email, content marketing, SEO, pay-per-click, podcast tour, speaking, it’s less scalable, but it can get you in front of the right people. The only two others that I would throw in that are in my mental shortlist, and that I see working with MicroConf and TinySeed folks are integrations. Integration marketing where you get both sides to promote, which you were the first person I ever saw do that well way back in the day, probably a decade ago now.
The other one is (and it really depends on your space) is to be higher priced, be the enterprise, but its trade shows. It’s going and being in a booth. I know that a lot of us roll our eyes at that when we want to be self-service SaaS, but I will say there’s more than one company I am deeply involved with that is killing it with trade shows, and they’re absolutely worth every dollar they spend.
Ruben: I’ve always known people that have apps or that serve customers that are a little bit older school (I would say), and they do really well on those. I could hear that those are still doing good.
Rob: I know, and there are obviously many others. I have a long list in a Google Doc, but I also refer people to the book traction by Justin Mares and Gabriel Weinberg for just a list. I think there’s 20 in there. The tactics that are in the book are a few years old now. They may or may not work specifically, but that’s a laundry list that I would start from if I had nothing in the chambers.
Ruben: One thing that I would mention for him, given that his product is technical, maybe looking at what some people are calling engineering as marketing. Free tools is a big one. We’ve had some success with that where we get a lot of traffic doing that. I’ve known other people that have done really well with that. The only thing that I would say about that is that a lot of developers might get excited about those and think that all you have to do is build a calculator or a free tool, put it out there, and you’re just going to get traffic from it.
It’s a product. Building the tools is maybe 20% of it, and then 80% is promoting and marketing. You have to figure out how you’re going to get traffic with it. For us, it was SEO. First figure out the keywords that we’re targeting, this is the traffic that we’re going to get from it, build out the tool, and promote it to start getting that traffic.
Bryan Harris from this company called Growth Tools—it used to be called Videofruit—has a lot of free tools. His approach is very different from mine. His approach is partnerships and paid acquisition to promote the free tools. It’s working really well. He’s written a lot about it. I recommend checking out his stuff.
Rob: That’s a good suggestion. If you are marketing to engineers, then working in public ala […] Derrick Reimer, basically on Twitter posting stuff once a day or twice a week with code snippets—developers love that kind of stuff—recording a short screencast if you’re you actually coding something up. I think that uniquely works in that space and almost nowhere else, maybe with designers or something.
Ruben: I think related to that, something that probably works with almost any product in any space, is basically look at who’s doing a good job attracting that type of customer. It doesn’t have to be just related products. I really like looking at things that are just different. I have a SaaS, but maybe I’ll look at somebody who’s running a podcast, who does a really good job of attracting that type of audience or somebody who’s running a downloadable tool, or a different type of SaaS that’s not competitive in any way, and see what they’re doing. It’s always amazing what you’ll learn from it.
Rob: Thanks for the question. I hope that was helpful. Our next question is a voicemail about the most common employment arrangements in early stage startups.
Sean: Hey, My name’s Sean. I’ve been listening to your stuff for a little while now. I’m not a founder yet, but I love everything you guys do on the podcast and through MicroConf. I’m hoping to find a project to start soon, but for the meantime, I’ll keep listening and thinking. Anyway, my question is, and you may have quoted this before so my apologies. If you haven’t, what are the most common employment arrangements with early stage, no or low funding startups that you typically see?
Rob: Good question, Sean. I believe we have discussed this before, but it is likely hundreds of episodes ago. Ruben, you have thoughts on this?
Ruben: Generally, when you’re starting off, you don’t have a lot of money. Most people that I know (including myself) start off with contractors, part-time then full-time, no equity even when you bring on full-time people, no health insurance early on. It’s being really efficient with the money that you have. Later on, a little bit later, when you start growing a team and stuff but still no equity, I think the thing that I’ve been hearing a little bit more nowadays is that some people are exploring profit sharing a little bit more. At some point, you had health insurance there.
Rob: Right, when you have enough money to think about it. I think for us, it was when we were maybe 3-4 employees. I agree with you, it was part-time contractors for me for years and then you hit a certain point where everyone’s full-time and it kind of makes sense to bring them onboard, they have a bunch of institutional knowledge. Start paying them W-2, it’s more expensive, and you do start offering some benefits. I think the profit sharing is what I’ve seen done most in the bootstrap space just because some bootstrappers are really averse to giving away equity or it just complicates things to have anyone else on the cap table.
Ruben: If I have an LLC, if I wanted to do that for my company, I’d have to change that, wouldn’t I?
Rob: No, you can giveaway units. You can give units. You can do an RS user to restricted stock units. I believe there’s restricted units of LLCs and the vesting just isn’t as straightforward as a thing. That’s the other thing, I really haven’t seen people who haven’t taken any funding. I haven’t seen anyone who’s done stock options versus just an equity grant that vest over a few years. Even though that’s pretty rare and most of it has just been either nothing or it’s been profit sharing, I think it is the general rule in our space versus with Silicon Valley. With a venture-funded startup, there are options everywhere. That’s the currency.
Ruben: Back in the day, and it’s still pretty good, Peldi wrote a good post about profit sharing. If anyone ever wants to explore that, I know a lot of people have used that as a model or the way that they’re doing their profit sharing.
Rob: That’s the one I refer everyone to as well. It’s kind of the best write up I’ve seen. Thanks for that question, Sean. I know you had another one, and we’re going to roll that right here.
Sean: Another question. I’d love to see what the number of hours per week worked is sliced by company maturity or age. I have some assumption about what curve for what that might look like, founders who are in the MicroConf community trying to also double lifestyle and maintainable business? Again, thanks for everything you guys do. I love listening to the podcast. I know you already said you get this a lot, but I love the variety. The variety is great. Thanks a lot. All right. Bye.
Rob: That’s a good question. In fact, I have asked the statistician and data scientist who analyze the data to do that analysis. Hopefully, maybe next week or in the next few weeks, I will have that data, discuss it on the show, and address it then.
Daniel: Hi, this is Daniel. I’m a long-time listener, first time caller. My question is about the transition from being a small team where I run everything to a still small team where I simply can’t do that anymore. I’ve been selling a Word add-in since 2009, took on the first employee in 2015, but this year we’ve completed our transition from being a one-off permanent license to being an annual license. Suddenly, in a space of 6 months, we’re going from a team of 5 to a team of 10, and this just changes everything.
We suddenly have a staff manual and suddenly it’s crazy that people send me leave requests, which they always did before, but now they have line managers now. It seems crazy that I’m still processing expenses and a dozen other small things like that. I’m finding it quite hard to get helpful guidance because everything I see is written for companies that are either smaller than us or larger than us.
My question to you is, knowing that this transition is hard (and you’ve mentioned on the show several times that it is a hard transition), what are the things you see that are mostly likely to break? What systems should I be looking to put in place? And how do I avoid just becoming a glorified admin person? Thanks for your help.
Rob: Thanks for that question, Daniel. Daniel also sent an email where he said, of the ten people on the team, the breakdown is him, six engineers, one customer success, one part-time QA, one part-time growth marketer, and one admin. With that, I’m curious to hear your thoughts.
Ruben: I know a lot of people struggle with the people side. It’s not something that I struggled with a lot. Maybe because before I had my product, I managed a group of people and I went through all the stages from it just being myself to 3 people, 5 people, 10, all the way up to past 30 people. And I studied a lot throughout all of those stages.
Thinking about it more, I think it can be a little bit tricky when you get (let’s say) from 5–10 versus 5–15 or 5–20. When you’re at 15–20 people, it’s a lot more clear that you can’t do everything yourself. You can’t be as involved yourself. You have to depend on others. When you’re in that 8, 9, 10 zone, maybe it’s a little tricky because you can technically do it. You can have most of those people reporting to you directly, but it gets tricky because you’re so busy feeling like an admin doing all the stuff and just managing people.
I would probably say, mindset is one of those things that I would think about your team being bigger than it actually is because it probably will be bigger soon, and the things that you need to do to manage effectively, to have it, you can’t be managing everybody directly. Breaking your people up into small teams, having other people on your team lead and own their positions, are really big. It’s hard to run a team of that size without doing that, and then be having time to do other things. Those are just some of the things that I’d think about.
Also, read. I see a lot of people in our space, it feels like they’re constantly figuring this out for the first time, but there are decades of information about managing teams and a lot of it is useful. It doesn’t have to be specific to startups or a certain size. A couple of books—Traction—I forgot the other author. Not the marketing one. I’ve heard it’s pretty practical and a lot of people seem to like it.
Rob: […] I forgot that author, too, but here it’s the Entrepreneurial OS or EOS. If you search that on Amazon, it’ll get you to the book.
Ruben: Right, and just from talking to people that have read it, a lot of the stuff that they’ve implemented based off that book is stuff that I’ve implemented over the years. It sounds really in line with a lot of the way that people (especially in our space) operate their businesses at these sizes, so check that out. I also like One Minute Manager. That one is one that I really like and I read every once in a while.
Rob: And it’s Traction by Gino Wickman. I agree with everything you said. Actually, I made notes as I was listening to the voicemail, and one of the first ones I said when he said, “What systems should I put in place?” is to have managers that are not just you because you cannot have 12 direct reports. Right now, you have nine or maybe you do have line managers, I don’t know. A mistake that I made with Drip is that everyone reported to me the whole time. There were a bunch of reasons. There were excuses why I didn’t do it, is really the bottom line. It took a toll on me and it’s something that I wouldn’t do again.
I think something else that I noticed is that when I look at your line-up, it’s very product-heavy. You have no sales people and you only have a part-time marketer out of 10 people. To me, that feels off. I would consider, can you grow the business a little faster if that growth marketer was full-time or if you had a salesperson?
The reason leads are still coming to you is because you don’t have anyone else doing sales. I would consider (in a short-term) typically customer success people are often pretty good at sales. Without a quota and all the stuff, they may not be as good as if you went the full process, but customer success people know your product. They know how to talk to people. That is what we did when we only had one customer success person. She did both those roles, and I think that was a good move we made.
Another I would think about, specifically to the phrase of, “How do I avoid becoming a glorified admin,” I would seriously consider at what point here do you need to hire even a part-time Director of Operations or Director of HR? It seems really early to that, but if you’re running your own payroll, you’re thinking about your own books and your accounting, you’re dealing with the state or local governments with the taxes, there’s always unemployment, there’s like three different accounts in every state where you hire someone, and it’s so hard to outsource. It’s like Gusto or any of these payroll providers. They say they do a lot of it, but they don’t do that stuff. You need a PEO (at least in the US) to do that, and that becomes very expensive.
Another mistake I made is that I wished I hired someone to handle a lot more of the day-to-day ops. In the old days, they called them an office manager. They did all of that stuff, kept the personnel files and did a lot of the payroll, the bookkeeping, the accounting, the invoicing, accounts payable, accounts receivable, all of that. Everything was under their purview.
We don’t have all those things necessarily if you’re selling software, but I do think finding someone really competent, who you can hand that off and completely delegate it. Not someone you’re telling what to do day-to-day because you already have an admin, but is that admin competent or experienced enough to really come in and take charge or do you need to go out and find that ops person to get yourself out of that role?
Thanks again for the questions, Daniel. Hope that was helpful.
Our next question is from long-time listener, Mr. James Kennedy. He’s also spoken at a couple of MicroConfs. He says, “It’s clear from the number of people writing into the show with a million-dollar or more SaaS businesses that the community has really come a long way.” I’d like to hear your thoughts on where to go after you’ve replaced the day job. If it’s become a grind, then selling your apps seems obvious, but it’s not a grind, what’s next? There’s always the fear that it all goes south. Most are probably over-invested in a single startup that works. Who have you seen that has handled managing this risk while still running their company and how do they do it? James.”
And he says, “PS, the podcast has never been stronger. It’s still great to hear from Mike, but the extra TinySeed tales and variety of new guests has invigorated the whole thing.” Thanks for that, James. To his question, your thoughts on that, Ruben?
Ruben: Yeah. He said after quitting the day job. I’m assuming it’s way after because right after you quit the day job, it’s still pretty early, and it’s basically at that point, grow the company. But after growing the company maybe for a couple of more years, good revenue, getting people on board (or not, depending on that company). Some people sell, and this has really always been interesting to me. People run their companies, like they’re going to be around forever.
It’s really interesting to me that there’s that mindset in our space where things are changing all of the time and companies are dying. Like in that question, I don’t remember exactly how it was phased, but something about that it can all go away at some point. I have that. I know a lot of people that also have that thought, but I do know other people that it’s not even a thought for them, which I find really interesting.
I think that’s not so good. It’s cool if you want to run the company for a long time but at some point, I think it’s really important for the founder to take some money off the table in some way, shape, or form. If you don’t sell, then sell part of the company or what I’ve done at periods of time is basically use the company almost like a cash machine. If it’s really profitable and you’re efficient with how you’re acquiring customers and all that stuff, I know a couple of people that are currently doing that as well.
I think being in that stage where you’re not that profitable, you have a lot of employees for the amount of revenue that you’re bringing in, running that company in that way for a long time, and expecting it to be around forever and not taking any money off the table, it’s a really risky way of doing things. What do you think?
Rob: I was going to say the same thing. There’s selling. It used to be that it was really hard to sell these small apps. There was no market for them. There was no Quiet Light, FE International, Empire Flippers. It was person-to-person. You’d go on a website and you’d get 1X your annual revenue of something. It was great for buyers, but really bad if you wanted to exit. But there’s so much money coming into the space now. Both through these brokers but also just strategic acquirers where they actually do come in. Strategic or private equity buyers if you’re over a million, where they will pay you revenue in multiples now. You sell a business doing a million dollars for $2 million or $3 million, that’s crazy.
It’s doing a million dollars, and after payroll and all your expenses, you’re making $100,000 or something because you’re growing so fast, and yet, you sell that for $2 million or $3 million, I have seen this happen now. Josh with Baremetrics. We talked an episode or two ago about how he got an offer for 3.75 revenue. It was a $5 million offer. That certainly doesn’t happen every day, but it’s a lot more common than people would believe, I’ll put it that way.
Soon as you go above north $1 million is where that happens. Obviously, I’ve sold a bunch of companies. I’ve either sold or shut down every company I’ve ever had, so I’m not saying you should or shouldn’t sell, but it wasn’t an option. Then it became an option, and now, we know what you just said is selling part of your company, selling 20%. Obviously, look for similar evaluation to a partner who is still a minority partner, doesn’t have control, and it’s not venture capital. It’s for you to literally take the money off the table.
A founder running a million-dollar app that (let’s say) is worth “someone might be willing to pay $2½ million for it.” If you could sell 20% for half a million dollars and put that half a million in the bank, personally, I would’ve slept way better at night when I was running any of my companies, and I wish that that have been more of an option. It is now becoming more of an option. There are folks who have set up funds. Now, there’s only a handful. It’s still an emerging thing. Much like into that VC tiny seed stuff, that’s still this emerging frontier. There’s also this partial cash-out equity that I’m seeing happens. I think it’s an intriguing idea.
Ruben: Yeah. It makes a lot of sense and I’m glad that those types of options are available nowadays. This is still good for people who are in the VC space, getting funding at ridiculous amounts. Mainly because the founder is taking money off the table as well.
Rob: Yup. Typically, it’s like oftentimes, the second round, the Series B founders will take money off the table to be able to sleep better at night. It over-invested in one startup is a good way to think about it.
The last thing that we haven’t discussed is—I’ve seen some folks—find a CEO to run the thing. You couldn’t do that in the stages but if you’re north of a million, is there a budget there? If you decided you did want to step away, can you find someone who is really good enough that you trust to keep the company going while you step away to do something else? I think this is a little bit like the model.
When we look at the folks who have run SaaS apps for really long periods of time, like the Basecamp guys, they’re not still working on that first product. They would be bored out of their mind. We get too bored with stuff. They’re rewritten it multiple times now. They’ve launched Haystack. They launched a bunch of stuff over the years, so that’s how they stay invested. If you think about it, they’re just starting a bunch of companies, but really, they’re not. They’re just starting a bunch of products under the umbrella, the company.
That’s a dream scenario, and I think most of us can’t do that, but if that’s what you need, if you feel like, “Well, I have these companies running really well, and I can find someone good to run it,” there’s obviously huge risk here, right? You find the wrong person and the company tanks. Maybe you sell part of it to take money off the table, you find someone to replace you, and then go on to do your next act. Is that something of interest?
Ruben: Yeah, I’ve known several that have done this. I’ve actually known people that have had success doing it, then basically ended up with the wrong person and had to come back.
Rob: Yeah, and it’s something I have never done. It always seems really scary to me, like I couldn’t find the right person and on, and on, and on. Insert a bunch of excuses here about why I didn’t do it, but it is something I wish I had potentially evaluated earlier with some of the apps that I’ve had. Thanks for that question, James. I hope that was helpful.
Our next question is about starting with no audience and selling at higher price points. The person says, “In two previous podcast episodes, I’ve heard you talk about startups having no audiences and selling their product with significant MRR. I’d love to hear more about this. I started my own SaaS product early this year and I’m doing the cold outreach route with some success. However, apart from what Steli Efti writes, there are very few other resources as to how to get going when you’re first starting out.”
This was another one where I wasn’t saying don’t start with no audience. I was saying taking that B2C audience and trying to transition. Yeah, we already covered this, but the idea is I think having an audience would be great but if you don’t, how do you start selling at higher price points? To me, it’s like cold email is the one that everyone does because it’s worth doing.
I think AdWords is another one that’s really expensive, but if you have any type of cash to pour into it, you don’t need that many leads if you are selling at higher price points. It is going to be so consultative anyway, that you’re going to be getting in demos and conversations with folks. What are your thoughts on this, Ruben?
Ruben: I’m wondering what people mean when they say “no audience.” You covered it a little bit, but are they thinking just any sort of audience at all or more like the personal brand type of thing?
Rob: I think she means no reach, really no audience.
Ruben: Nothing? Starting from the ground?
Rob: Yeah, kind of like no launch email lists, because if you have an email list that was interested in hearing about the product when it launches, then you would just do that, but I think she does mean like, “I’ve made a traditional developer mistake. I built some stuff maybe, I was having conversations, but I did know marketing.” Start marketing the day you start quoting. Start marketing before you start quoting. Just take my advice, please, so that you don’t wind up in this position, but it’s obviously very common for people to wind up in that position.
Ruben: Yeah. Even if you’re not in that position by the time that you launch, everybody starts off that way or most people do. You start with nothing then you build it up. Really, it’s just marketing. It’s just in the earliest stages when you don’t have anything, kind of going back to the first question. It’s about figuring out who your target customer is. How do they buy? Where do they hang out? Then, doing things that will lit up their work that take time to build up. Some things are a little bit faster, like paid acquisition if you can make that work.
Most people that I know don’t make that work very early on. Maybe there are just too many unknowns at that point. Partnerships which work really well at any stage, I’ve seen a lot of people make those work. They’re good because you can get in front of a big audience really quickly. It does take some work but I like those. And I really like SEO, which takes time. I tend to start SEO and content marketing before launching the product because I have experience with it, and I’m confident that I can do the research to get the right keywords and do the work to start ranking for terms.
By the time that the product is released, I think for a lot of people, before investing a lot of time in SEO and content marketing, I probably just get more confidence in the product, in what I’m selling, and that it’s going to work before really investing heavily in that. Investing some time in that is always good but I’d probably start with some of the other things first.
Rob: I think that’s a really good answer. I don’t have much to add to that. Ruben, thanks again for coming on the show.
Ruben: Thanks for the invite. These are fun. I like the Q&A. I once listened to them, and now actually participating in one.
Rob: That’s great. Folks want to find out more about what you’re up to, they can go to docsketch.com, which is an electronic signature app—you’re killing it over there—as well as bidsketch.com, which is proposal software for everyone now. I think back. You did such a good lead and expand. Proposal software made for designers. That was the first year or something, and then the next 9 or 10 years has been proposal software.
Ruben: Yeah, now that’s like 10% of the customer base.
Rob: Yeah, but I got you traction in the early days.
Ruben: Yup.
Rob: Thanks again. Talk to you soon.
Ruben: All right, thanks.
Rob: Thanks again to Ruben for coming on the show. If you want to find him on Twitter, his username is @earthlingworks.
We only have a handful of questions for our next Q&A show, so if you have a question for us, you can leave a voicemail at (888) 801-9690 or email questions@startupsfortherestofus.com, and you can attach a voicemail. Voicemails always go to the top of the stack or send a text question and I’ll read it out for you.
Our theme music is an excerpt from We’re Outta Control by MoOt. It’s used under Creative Commons. You can subscribe to us in any podcatcher. Visit startupsfortherestofus.com for a full transcript of each episode. Thank you for listening. I’ll see you next time.
Episode 482 | The Value vs. Stress of Twitter, Pros and Cons of Remote Work, and Digital Minimalism – A Discussion Show with Derrick Reimer
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Show Notes
In this episode of Startups For The Rest Of Us, Rob does a discussion show format with guest Derrick Reimer. They discuss multiple topics including the pros/cons of remote work, value vs. stress of Twitter, and more.
Items mentioned in this episode:
- The Art of Product Podcast
- Derrickreimer.com
- StaticKit
- Baremetrics Blog Post: “I almost sold Baremetrics for $5M”
- Baremetrics Blog Post: “5 things I learned failing to sell Baremetrics for $5M”
Rob: Welcome to this week’s episode of Startups for the Rest of Us, I’m your host, Rob Walling. This week, I’m trying out a new episode format. It is a discussion show, so it’s a conversation between myself, my old friend Derrick Reimer, and we talk about a number of topics. We talk about the value versus the stress of Twitter and social media in general, the pros and cons of remote work. We talk about Cal Newport’s new book Digital Minimalism, and then we wind up talking about Josh Pigford’s blog post in the Baremetrics blog that’s titled, I Almost Sold Baremetrics for $5 Million.
What I like about this episode format is it’s pretty casual and we’re covering topics that I think are relevant to many of us and a lot of us are thinking about. I originally thought of structuring this in some type of news, round-table, or show where we’re talking about topics of today. We do that with a couple things, I think the ability to introduce topics that aren’t necessarily news articles or news headlines also works, and the fact that Derrick and I know each other as well as we do really helps with just the rapport in the conversation, it’s not stiff or stilted. I hope you feel the same way about that.
If you don’t recall who Derrick Reimer is, he and I have known each other for years. We met back when I lived in Fresno. He was a young kid who was participating in a startup competition that I was the judge of. He won a couple years in a row. Then, he was thinking about starting to do some consulting work and I said, “Look, why don’t you come, write some code for HitTail?”
He wrote all the early code for Drip and later on, became retroactive co-founder of Drip. So, he and I have known each other. We’ve worked together. He’s been on the show several times talking about starting an app on the side called Codetree that he sold for $128,000 a few years back. Then, he moved to Minneapolis when we sold Drip. So, he and I now live six or seven minutes apart.
We see each other once a month or so and it’s always a good time to hang out and chat. So, I wanted to mix up the format just a little bit and do something that’s not an interview, not keeping up with Mike Taber, not just question and answer, but actually just bringing topics to the table that (I think) might be of interest to you. So let me know what you think.
You can tweet me @robwalling, you can email questions@startupsfortherestofus.com, or you can post a comment on this episode, episode 482 and just say, “Yeah, I enjoyed the mix-up of the show format and the fresh ideas in a conversation.” Or you can say, “Got five minutes in, didn’t hold my attention, and I was out.”
That helps me think about and consider maybe we had one of these to the line up every couple months. It doesn’t always have to be Derrick. I could bring on different co-hosts and folks to weigh in, so we have different perspectives.
And with that, let’s dive into the show. Derrick Reimer, thank you for joining me on the show.
Derrick: Hey, thanks for having me again.
Rob: Yeah, I think this is going to be a fun one today, just talking through some interesting topics. I had a few in mind over the past couple weeks, some things have come up where I’m like, “You know, I really want to discuss these with someone,” and I don’t know who to bring on the show to do it. Then, you and I were having dinner last night and we got on some really good conversation topics, so I figured we could jump on the mic and record a few of these.
Derrick: Yeah, we both are a couple of old-fashioned, but we probably should have brought our mics, to be honest.
Rob: I know, I agree. One thing you kicked off with was just talking about something on a lot of our minds, social media in general but Twitter specifically, because that’s big in our circles and the value versus the stress of it.
Derrick: Yeah, for me, my personal journey with it has been the last remaining piece of social media that I really use these days. I’ve given up Facebook, technically, I have an Instagram account but I don’t really use it, and I’m not really hooked on checking those things. But Twitter is a tricky one and I think it is for a lot of people in the text space because it’s where a lot of our industry news is coming from, where a lot of the camaraderie among software developers and start up people is happening. There’s not really (to my knowledge) another platform like it.
There are niche communities in Slack and things like that, but Twitter is the public square for that. It’s been a struggle (I think) for the last few years. I’ve been saying things like, “Yeah, I’ve given up all social media,” but I can’t on Twitter because that’s where work stuff happens. I just become so aware that, for me (and I think it varies from person to person how they deal with it) it’s like Twitter is always the default. I hit a rough spot on something I’m working on and what’s my first inclination is to go check Twitter, go get a dopamine hit, and I’m over it at this point.
Rob: Do you still have it on your phone?
Derrick: I took it off my phone (which has been good) and I actually did another trick where I put all my apps in one folder, so now I just have like a blank desktop screen essentially on my phone. I keep email on there, for example, because I just want to be able to do email mobily, but I don’t want it to be something I compulsively check if I have a break during my day. That’s been a good way to deter that.
Rob: When you put them all in one folder, was it just to make them hard to find?
Derrick: Yeah. It’s like I had muscle memory built where I knew where to tap my thumb subconsciously to open email and now it adds friction to that.
Rob: Yeah, I do that. I’m compulsive with email and Slack, specifically the TinySeed Slack. I don’t do it with Twitter or Facebook and I’ve never really had that problem, but I definitely can see getting into that habit and I try to avoid it. I think the thing with Twitter is I check Twitter a couple times a week and (for me) that’s a pretty healthy balance.
I might post to it more often. A few months ago, I was posting every day and I fell off that wagon. I’d like to do that again, but checking it all the time is not healthy. That’s what you were saying last night. It doesn’t feel good because you’re going for the dopamine hit of someone replying to you, a conversation, likes, or retweets?
Derrick: Yeah. I don’t know if I’m feeling particularly just unsure about something I’m working on or just my business in general, all these existential mini crises we have all the time into building startups. That’s an easy place to turn where I’m going to share some piece of work that I’m doing and it’s going to have some marketing benefit. It’s going to increase awareness about what I’m doing and hope people will spread it around. Maybe someone new will discover my app.
I can justify that there’s some benefit to it, so then I’ll share something and it feels good to get people liking, engaging, and commenting, but it’s pretty hollow and it’s a veneer that’s providing a short-term benefit, but I don’t think it’s the healthiest way to engage with that. Then, when you don’t get the response that you were hoping for, then you feel bad. It’s like, “Why am I doing this in the first place?” This is not a solid way to go.
Rob: Yeah and the struggle is that it’s not just the social aspect. I know you got off Facebook years ago and I think it was easier to justify because there was no work component. There was no way Facebook was going to help you build or grow a company, whereas Twitter might (and I want to put it in italics and bold). We know folks who have personal brands on Twitter, social media empires. I don’t know of anyone who has built a SaaS app and the marketing was all Twitter.
I view Twitter as you can get a small audience and you can get those first few customers or you can get the first people who are going to give you good feedback. It’s part of just building that relationship with people, but realistically, once you have any type of product market fit and you’re actually trying to build a scalable marketing approach, Twitter is not it. If you’re looking at it purely as a utilitarian thing, there’s definitely times and places to do it and be on it, but with all the negatives, it does feel hard to justify to me.
Derrick: Yeah. You can definitely come into it with the strategy of like, “I know the best times a day to post where I’m going to maximize engagement,” I figured out some of those things for myself. Some of it, you can apply methodically. Other parts of it are a lot of the benefits that have come to me has been serendipitous and that’s where I have a little bit of fear that if I were to give this thing up, I don’t know what I’m giving up entirely. I don’t know what random encounters or interactions I might be missing out on and I think that’s for the fear that comes. This could be the thing that catapults my nascent start up into a different realm, if I were just there engaging in the community on Twitter. In reality, I’ve become pretty convinced that’s probably not a very good reason to accept all the negatives.
Rob: I keep doing it, yeah. You make a good point because it isn’t just finding customers, but what about that one relationship you build with the business development where someone says, “Let’s integrate. We’re a web host so let’s integrate.” You’re like a kid and you’re like. “Yeah, that could move the needle.” That’s what you’re saying, it’s like, “Do I want to miss out on those? What’s the potential?” and that’s where they get you. That’s where […], is it has all these negatives, and yet we still want to consider doing it.
Derrick: Yeah. If I think back, I’m frustrated by how many Twitter DMs have actually led to productive business meetings or chats and it’s like, “Why does that have to come to a Twitter DM?” because that’s just reinforcing that I struggle to actually get off of there, because people would have to find my email address or something.
Rob: Yeah, and it does seem like Twitter has declined pretty substantially in popularity. That’s been my sense and just the number of people on it. Obviously, the tech community, the Silicon Valley, plus MicroConf and just startups in general are on there. And the press. It does seem like there’s a lot of journalists, not just like TechCrunch but like Wall Street Journal, big-named journalists are on there and there’s certainly still some value. Remember Arab Spring, there is communication there, there is value to the world that that stuff is able to get out.
It really does seem like people have moved on to Instagram and what are the others? Snapchat, although I guess they’re on […] now. You mentioned TikTok last night and I was like, “Yeah, I’ve heard of that. No idea what it does.” I’m so old dude.
Derrick: Yeah, we’re getting old.
Rob: What are you going to do? If you listen like I was asked on stage, “Are you bullish or bearish on Twitter?” and I was like, “Bearish.” This was last year. I was on my 2016 or 2017 prediction. This is when Twitter was still going strong. There are going to be too many trolls. People are just going to move on, and the nature of social media is that it’s pretty rare for a platform to actually stick around for that long. People just move from one to the next.
I don’t love Twitter and struggle with a lot of stuff on it, although I am still on it. I think there are benefits, especially now with the MicroConf stuff, the podcast and all that. I’m not going to quit Twitter anytime soon, even though I do have some struggles with it. But I’m curious, you’re seriously thinking about getting off of it or quitting it basically. Is that right?
Derrick: Yeah. I’m getting dangerously close to that. For me, my big fear is how am I going to keep a similar type of connection to people in the industry who I’m not so close with? I’m texting or private messaging all the time. How am I going to maintain that? How am I going to still get up-to-the-minute news about stuff? I see a lot of things in the React community, for example. New things emerging or new releases of things and a lot of that I’m getting through Twitter right now.
It’s important for me to know about that because I’m building tooling in that ecosystem. I don’t always want to be the guy who’s a month behind late to the party knowing about stuff, but a lot of these you can think of it as, is that really so bad if you’re a few more days delayed in finding stuff out? Probably not. In that case, for me, I’m trying to look for what are some digests newsletters for example that are in the industry? I’m already a part of some of these.
The Changelog is one of them. They send a weekly summary of what’s happening in the open source world. There’s one for the Jamstack community, too, and I’m on that one. I get a lot of good info from that. These are probably good enough for the news part. For me it’s like, how am I going to keep connection to my “audience?”
The podcast is a good one side of a way to do that. Again, returning back to the fundamentals. My email list, my newsletter list, how can I invest there? The time I maybe would have spent on Twitter carve out some of that time to try to invest that in the email list. Those are some of the ways I’m thinking about it.
Rob: Those are good alternatives. I was going to propose that mailing list and a couple of those other things. The bottom line is, yes, you may miss out on some things, but take the time and invest in stuff. I would say, investment in stuff that is less ephemeral.
That’s what bothers me about social media. It’s just here today and gone tomorrow. It’s not a blog post. It’s not even a podcast episode people go back and listen to. It’s not a book that people will read for years.
With your email list, if you can invest in an email list and repost that on the blog, because email is a bit ephemeral even though it’s a pretty deep connection. That’s when I’ve been off because the entire time we were doing Drip, I was not on Twitter at all. It was the right choice. I didn’t quit it for life though, I came back. Obviously, I’m a little more active on it now, but I do hear what you’re saying. If you tried it for two weeks or 30 days, or something, my guess is you’re not going to want to go back.
Derrick: That’s a good segue, because I’ve been reading a book, Cal Newport’s latest book called Digital Minimalism, which is like Deep Work. A lot of people know about that one. It’s Deep Work principles applied to more of your personal life and how you interface with things like social media.
One of the things you he talks about in there and recommends doing is like a digital declutter. That’s a term he coined for. Basically, taking 30 days and eliminating the things that are causing you problems like social media, that are pulling at your brain and causing it to be distracted, and all the negative side effects that come with it.
Think of this as you’re eliminating all this stuff and then at the end of it, be really deliberate about what you add back in. Don’t think of this as just a temporary detox where you remove all and then at the end, I’ve reset and now I can go back to the way I was doing things.
I’m in the midst of one of those right now. I’m not deleting my Twitter account, but I’m not checking it. I started this off going on a trip where I had very little internet access. That forced me to step away from it and even coming back from that after five days, I already had much less desire to go check it. I do feel a certain amount of Zen just from that. That’s becoming a reinforcing thing already for me. The more time I spend off of it, the less drive I have to go and check it all the time. That’s been healthy, I think.
Rob: That’s cool. How long have you been doing that?
Derrick: Since really the turn of the New Year, so we’re about two weeks in. It’s been good.
Rob: It’s a trip when you change habits like that. How scary, you don’t know if it’s going to work, and then you get in a few days and suddenly you feel this clarity, and then trying to come back to it. I’ve done this with drinking alcohol, social media, or just anything. I enjoy it. There are pros and cons to each of those things. It’s like if I have an old fashion, I feel better. In the short-term, it’s a good thing. Much like checking Twitter. Then in the long-term, I question the value of doing that and going off of those things. Coming back, you just realize how much it impacts your day-to-day or just how it actually affects your life.
Derrick: Yeah.
Rob: And you were saying last night because I haven’t read Digital Minimalism, but you piggy-backed on it and it got you thinking about remote work.
Derrick: Yeah. A thing that he spends a fair amount of time talking about in the book is what does it mean to have relationships and have real connection with other human beings. This is heavily tied in with the era of social media there of text messaging. The fact that we rarely call each other anymore. We are always texting. There’s all these norms that were established in society and a lot of them were around lower fidelity means of communication.
He makes a good point. This is based on some research he pulls into his thesis. We’re wired after millennia of communicating with each other, talking to each other, being able to read non-verbals and verbals, the whole picture, and now we’re reducing our communication down to very binary things. If you think about what’s a reaction in Slack or a like on Twitter? It’s literally a binary piece of information. You compare that to all the richness that comes with someone reacting to something in person. You get to see their face, you get to see them smile, or see them look inquisitive. There’s just so much more you can get from it.
In the one sense, you can think of it as more efficient using these productivity tools like Slack, but on the other hand, how much communication are you missing out on and what does that do to our mental state? You make some pretty interesting points that there’s high rates of depression and mental health among college students in the generation that grew up with smartphones. That’s starting to become really evident. There’s been some research at universities about this and just a really sharp increase in a lot of these issues that weren’t a problem before.
You take all that, bundle that all up, and I start thinking about how are we architecting companies? How are we building teams? I feel like a struggle that you build a 100% remote company. How often do you really have that high fidelity communication with each other? That’s what got me thinking about that.
Rob: It’s tough. My personality is I want to go against the majority opinion. It’s like, “Hey, everyone’s raising venture capital.” “Cool. I’m going to go start one without venture capital,” and that’s going to be a bad thing that I talk about. Or, “Hey, all these Fortune 1000 companies or even venture capitalists want you to be located in one place.” “Cool. I’m going to go start a remote company.” That was what you do and it’s a natural thing that I want to do.
In addition, we have the Remote book by DHH and Jason Fried. It’s definitely a thing and we know tons of startups, especially more in the non-venture track space that we write in, that are remote. And there are advantages to it. You can hire people in cheaper locations. You can hire the best people around the world. Everyone doesn’t have to be local, all that stuff.
I see the value of that for sure, but I’ve always said that the situation we had with Drip where half of us were in one city, and I would have loved for all of us to be in one city. We just couldn’t find the talent in Fresno. Half of us were in one city and we were in the office 2-3 days a week. That was my dream setup and I wish every job that I worked and every company I run, because now with TinySeed, there’s three of us and then with MicroConf, there’s two of us, and we’re all remote.
While I don’t think we should all need to live in the same city—it wouldn’t be practical, because (again) we wanted to hire the best people, and Einar and I are co-founders, he’s in California and I’m in Minneapolis—I would love to see them once or twice a week in person, which is what we did back when we’re doing Drip. And that’s so healthy.
Derrick: Yeah it felt pretty ideal. The nice thing was we can write the rules for how this works. There was inherent flexibility, we weren’t always on the same days every week. If something in life happens and you need to be out of the office an extra day a week, no big deal. But to have that as the default, it felt really good, like hopping in front of a white board with […] getting to work through some tough problems. I was never able to reproduce the same benefits over digital means and maybe someone still needs to solve that. Maybe we’ll get there.
Rob: Yeah, that’s the question that’s like will VR solve that at some point? Can you imagine if VR was super, super high fidelity, you and I can look around, literally feel like we are in front of a whiteboard together, and to get social cues, to where it’s uncanny “Valley” type stuff, like you see these amazing video games or even a Pixar movie. Humans look human enough that you can pick up all the stuff. If you and I can be in a room and literally look like that, maybe that would do it.
It’s a bummer. Some of the things I enjoy the most are lunches and hanging out, but I don’t know if you need that. Maybe that’s the point where it’s solved because video chat isn’t enough. Zoom is not enough because you are not going to sit on a Zoom call for 2–4 hours and shoot the breeze and get those moments that you need.
Derrick: That’s the thing. A lot of the way we are thinking about building companies and the tools that we are building for them, it’s introverted Silicon Valley-type engineers who are helping architects how we socially interact with each other. There’s an inherent bias in that. The fact that we are all about using tools for productivity, an important part of building a healthy team is actually having a relationship that has nothing to do with direct productivity. That’s more of a long-ball type of thing. If we are going to build cohesion, we’re going to be able to go to lunch together.
A friend of mine shared this anecdote, coming back after a long break and catching up on work over the holidays. His wife was relaying this to him and she said, “How was work today?” He’s like, “It wasn’t a great day, but I got to see my friends.” It was powerful. That’s something that you don’t necessarily have if you just stay, show up, and be productive. If your day is not productive, then you feel like you had a good day. If you get to see your friends, you get to see the people you built relationships with, then perhaps you’ll feel a lot more well-balanced.
Rob: Yeah. In Slack, you get the emojis and you get some fun stuff shared on a random channel. That’s fun, but it’s definitely different and it’s hard. Think about with TinySeed, we are a remote accelerator, so this is an issue. We get together three or four times a year and those times are really cool when we’re together. There’s a lot of bonding that happens being in person. That’s something that we are going to be facing and trying to overcome for sure.
In a perfect world, again, I just like seeing people more often. I’m pretty introverted, too. To your point about Silicon Valley people building tools, introverted Silicon Valley people thinking that remote work is, I won’t say infallible but it is the ideal. I don’t think it is for most of the world. I don’t think it is especially for extroverts for people who want to be around other folks. The loneliness and isolation is absolutely being shown. They are doing research on it, there’s going to be a real swing here depending on personality type. There’s a lot here that is not as clear cut as just saying, “Here are the pros of remote work and therefore we should all do it,” because it’s nowhere near that clear-cut.
Derrick: I feel like I’m starting to look at a lot of these things that I previously saw as absolutes and I’m starting to see a lot more gray in them. There are benefits, but there’s also drawbacks and you have to weigh them against each other. One cool anecdote that was from Cal Newport’s book, he talks about the Amish and he talks about how a lot of people just assume that it’s this community of people that decided arbitrarily like, “This is the peak of technology and we shall not accept anymore technology.”
That’s what I thought for many years. It just feels very arbitrary, why are horse-drawn carriages better than cars? I don’t know. It’s just a form of technology. But he talks about if you actually learn about their culture, they always evaluate technology. They are very open to it, but they also evaluate the pros and cons against their value system.
Look at cars back in the early 1900s. They try to mount for a while and then they determine that people who are driving cars tended to leave the community, go to neighboring cities, and engage with people outside the community that led to a breakdown in relationships. They just decided like, “This is not coherent with our values, so we are not going to do it.” I think there’s something really powerful to being open to looking at pros and cons and weighing them against value systems and what you are trying to do.
Rob: Yeah and that’s the thing. There are so many fewer absolutes than we would like. They talk about how it’s a sign of intelligence being able to hold two conflicting ideas in your head at once. That’s what both of the things we just talked about are, Twitter and social media conflicting there has a lot of pros and cons.
The same thing with remote work where you can get a little too gung ho in either direction. I think it’s situational and having the willingness to really think it through on a case-by-case basis, to see the realities of it, and know no matter which choice I make, neither is ideal. That’s the hard part is that neither one is ideal. They are going to come with pretty major cons and figuring out how to work around them as best as you can.
As our last topic before we wrap up today, did you read that article, Josh Pigford almost sold Biometrics for $5 million. That was the title, I almost sold Biometrics for $5 million. He published it about six weeks ago.
Derrick: Yeah, I did check it out. It’s a pretty interesting read just because you don’t generally see this level of transparency about something like almost selling your company. It was pretty fascinating to see someone outline their thought process and what was going on through that.
Rob: I know. Super gutsy to do it. I think that’s why because there can be backlash. If you sell it, obviously it goes public that you sold it, but if you don’t sell it and you talk about doing it, there’s danger there. You could have customers leave. You can have employees be upset. Kudos to him for sharing that and sharing his thought process because it sounded tough. A really tough process.
To start with, he kicked it off and he said there’s always a price. Some people get too hung up. A lot of people are, “I’m never selling my business. Why would I sell my business?” I just don’t know. I don’t think that’s the right choice for most people. If you could become independent wealthy, why would you not do this? I don’t hold it against people certainly if you are going to keep your company but don’t just say something out of principle or out of some belief that this is the right thing to do to never sell your company. Think this through.
Now it’s easy. Let’s say I was running a company. It’s doing $50 million a year and I’m pulling $5 million or $10 million a year right off the top, which is totally easy to do with SaaS because it’s so profitable. If you really enjoy what you are doing, then yeah selling your company for $250 million. How much is it actually going to change your lifestyle?
You can afford a jet or whatever, but if you don’t want that and you are doing what you’re doing, why would you do that? But most of us are not in that situation. If you’re running an app doing a million or $5 million a year, somewhere in there, you are not pulling that much money off typically. Typically at that stage, you are in danger of riding it over the top, the growth can die, we can have a recession, you can get killed by a competitor. There’s all these things that could happen and selling a company for a 3X, 4X, or 5X revenue multiple, which Josh was offered 3.75 revenue.
You are doing $2 million a year and you are going to sell your company for $7.5 million, that is absolutely life changing. If you are making $150,000 or $200,000 a year and suddenly you can sell it for that, life-changing in the real sense of the word. It will change your life. You will have options that you never knew you had at that point.
Derrick: A lot of this talk of like why I would want to sell the thing. I’m working on my best idea. I can’t help but think of the Basecamp guys and that was their narrative for a long time. I feel like nowadays there’s a lot more nuance coming from them, which is really refreshing. Jason Fried was at MicroConf, was it last year or the year before?
Rob: Yeah, last year in 2019.
Derrick: Yeah, talking from the stage and he has been one, much more quick to plan the fact that they early on took some money off the table enough, to where him and JJ were millionaires after a couple of years and felt like, “Okay, we’ve made a healthy amount of return of this business. Now we can write it for longer.” A lot of founders go in blind and say, “Why would I want everyone to sell my company,” and yet, what usually ends up happening is that you are not as financially rewarded upfront as you would be if you were taking your raw skill set and having a salary job.
You’re foregoing a lot of money you could be making. A lot of opportunity cost and you are messing that into your equity that you have in your company. If you do end up five years down the line, things are competitive, whatever market conditions, and now suddenly you can’t achieve profitability, you are unable to sell it when you really want to, and you find yourself not able to extract a return from all of the investment that you’ve put into it.
For Basecamp to say, “Why would we want to sell?” because you were able to take some money off the table early on. Then, he also compared now Basecamp to like, “As if I’ve won the lottery and I’m taking the payout over time as opposed to a lump sum.” That totally makes sense.
Rob: Yup. The odds of them going to a business or something is infinitesimal and they get to work. They love their jobs, they have built a great team, and they get to build whatever they want. They’re building Basecamp version three, already built that. Jason Fried was talking a couple of weeks ago on Twitter, like they’re launching two more things this year. They really are a kid in a candy store.
If I were them, I wouldn’t sell, either, but I wouldn’t tell other people. I know they don’t tell other people not to, that’s not something. But I do think that people hear that and then take it upon themselves to think, “Well, I respect Jason Fried and […], I want to be like them, so I’m not going to sell my company either.” I don’t think that’s smart. I think you should evaluate.
Again, if I were Jason Fried, I would not sell Basecamp either because that sounds amazingly fun, but if you’re not in that situation, where you’re tens of millions a year in net profit is what he said, up from the market […], if you’re not in that situation and maybe you don’t enjoy your job, maybe you’re in a really competitive space, and you think that you could flat line.” Once your growth flat lines, your sales multiple plummets. There’s a really good time to sell and if you ride it over the top, suddenly you’re selling for 1X revenue or less. If you’re doubling every year, you’re selling for 4X or 5X revenue, again, it can be a life-changing amount of money or not.
I’m not encouraging people to sell. I think you should do what you want to do, but just really think things through. Back to that whole article we were talking about where Josh basically says, “Hey, there’s always a price. I wasn’t really that open to it,” but he got an offer for $4.95 million and it was like, “Wow, that would change my life.” Then he talks about just how it was a dead end and the buyers had claimed they had the money, but in actual hell, they got him under LOI (letter of intent), they went out and tried to raise money from investors, it was pretty dang shady. It was not cool. That must have been very, very hard.
Derrick: I can only imagine if that had been the case with our Drip story, because I just know how much stress we were under, you especially because you are really bearing the brunt of it, how long the process was, the due diligence stuff, just even getting to LOI. I’m glad that it moves a bit faster, like things didn’t drag out a year, and then Josh discovered this.
I guess on that sense it’s good that it didn’t go on too long, but even for as long as it did, I can only imagine how much you build up all this anticipation. You start to think, “Well, this is looking like it’s going to happen, they seemed very serious about it. Everything I’m hearing from them seems good.” It’s really hard to shift your mind into the gear of like, “I’m about to have a life-changing exit,” and then for that to be torn away is really a mental struggle.
Rob: Yeah. He said, “We’d spent nearly $20,000 on legal fees, months of time gathering all the docs, and they just disappeared. It was crushing. I was and still am furious with them. They wasted an epic amount of our time and money and then crawled into a new hole when they realized they couldn’t do the deal.” Crushing is an understatement, I would have probably crawled into a hole for weeks because your momentum is gone.
It’s one of those really hard decisions to make, but once you make it, you get a sense of peace about it and then that’s all you want. I remember almost hanging on to it too much because you don’t know if the deal is going to go through until it’s all signed. A month before we were selling Drip, it was like, “I’m so ready to sell this company. But I can’t say that out loud, because then if it doesn’t happen, I’ll be crushed.” I definitely feel his pain.
Derrick: Yeah, it’s tough. I don’t know how you could combat that. You have to enter the process, you have to trust what people are telling you initially. You had counsel, you had advisors and stuff, so I wonder how can you avoid that from happening or can you?
Rob: Yeah. I have no idea. I certainly did not and do not believe that I personally could. You would have to be someone of real fortitude to do it. I do like he links over to another article, where he says, “Five things I learned failing to sell my company,” and one of the things he says is avoid needing to sell. This is something a lot of people forget. If you need to sell, if you’re a desperate seller, you will have terms that are not as good.
Always having the abilities to, “Hey, we are growing, we are profitable. I don’t need to sell.” Those three sentiments will get you the best price, that plus getting a lot of different offers. That puts you in the driver’s seat. It’s the same thing with raising funding. Unfortunately, so many people go out to raise funding when they really, really need funding to do anything and nobody wants to fund those companies. They want to fund the companies that don’t need the funding as paradoxical as that sounds.
Derrick: Even on a small scale. When I sold Codetree, this is happening about around the same time that the Drip sale is going through. I was so focused on the Drip stuff that was going on and this was a side app that wasn’t really growing much, but was still just a nice side income for me. I decided it was time to not have to worry about that anymore, but even just having that, going into that with the mindset of like, “I want to sell this thing because it seems like the right time to do that, but I don’t have to,” it could just keep running on the side for a while and no big deal.
Even just going into the negotiation with that attitude. The seller then later on wrote a blog post about how they felt, like they were at a disadvantaged position because they could come in and say, “No, we really want $20,000 off.” My broker was like, “No, we don’t need to do that.” I’m like, “Cool, then tell them no.” Of course, I’m not going to do that, and then ultimately, I think, trying to keep that mindset of like, “If this doesn’t go through, no big deal. I don’t have to do this.” It helps.
Rob: Yeah, having your backs to the walls. Never good, whether you’re selling a car, selling a house. If you’re in a big hurry, you just get the worst deal. Kudos to Josh for that and for sharing. These are helpful things because (again) so many people don’t talk about it when deals fall through like this because it could have negative repercussions, but that’s something that I do love about our community, is that people are often willing to share experiences to help others avoid the mistakes they’ve made.
As we say in the intro, whether it’s to avoid the mistakes or just to understand, if I get into that situation, what will I do? What is this really like? That’s the other thing. If you have not heard of these stories, if you haven’t heard Josh, you haven’t heard you and I talk about selling Drip or any (I’ll say) real startup acquisition, then all you’ve heard is that on TechCrunch, that Instagram sold for $1 billion to Facebook over a weekend, when they had seven people and not much revenue. It’s like, “Well, that’s how startup acquisitions work.” It’s like, “No, they never do. Never.” This is like one in ten years does that.
The real startup acquisitions take a long time, they’re a grind, they’re typically for a revenue multiple or a net profit multiple if you’re running a different type of business or at a smaller revenue scale. There’s just a bunch of pretty common things that are realistic. If you don’t know that and you’ve only read the popular articles about the outliers, your sale is probably not going to be an outlier. So level-setting expectations with this post that Josh wrote is (I think) good.
Derrick: A helpful piece for the community archive for sure.
Rob: Yup, indeed. Thanks, man. Thanks for coming on the show.
Derrick: Yeah. It was a blast, thanks for having me.
Rob: If folks want to keep up with you, you release an episode every week, podcast episode at the Art of Product, you and your co-host Ben Orenstein. That’s a good bootstrap for podcasts over there. Then you are at @derrickreimer on Twitter. We’ll just send people there, but that is what it is.
Derrick: Yeah. Twitter and derrickreimer.com newsletter. Sign-up there.
Rob: That’s probably the one. That’s almost what we should recommend more, derrickreimer.com. I know you’ve blogged a bit over the years. I think all of us probably wish you blogged more.
Derrick: Yeah, it’s always the thing. It’s interesting to think about trying to do more, like higher frequency, less trying to spend 10 hours writing a piece, and think of it a little bit more like Twitter. That could be an interesting thing, too.
Rob: Sounds good, man.
Derrick: Cool. Thanks.
Rob: Thanks again to Derrick for coming on the show. He is working on his new startup. It’s called StaticKit, statickit.com. If you’re working on static sites stuff or interested in that whole ecosystem, he’s building some pretty interesting tools for static site builders.
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What I like about this episode format is it’s pretty casual and we’re covering topics that I think are relevant to many of us and a lot of us are thinking about. I originally thought of structuring this in some type of news, round-table, or show where we’re talking about topics of today. We do that with a couple things, I think the ability to introduce topics that aren’t necessarily news articles or news headlines also works, and the fact that Derrick and I know each other as well as we do really helps with just the rapport in the conversation, it’s not stiff or stilted. I hope you feel the same way about that.
If you don’t recall who Derrick Reimer is, he and I have known each other for years. We met back when I lived in Fresno. He was a young kid who was participating in a startup competition that I was the judge of. He won a couple years in a row. Then, he was thinking about starting to do some consulting work and I said, “Look, why don’t you come, write some code for HitTail?”
He wrote all the early code for Drip and later on, became retroactive co-founder of Drip. So, he and I have known each other. We’ve worked together. He’s been on the show several times talking about starting an app on the side called Codetree that he sold for $128,000 a few years back. Then, he moved to Minneapolis when we sold Drip. So, he and I now live six or seven minutes apart.
We see each other once a month or so and it’s always a good time to hang out and chat. So, I wanted to mix up the format just a little bit and do something that’s not an interview, not keeping up with Mike Taber, not just question and answer, but actually just bringing topics to the table that (I think) might be of interest to you. So let me know what you think.
You can tweet me @robwalling, you can email questions@startupsfortherestofus.com, or you can post a comment on this episode, episode 482 and just say, “Yeah, I enjoyed the mix-up of the show format and the fresh ideas in a conversation.” Or you can say, “Got five minutes in, didn’t hold my attention, and I was out.”
That helps me think about and consider maybe we had one of these to the line up every couple months. It doesn’t always have to be Derrick. I could bring on different co-hosts and folks to weigh in, so we have different perspectives.
And with that, let’s dive into the show. Derrick Reimer, thank you for joining me on the show.
Derrick: Hey, thanks for having me again.
Rob: Yeah, I think this is going to be a fun one today, just talking through some interesting topics. I had a few in mind over the past couple weeks, some things have come up where I’m like, “You know, I really want to discuss these with someone,” and I don’t know who to bring on the show to do it. Then, you and I were having dinner last night and we got on some really good conversation topics, so I figured we could jump on the mic and record a few of these.
Derrick: Yeah, we both are a couple of old-fashioned, but we probably should have brought our mics, to be honest.
Rob: I know, I agree. One thing you kicked off with was just talking about something on a lot of our minds, social media in general but Twitter specifically, because that’s big in our circles and the value versus the stress of it.
Derrick: Yeah, for me, my personal journey with it has been the last remaining piece of social media that I really use these days. I’ve given up Facebook, technically, I have an Instagram account but I don’t really use it, and I’m not really hooked on checking those things. But Twitter is a tricky one and I think it is for a lot of people in the text space because it’s where a lot of our industry news is coming from, where a lot of the camaraderie among software developers and start up people is happening. There’s not really (to my knowledge) another platform like it.
There are niche communities in Slack and things like that, but Twitter is the public square for that. It’s been a struggle (I think) for the last few years. I’ve been saying things like, “Yeah, I’ve given up all social media,” but I can’t on Twitter because that’s where work stuff happens. I just become so aware that, for me (and I think it varies from person to person how they deal with it) it’s like Twitter is always the default. I hit a rough spot on something I’m working on and what’s my first inclination is to go check Twitter, go get a dopamine hit, and I’m over it at this point.
Rob: Do you still have it on your phone?
Derrick: I took it off my phone (which has been good) and I actually did another trick where I put all my apps in one folder, so now I just have like a blank desktop screen essentially on my phone. I keep email on there, for example, because I just want to be able to do email mobily, but I don’t want it to be something I compulsively check if I have a break during my day. That’s been a good way to deter that.
Rob: When you put them all in one folder, was it just to make them hard to find?
Derrick: Yeah. It’s like I had muscle memory built where I knew where to tap my thumb subconsciously to open email and now it adds friction to that.
Rob: Yeah, I do that. I’m compulsive with email and Slack, specifically the TinySeed Slack. I don’t do it with Twitter or Facebook and I’ve never really had that problem, but I definitely can see getting into that habit and I try to avoid it. I think the thing with Twitter is I check Twitter a couple times a week and (for me) that’s a pretty healthy balance.
I might post to it more often. A few months ago, I was posting every day and I fell off that wagon. I’d like to do that again, but checking it all the time is not healthy. That’s what you were saying last night. It doesn’t feel good because you’re going for the dopamine hit of someone replying to you, a conversation, likes, or retweets?
Derrick: Yeah. I don’t know if I’m feeling particularly just unsure about something I’m working on or just my business in general, all these existential mini crises we have all the time into building startups. That’s an easy place to turn where I’m going to share some piece of work that I’m doing and it’s going to have some marketing benefit. It’s going to increase awareness about what I’m doing and hope people will spread it around. Maybe someone new will discover my app.
I can justify that there’s some benefit to it, so then I’ll share something and it feels good to get people liking, engaging, and commenting, but it’s pretty hollow and it’s a veneer that’s providing a short-term benefit, but I don’t think it’s the healthiest way to engage with that. Then, when you don’t get the response that you were hoping for, then you feel bad. It’s like, “Why am I doing this in the first place?” This is not a solid way to go.
Rob: Yeah and the struggle is that it’s not just the social aspect. I know you got off Facebook years ago and I think it was easier to justify because there was no work component. There was no way Facebook was going to help you build or grow a company, whereas Twitter might (and I want to put it in italics and bold). We know folks who have personal brands on Twitter, social media empires. I don’t know of anyone who has built a SaaS app and the marketing was all Twitter.
I view Twitter as you can get a small audience and you can get those first few customers or you can get the first people who are going to give you good feedback. It’s part of just building that relationship with people, but realistically, once you have any type of product market fit and you’re actually trying to build a scalable marketing approach, Twitter is not it. If you’re looking at it purely as a utilitarian thing, there’s definitely times and places to do it and be on it, but with all the negatives, it does feel hard to justify to me.
Derrick: Yeah. You can definitely come into it with the strategy of like, “I know the best times a day to post where I’m going to maximize engagement,” I figured out some of those things for myself. Some of it, you can apply methodically. Other parts of it are a lot of the benefits that have come to me has been serendipitous and that’s where I have a little bit of fear that if I were to give this thing up, I don’t know what I’m giving up entirely. I don’t know what random encounters or interactions I might be missing out on and I think that’s for the fear that comes. This could be the thing that catapults my nascent start up into a different realm, if I were just there engaging in the community on Twitter. In reality, I’ve become pretty convinced that’s probably not a very good reason to accept all the negatives.
Rob: I keep doing it, yeah. You make a good point because it isn’t just finding customers, but what about that one relationship you build with the business development where someone says, “Let’s integrate. We’re a web host so let’s integrate.” You’re like a kid and you’re like. “Yeah, that could move the needle.” That’s what you’re saying, it’s like, “Do I want to miss out on those? What’s the potential?” and that’s where they get you. That’s where […], is it has all these negatives, and yet we still want to consider doing it.
Derrick: Yeah. If I think back, I’m frustrated by how many Twitter DMs have actually led to productive business meetings or chats and it’s like, “Why does that have to come to a Twitter DM?” because that’s just reinforcing that I struggle to actually get off of there, because people would have to find my email address or something.
Rob: Yeah, and it does seem like Twitter has declined pretty substantially in popularity. That’s been my sense and just the number of people on it. Obviously, the tech community, the Silicon Valley, plus MicroConf and just startups in general are on there. And the press. It does seem like there’s a lot of journalists, not just like TechCrunch but like Wall Street Journal, big-named journalists are on there and there’s certainly still some value. Remember Arab Spring, there is communication there, there is value to the world that that stuff is able to get out.
It really does seem like people have moved on to Instagram and what are the others? Snapchat, although I guess they’re on […] now. You mentioned TikTok last night and I was like, “Yeah, I’ve heard of that. No idea what it does.” I’m so old dude.
Derrick: Yeah, we’re getting old.
Rob: What are you going to do? If you listen like I was asked on stage, “Are you bullish or bearish on Twitter?” and I was like, “Bearish.” This was last year. I was on my 2016 or 2017 prediction. This is when Twitter was still going strong. There are going to be too many trolls. People are just going to move on, and the nature of social media is that it’s pretty rare for a platform to actually stick around for that long. People just move from one to the next.
I don’t love Twitter and struggle with a lot of stuff on it, although I am still on it. I think there are benefits, especially now with the MicroConf stuff, the podcast and all that. I’m not going to quit Twitter anytime soon, even though I do have some struggles with it. But I’m curious, you’re seriously thinking about getting off of it or quitting it basically. Is that right?
Derrick: Yeah. I’m getting dangerously close to that. For me, my big fear is how am I going to keep a similar type of connection to people in the industry who I’m not so close with? I’m texting or private messaging all the time. How am I going to maintain that? How am I going to still get up-to-the-minute news about stuff? I see a lot of things in the React community, for example. New things emerging or new releases of things and a lot of that I’m getting through Twitter right now.
It’s important for me to know about that because I’m building tooling in that ecosystem. I don’t always want to be the guy who’s a month behind late to the party knowing about stuff, but a lot of these you can think of it as, is that really so bad if you’re a few more days delayed in finding stuff out? Probably not. In that case, for me, I’m trying to look for what are some digests newsletters for example that are in the industry? I’m already a part of some of these.
The Changelog is one of them. They send a weekly summary of what’s happening in the open source world. There’s one for the Jamstack community, too, and I’m on that one. I get a lot of good info from that. These are probably good enough for the news part. For me it’s like, how am I going to keep connection to my “audience?”
The podcast is a good one side of a way to do that. Again, returning back to the fundamentals. My email list, my newsletter list, how can I invest there? The time I maybe would have spent on Twitter carve out some of that time to try to invest that in the email list. Those are some of the ways I’m thinking about it.
Rob: Those are good alternatives. I was going to propose that mailing list and a couple of those other things. The bottom line is, yes, you may miss out on some things, but take the time and invest in stuff. I would say, investment in stuff that is less ephemeral.
That’s what bothers me about social media. It’s just here today and gone tomorrow. It’s not a blog post. It’s not even a podcast episode people go back and listen to. It’s not a book that people will read for years.
With your email list, if you can invest in an email list and repost that on the blog, because email is a bit ephemeral even though it’s a pretty deep connection. That’s when I’ve been off because the entire time we were doing Drip, I was not on Twitter at all. It was the right choice. I didn’t quit it for life though, I came back. Obviously, I’m a little more active on it now, but I do hear what you’re saying. If you tried it for two weeks or 30 days, or something, my guess is you’re not going to want to go back.
Derrick: That’s a good segue, because I’ve been reading a book, Cal Newport’s latest book called Digital Minimalism, which is like Deep Work. A lot of people know about that one. It’s Deep Work principles applied to more of your personal life and how you interface with things like social media.
One of the things you he talks about in there and recommends doing is like a digital declutter. That’s a term he coined for. Basically, taking 30 days and eliminating the things that are causing you problems like social media, that are pulling at your brain and causing it to be distracted, and all the negative side effects that come with it.
Think of this as you’re eliminating all this stuff and then at the end of it, be really deliberate about what you add back in. Don’t think of this as just a temporary detox where you remove all and then at the end, I’ve reset and now I can go back to the way I was doing things.
I’m in the midst of one of those right now. I’m not deleting my Twitter account, but I’m not checking it. I started this off going on a trip where I had very little internet access. That forced me to step away from it and even coming back from that after five days, I already had much less desire to go check it. I do feel a certain amount of Zen just from that. That’s becoming a reinforcing thing already for me. The more time I spend off of it, the less drive I have to go and check it all the time. That’s been healthy, I think.
Rob: That’s cool. How long have you been doing that?
Derrick: Since really the turn of the New Year, so we’re about two weeks in. It’s been good.
Rob: It’s a trip when you change habits like that. How scary, you don’t know if it’s going to work, and then you get in a few days and suddenly you feel this clarity, and then trying to come back to it. I’ve done this with drinking alcohol, social media, or just anything. I enjoy it. There are pros and cons to each of those things. It’s like if I have an old fashion, I feel better. In the short-term, it’s a good thing. Much like checking Twitter. Then in the long-term, I question the value of doing that and going off of those things. Coming back, you just realize how much it impacts your day-to-day or just how it actually affects your life.
Derrick: Yeah.
Rob: And you were saying last night because I haven’t read Digital Minimalism, but you piggy-backed on it and it got you thinking about remote work.
Derrick: Yeah. A thing that he spends a fair amount of time talking about in the book is what does it mean to have relationships and have real connection with other human beings. This is heavily tied in with the era of social media there of text messaging. The fact that we rarely call each other anymore. We are always texting. There’s all these norms that were established in society and a lot of them were around lower fidelity means of communication.
He makes a good point. This is based on some research he pulls into his thesis. We’re wired after millennia of communicating with each other, talking to each other, being able to read non-verbals and verbals, the whole picture, and now we’re reducing our communication down to very binary things. If you think about what’s a reaction in Slack or a like on Twitter? It’s literally a binary piece of information. You compare that to all the richness that comes with someone reacting to something in person. You get to see their face, you get to see them smile, or see them look inquisitive. There’s just so much more you can get from it.
In the one sense, you can think of it as more efficient using these productivity tools like Slack, but on the other hand, how much communication are you missing out on and what does that do to our mental state? You make some pretty interesting points that there’s high rates of depression and mental health among college students in the generation that grew up with smartphones. That’s starting to become really evident. There’s been some research at universities about this and just a really sharp increase in a lot of these issues that weren’t a problem before.
You take all that, bundle that all up, and I start thinking about how are we architecting companies? How are we building teams? I feel like a struggle that you build a 100% remote company. How often do you really have that high fidelity communication with each other? That’s what got me thinking about that.
Rob: It’s tough. My personality is I want to go against the majority opinion. It’s like, “Hey, everyone’s raising venture capital.” “Cool. I’m going to go start one without venture capital,” and that’s going to be a bad thing that I talk about. Or, “Hey, all these Fortune 1000 companies or even venture capitalists want you to be located in one place.” “Cool. I’m going to go start a remote company.” That was what you do and it’s a natural thing that I want to do.
In addition, we have the Remote book by DHH and Jason Fried. It’s definitely a thing and we know tons of startups, especially more in the non-venture track space that we write in, that are remote. And there are advantages to it. You can hire people in cheaper locations. You can hire the best people around the world. Everyone doesn’t have to be local, all that stuff.
I see the value of that for sure, but I’ve always said that the situation we had with Drip where half of us were in one city, and I would have loved for all of us to be in one city. We just couldn’t find the talent in Fresno. Half of us were in one city and we were in the office 2-3 days a week. That was my dream setup and I wish every job that I worked and every company I run, because now with TinySeed, there’s three of us and then with MicroConf, there’s two of us, and we’re all remote.
While I don’t think we should all need to live in the same city—it wouldn’t be practical, because (again) we wanted to hire the best people, and Einar and I are co-founders, he’s in California and I’m in Minneapolis—I would love to see them once or twice a week in person, which is what we did back when we’re doing Drip. And that’s so healthy.
Derrick: Yeah it felt pretty ideal. The nice thing was we can write the rules for how this works. There was inherent flexibility, we weren’t always on the same days every week. If something in life happens and you need to be out of the office an extra day a week, no big deal. But to have that as the default, it felt really good, like hopping in front of a white board with […] getting to work through some tough problems. I was never able to reproduce the same benefits over digital means and maybe someone still needs to solve that. Maybe we’ll get there.
Rob: Yeah, that’s the question that’s like will VR solve that at some point? Can you imagine if VR was super, super high fidelity, you and I can look around, literally feel like we are in front of a whiteboard together, and to get social cues, to where it’s uncanny “Valley” type stuff, like you see these amazing video games or even a Pixar movie. Humans look human enough that you can pick up all the stuff. If you and I can be in a room and literally look like that, maybe that would do it.
It’s a bummer. Some of the things I enjoy the most are lunches and hanging out, but I don’t know if you need that. Maybe that’s the point where it’s solved because video chat isn’t enough. Zoom is not enough because you are not going to sit on a Zoom call for 2–4 hours and shoot the breeze and get those moments that you need.
Derrick: That’s the thing. A lot of the way we are thinking about building companies and the tools that we are building for them, it’s introverted Silicon Valley-type engineers who are helping architects how we socially interact with each other. There’s an inherent bias in that. The fact that we are all about using tools for productivity, an important part of building a healthy team is actually having a relationship that has nothing to do with direct productivity. That’s more of a long-ball type of thing. If we are going to build cohesion, we’re going to be able to go to lunch together.
A friend of mine shared this anecdote, coming back after a long break and catching up on work over the holidays. His wife was relaying this to him and she said, “How was work today?” He’s like, “It wasn’t a great day, but I got to see my friends.” It was powerful. That’s something that you don’t necessarily have if you just stay, show up, and be productive. If your day is not productive, then you feel like you had a good day. If you get to see your friends, you get to see the people you built relationships with, then perhaps you’ll feel a lot more well-balanced.
Rob: Yeah. In Slack, you get the emojis and you get some fun stuff shared on a random channel. That’s fun, but it’s definitely different and it’s hard. Think about with TinySeed, we are a remote accelerator, so this is an issue. We get together three or four times a year and those times are really cool when we’re together. There’s a lot of bonding that happens being in person. That’s something that we are going to be facing and trying to overcome for sure.
In a perfect world, again, I just like seeing people more often. I’m pretty introverted, too. To your point about Silicon Valley people building tools, introverted Silicon Valley people thinking that remote work is, I won’t say infallible but it is the ideal. I don’t think it is for most of the world. I don’t think it is especially for extroverts for people who want to be around other folks. The loneliness and isolation is absolutely being shown. They are doing research on it, there’s going to be a real swing here depending on personality type. There’s a lot here that is not as clear cut as just saying, “Here are the pros of remote work and therefore we should all do it,” because it’s nowhere near that clear-cut.
Derrick: I feel like I’m starting to look at a lot of these things that I previously saw as absolutes and I’m starting to see a lot more gray in them. There are benefits, but there’s also drawbacks and you have to weigh them against each other. One cool anecdote that was from Cal Newport’s book, he talks about the Amish and he talks about how a lot of people just assume that it’s this community of people that decided arbitrarily like, “This is the peak of technology and we shall not accept anymore technology.”
That’s what I thought for many years. It just feels very arbitrary, why are horse-drawn carriages better than cars? I don’t know. It’s just a form of technology. But he talks about if you actually learn about their culture, they always evaluate technology. They are very open to it, but they also evaluate the pros and cons against their value system.
Look at cars back in the early 1900s. They try to mount for a while and then they determine that people who are driving cars tended to leave the community, go to neighboring cities, and engage with people outside the community that led to a breakdown in relationships. They just decided like, “This is not coherent with our values, so we are not going to do it.” I think there’s something really powerful to being open to looking at pros and cons and weighing them against value systems and what you are trying to do.
Rob: Yeah and that’s the thing. There are so many fewer absolutes than we would like. They talk about how it’s a sign of intelligence being able to hold two conflicting ideas in your head at once. That’s what both of the things we just talked about are, Twitter and social media conflicting there has a lot of pros and cons.
The same thing with remote work where you can get a little too gung ho in either direction. I think it’s situational and having the willingness to really think it through on a case-by-case basis, to see the realities of it, and know no matter which choice I make, neither is ideal. That’s the hard part is that neither one is ideal. They are going to come with pretty major cons and figuring out how to work around them as best as you can.
As our last topic before we wrap up today, did you read that article, Josh Pigford almost sold Biometrics for $5 million. That was the title, I almost sold Biometrics for $5 million. He published it about six weeks ago.
Derrick: Yeah, I did check it out. It’s a pretty interesting read just because you don’t generally see this level of transparency about something like almost selling your company. It was pretty fascinating to see someone outline their thought process and what was going on through that.
Rob: I know. Super gutsy to do it. I think that’s why because there can be backlash. If you sell it, obviously it goes public that you sold it, but if you don’t sell it and you talk about doing it, there’s danger there. You could have customers leave. You can have employees be upset. Kudos to him for sharing that and sharing his thought process because it sounded tough. A really tough process.
To start with, he kicked it off and he said there’s always a price. Some people get too hung up. A lot of people are, “I’m never selling my business. Why would I sell my business?” I just don’t know. I don’t think that’s the right choice for most people. If you could become independent wealthy, why would you not do this? I don’t hold it against people certainly if you are going to keep your company but don’t just say something out of principle or out of some belief that this is the right thing to do to never sell your company. Think this through.
Now it’s easy. Let’s say I was running a company. It’s doing $50 million a year and I’m pulling $5 million or $10 million a year right off the top, which is totally easy to do with SaaS because it’s so profitable. If you really enjoy what you are doing, then yeah selling your company for $250 million. How much is it actually going to change your lifestyle?
You can afford a jet or whatever, but if you don’t want that and you are doing what you’re doing, why would you do that? But most of us are not in that situation. If you’re running an app doing a million or $5 million a year, somewhere in there, you are not pulling that much money off typically. Typically at that stage, you are in danger of riding it over the top, the growth can die, we can have a recession, you can get killed by a competitor. There’s all these things that could happen and selling a company for a 3X, 4X, or 5X revenue multiple, which Josh was offered 3.75 revenue.
You are doing $2 million a year and you are going to sell your company for $7.5 million, that is absolutely life changing. If you are making $150,000 or $200,000 a year and suddenly you can sell it for that, life-changing in the real sense of the word. It will change your life. You will have options that you never knew you had at that point.
Derrick: A lot of this talk of like why I would want to sell the thing. I’m working on my best idea. I can’t help but think of the Basecamp guys and that was their narrative for a long time. I feel like nowadays there’s a lot more nuance coming from them, which is really refreshing. Jason Fried was at MicroConf, was it last year or the year before?
Rob: Yeah, last year in 2019.
Derrick: Yeah, talking from the stage and he has been one, much more quick to plan the fact that they early on took some money off the table enough, to where him and JJ were millionaires after a couple of years and felt like, “Okay, we’ve made a healthy amount of return of this business. Now we can write it for longer.” A lot of founders go in blind and say, “Why would I want everyone to sell my company,” and yet, what usually ends up happening is that you are not as financially rewarded upfront as you would be if you were taking your raw skill set and having a salary job.
You’re foregoing a lot of money you could be making. A lot of opportunity cost and you are messing that into your equity that you have in your company. If you do end up five years down the line, things are competitive, whatever market conditions, and now suddenly you can’t achieve profitability, you are unable to sell it when you really want to, and you find yourself not able to extract a return from all of the investment that you’ve put into it.
For Basecamp to say, “Why would we want to sell?” because you were able to take some money off the table early on. Then, he also compared now Basecamp to like, “As if I’ve won the lottery and I’m taking the payout over time as opposed to a lump sum.” That totally makes sense.
Rob: Yup. The odds of them going to a business or something is infinitesimal and they get to work. They love their jobs, they have built a great team, and they get to build whatever they want. They’re building Basecamp version three, already built that. Jason Fried was talking a couple of weeks ago on Twitter, like they’re launching two more things this year. They really are a kid in a candy store.
If I were them, I wouldn’t sell, either, but I wouldn’t tell other people. I know they don’t tell other people not to, that’s not something. But I do think that people hear that and then take it upon themselves to think, “Well, I respect Jason Fried and […], I want to be like them, so I’m not going to sell my company either.” I don’t think that’s smart. I think you should evaluate.
Again, if I were Jason Fried, I would not sell Basecamp either because that sounds amazingly fun, but if you’re not in that situation, where you’re tens of millions a year in net profit is what he said, up from the market […], if you’re not in that situation and maybe you don’t enjoy your job, maybe you’re in a really competitive space, and you think that you could flat line.” Once your growth flat lines, your sales multiple plummets. There’s a really good time to sell and if you ride it over the top, suddenly you’re selling for 1X revenue or less. If you’re doubling every year, you’re selling for 4X or 5X revenue, again, it can be a life-changing amount of money or not.
I’m not encouraging people to sell. I think you should do what you want to do, but just really think things through. Back to that whole article we were talking about where Josh basically says, “Hey, there’s always a price. I wasn’t really that open to it,” but he got an offer for $4.95 million and it was like, “Wow, that would change my life.” Then he talks about just how it was a dead end and the buyers had claimed they had the money, but in actual hell, they got him under LOI (letter of intent), they went out and tried to raise money from investors, it was pretty dang shady. It was not cool. That must have been very, very hard.
Derrick: I can only imagine if that had been the case with our Drip story, because I just know how much stress we were under, you especially because you are really bearing the brunt of it, how long the process was, the due diligence stuff, just even getting to LOI. I’m glad that it moves a bit faster, like things didn’t drag out a year, and then Josh discovered this.
I guess on that sense it’s good that it didn’t go on too long, but even for as long as it did, I can only imagine how much you build up all this anticipation. You start to think, “Well, this is looking like it’s going to happen, they seemed very serious about it. Everything I’m hearing from them seems good.” It’s really hard to shift your mind into the gear of like, “I’m about to have a life-changing exit,” and then for that to be torn away is really a mental struggle.
Rob: Yeah. He said, “We’d spent nearly $20,000 on legal fees, months of time gathering all the docs, and they just disappeared. It was crushing. I was and still am furious with them. They wasted an epic amount of our time and money and then crawled into a new hole when they realized they couldn’t do the deal.” Crushing is an understatement, I would have probably crawled into a hole for weeks because your momentum is gone.
It’s one of those really hard decisions to make, but once you make it, you get a sense of peace about it and then that’s all you want. I remember almost hanging on to it too much because you don’t know if the deal is going to go through until it’s all signed. A month before we were selling Drip, it was like, “I’m so ready to sell this company. But I can’t say that out loud, because then if it doesn’t happen, I’ll be crushed.” I definitely feel his pain.
Derrick: Yeah, it’s tough. I don’t know how you could combat that. You have to enter the process, you have to trust what people are telling you initially. You had counsel, you had advisors and stuff, so I wonder how can you avoid that from happening or can you?
Rob: Yeah. I have no idea. I certainly did not and do not believe that I personally could. You would have to be someone of real fortitude to do it. I do like he links over to another article, where he says, “Five things I learned failing to sell my company,” and one of the things he says is avoid needing to sell. This is something a lot of people forget. If you need to sell, if you’re a desperate seller, you will have terms that are not as good.
Always having the abilities to, “Hey, we are growing, we are profitable. I don’t need to sell.” Those three sentiments will get you the best price, that plus getting a lot of different offers. That puts you in the driver’s seat. It’s the same thing with raising funding. Unfortunately, so many people go out to raise funding when they really, really need funding to do anything and nobody wants to fund those companies. They want to fund the companies that don’t need the funding as paradoxical as that sounds.
Derrick: Even on a small scale. When I sold Codetree, this is happening about around the same time that the Drip sale is going through. I was so focused on the Drip stuff that was going on and this was a side app that wasn’t really growing much, but was still just a nice side income for me. I decided it was time to not have to worry about that anymore, but even just having that, going into that with the mindset of like, “I want to sell this thing because it seems like the right time to do that, but I don’t have to,” it could just keep running on the side for a while and no big deal.
Even just going into the negotiation with that attitude. The seller then later on wrote a blog post about how they felt, like they were at a disadvantaged position because they could come in and say, “No, we really want $20,000 off.” My broker was like, “No, we don’t need to do that.” I’m like, “Cool, then tell them no.” Of course, I’m not going to do that, and then ultimately, I think, trying to keep that mindset of like, “If this doesn’t go through, no big deal. I don’t have to do this.” It helps.
Rob: Yeah, having your backs to the walls. Never good, whether you’re selling a car, selling a house. If you’re in a big hurry, you just get the worst deal. Kudos to Josh for that and for sharing. These are helpful things because (again) so many people don’t talk about it when deals fall through like this because it could have negative repercussions, but that’s something that I do love about our community, is that people are often willing to share experiences to help others avoid the mistakes they’ve made.
As we say in the intro, whether it’s to avoid the mistakes or just to understand, if I get into that situation, what will I do? What is this really like? That’s the other thing. If you have not heard of these stories, if you haven’t heard Josh, you haven’t heard you and I talk about selling Drip or any (I’ll say) real startup acquisition, then all you’ve heard is that on TechCrunch, that Instagram sold for $1 billion to Facebook over a weekend, when they had seven people and not much revenue. It’s like, “Well, that’s how startup acquisitions work.” It’s like, “No, they never do. Never.” This is like one in ten years does that.
The real startup acquisitions take a long time, they’re a grind, they’re typically for a revenue multiple or a net profit multiple if you’re running a different type of business or at a smaller revenue scale. There’s just a bunch of pretty common things that are realistic. If you don’t know that and you’ve only read the popular articles about the outliers, your sale is probably not going to be an outlier. So level-setting expectations with this post that Josh wrote is (I think) good.
Derrick: A helpful piece for the community archive for sure.
Rob: Yup, indeed. Thanks, man. Thanks for coming on the show.
Derrick: Yeah. It was a blast, thanks for having me.
Rob: If folks want to keep up with you, you release an episode every week, podcast episode at the Art of Product, you and your co-host Ben Orenstein. That’s a good bootstrap for podcasts over there. Then you are at @derrickreimer on Twitter. We’ll just send people there, but that is what it is.
Derrick: Yeah. Twitter and derrickreimer.com newsletter. Sign-up there.
Rob: That’s probably the one. That’s almost what we should recommend more, derrickreimer.com. I know you’ve blogged a bit over the years. I think all of us probably wish you blogged more.
Derrick: Yeah, it’s always the thing. It’s interesting to think about trying to do more, like higher frequency, less trying to spend 10 hours writing a piece, and think of it a little bit more like Twitter. That could be an interesting thing, too.
Rob: Sounds good, man.
Derrick: Cool. Thanks.
Rob: Thanks again to Derrick for coming on the show. He is working on his new startup. It’s called StaticKit, statickit.com. If you’re working on static sites stuff or interested in that whole ecosystem, he’s building some pretty interesting tools for static site builders.
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Episode 481 | A Bluetick Update from Mike #Taber
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In this episode of Startups For The Rest Of Us, Rob checks in with Mike Taber’s progress with Bluetick. They talk about his big new customer, traction on the podcast tour, Mike’s outreach to his LinkedIn connections, and more.
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Rob: Welcome to this week’s episode of Startups for the Rest of Us. I’m your host, Rob Walling. This is episode 481 where I catch up with Mike Taber. He gives us an update on his recent progress with Bluetick.
It’s been about six weeks since we last spoke. Frankly, the last update was a little disappointing. Mike was not moving forward with the marketing things that I had encouraged him to do in October, November. He was kind of stuck and his motivation was not at an all time high. He’s definitely having a down month.
I appreciated the conversation this week. I think you’ll enjoy it. Things are definitely starting to tick up from Mike as I talk about in our conversation. The roller coaster metaphor (as completely cliche as it is) really matches up with our conversations. It’s 1–2 months, it tends to be about six weeks. You’ll just hear some episodes he’s crushing it and moving forward, in other episodes he’s not and his motivation’s low.
This week, he’s no different, but I hope you’ll enjoy this conversation. This is one that left me feeling a little better about things. My hope is that our conversations after this carries through. I think that’s something that Mike really needs and has really struggled with over the years—his momentum. He’ll have these good months—one, two, three months. But then, he hits this roadblock and can’t get past it. It really trips him up and stops momentum.
When you’re building a startup, as a founder, momentum is just so important. It’s important for your team. It’s important for your morale. It’s important just to stay sane while you’re trying to push this boulder up the hill once you get that momentum. It’s a lot easier to keep it going.
If you have no idea what I’m talking about. Mike Taber was essentially a former weekly co-host of Startups for the Rest of Us for about the first 450 episodes. He took a step back to focus on his startup, Bluetick, which is warm and cold email engagement. I enjoy these conversations because I think they’re valuable for you as a listener, to hear someone going through struggles, to hear them have to persevere as a founder, not have as much success as they’re trying to get. It is becoming more and more of me helping him think through things.
I think and hope I could give him some clarity so that he knows what he’s doing over the next four to six weeks. I try to cheer him on but also give him some tough love and accountability of, “You should have done that.” It’s not directly every episode an accountability session, but it definitely is a longitudinal look at a founder. I think we started these eight or nine months ago now, so it’s interesting. I’ve listened back to two or three episodes at a time to try to make sure I ask the right questions on the next one. It’s going to make a fascinating case study (I think) if we stitched this out over an extended period of time.
Mike has not committed to doing that over an extended period of time. I think it depends on a lot of factors, but it’s definitely becoming an interesting story (I think) that each of us can dip into every once in a while. He’s quite being open and honest. I’ll vouch for him that offline before and after, he and I had just a few minutes of conversation. It really isn’t other stuff going on that he’s not talking about both good and bad. There’s always some stuff in the works that’s a little early that we don’t touch on.
Really, this is what’s happening with him. I don’t have this big prepped conversation where we picked out the good or bad or whatever. He’s being an open book and I really appreciate that about Mike. I think it helps him think things through and keep moving forward. I also think that it helps all of us to follow someone’s story, to hear the struggles, and to hear how he’s pushing himself to make it through those. With that, let’s hear an update from Mike Taber on what he’s been up to on Bluetick.
Mikey T, how’s it going, man?
Mike: It’s going well. How are you?
Rob: Doing all right. Just wrapped up the State of Independent SaaS report and did my first livestream ever yesterday. I will just say it was really nerve-wracking. It was a 30 minute essentially with producers. Sander was there, of course, doing stuff, then there was a video guy that had the lower third. It felt like a cable access, new show or something. It was very intense. There were cameras, lights, and all that stuff. Fun, exhilarating, but completely adrenaline-filled and exhausting, just sitting and talking for 30 minutes. It was fun.
How about you? What have you been up to for the last six weeks since we talked?
Mike: Lots of stuff going on. I’m sure we’ll cover the vast majority over the next 30–40 minutes or so.
Rob: I’m excited to get into it. After the last episode, I did receive some feedback. There’s some comments on the website startupsfortherestofus.com/episodes/episode-475-a-bluetick-update-from-mike-taber. You can read those in there. There were mixed comments. Some people were really down on the fact that you hadn’t started the cold email outreach, the podcast tour, email outreach, or I guess it just started but there were no results. Other people were like, “Hang in there, Mike. Don’t let these things drag on forever. We’re rooting for you.”
My hope today is to dig into some of that stuff. I did listen back to some of our older conversations over the past. It’s been six or eight months now since we’ve been doing this kind of format. We retouch base every four to six weeks. The Google Audit stuff started a long time ago. That sealed .NET component has hung around in a very long time.
I think that’s the thing I want to look at today. I mentioned this a little bit last episode. I want to figure out how we can have things hang around for shorter amounts of time. We talked about them for months on hand. It feels like you’re not making progress on those fronts even though you might be on to some.
Before we were recording, my memory was, your big wins over the past six months have really been getting the Google Audit done and wrapped. Am I correct that that’s completely done? You haven’t had to spend any time on that?
Mike: Yes it is.
Rob: Cool, that’s good. Then, the other thing is something that we talked about last conversation where you said a new larger customer has signed up. I think it’s your biggest customer, actually. You were building some features, trying to keep them onboard. How has that gone since then over the past six weeks?
Mike: That customer is using the product. So far, it seems to be working well. I’d like to obviously see more of their users a little bit more actively engaged, but it’s kind of an ongoing process. So far, things are working out as far as I can tell. In terms of generally held, Bluetick is going well. Revenue is up in November, December, and it looks like it’ll be up in January as well. That’s a good sign, I guess. We’ll see how things go. I don’t know. It’s hard to put it in words as to not where things are at, but expectations do not always align with reality.
Rob: Sure. Even if you look back over the past three months, you’re saying revenues ticked up each month, which has not been the case a couple years prior to that. It’s been stagnant. It had been stagnant or slow the client from time to time. Can you give us any idea of scale? Probably without mentioning exact dollar amounts. When you say revenues up, is it up a few percentage points? Is it up pretty dramatically over that time period?
Mike: Over the past couple of months, I have to say it’s up maybe 30% or 40%, something like that. Maybe 50%.
Rob: Okay. How are you feeling about that?
Mike: I’m feeling good but it’s still short of where I would like. Revenue’s always going to be short of where you would like it to be. I feel really good about where things are headed. I spent a lot of time over a holiday break thinking about different things. You’ve mentioned how there were a couple of large things that were hanging over my head or Bluetick’s head in terms of where the product is at. It’s just not getting certain things done like Google Audit, for example. I made it a concerted effort to fully finish some of the things that I started now.
If I worked on the Google Audit, for example, my goal was to finish it, put a line in the sand, and say, “Look, even though there’s other things going on that are important, it needed to be paid attention to, I can’t just do 80% of this or 60% of it, then let it drop, and then move on to something else.” I need to take it all the way to the finish line as opposed to letting other things that maybe just as important to distract me. I’ve been making more of an effort to take things all the way to the finish line.
Rob: Yeah. I think that’s good to know about yourself. I have seen that in you for sure, the tendency to bounce from one thing to the next, to have that stuff that you do talk about for six months on podcast interview, and they feel like they hang around. There’s certainly a mental weight on your psyche if not in completely most things.
Mike: Yeah. That’s what I recognized, just the mental weight of those things. If there’s a couple of them, they start to stack up even though I’m bouncing back and forth between some of those things. I may be making progress on them, it doesn’t mean that they’re gone and out of the way. They still weigh on my mind. I think about them and there are times where I really shouldn’t be. It’s very distracting.
I got to a point where I made a list of distractions and said, “Look, I’m going to make an active decision to not pursue these things.” These are known distractions I basically written down. It’s like those shiny object syndrome for entrepreneurial ADD like, “Look. Recognize that these things are there, but I’ve made the decision to not go on this direction, and just walk away.”
Rob: Yeah. A really hard part about entrepreneurship is knowing what to work on next and try to prioritize. When you don’t have a boss, a lot of us came up through grammar school, high school, and college. Then you get through a job. Everyone’s telling you what to do. “Do this project.” “Do these worksheets.” “Write this code.” “Build this thing.”
Then, you’re a founder. It’s like, “I have 100 things I could work on. What do I do next?” It’s very, very hard to get used to. I think what you’re doing—locking it down and saying, “Whatever I decide to work on, I’m going to be deliberate about it. I’m going to see that through until it’s done.”—is a very strong way to do it.
A second topic are the distractions that then try to pull you away from those things. I’m curious to hear, you said you made a list of them. Is it stuff that we would expect like Twitter, Facebook, podcasts, audio books? Or was it other stuff?
Mike: It’s a combination of things. It’s stuff like that. It’s also things within the product where it’s like, “Look, this feels important but it actually doesn’t matter.” For example, there are certain new features that are on the list of things to do where I don’t feel that the features would be nice to have, but they’re not going to be things that drive revenue in any way, shape, or form. They would make the product better, but it’s not going to do anything for me, so don’t spend time on those things because that time could be better spent doing marketing, sales, demos and things like that.
Rob: Yeah. You’ve gone even a layer deeper. It’s not the superficial distractions of the world. You’re literally thinking, “Within my business, I have distractions that are so tantalizing,” like the siren song of, “We’re builders. We’re developers.” The siren song of building that next feature is always calling. We can always justify that our product isn’t as far along as it needs to be. That’s cool then.
You have two marketing efforts we talked about last time that you hadn’t started in mid-December. I’ll say I was disappointed or busting your chops. I really wished you had started these because I want you to get moving faster. The first one is this kind of warm/cold email where you’re sending it out, you have LinkedIn connections, Bluetick cancellations, other sales leads and all that stuff. I believed I have a quote in the dock. “It will definitely get kicked off by then,” because I said, “Do you think they will get kicked off by our next call?” You want to update us on that and what the status is?
Mike: Yes. I have started on that. Like I said, I was fortunate. I don’t know who I told this to and haven’t. I don’t remember if I messed this on the podcast last time, but I was fortunate enough to export my LinkedIn contacts before LinkedIn basically eliminated the ability to take the email addresses with them. I have all these email addresses. What I did is I went through, prioritize them, and said, “Who do I want to reach out to first? Who do I think is going to be either a contact who might be interested in purchasing Bluetick, or who would be interested in a position to either refer me to somebody else, or just give me direct feedback on a product and tell me whether or not it would be applicable in their business?”
Part of this was the discovery effort. Obviously, people that I’m connected to on LinkedIn are going to be more likely to respond to my emails. Even if I’m just saying, “Hey, can you take a look at this? Let me know whether it would be useful in your business or not? If so, I’d love to give you demo and try to get you onboarded as a customer. If not, I still want to have that conversation because I want to know why. Why would this product not be a good fit for your business?”
And use those essentially as votes. An affirmation of things I already believe or potentially new information about where Bluetick does fit in different businesses and where it doesn’t. Even if I hear something that I intuitively know or have already thought of before, I don’t care. It’s still a vote in that direction that is external. I can sit in my office all day long and think about these things. But getting those external votes to say X, Y, or Z, that’s important because it means that it’s more objective than me sitting there than looking at it and thinking about it.
I have kicked those off. My response rate is upwards of 50%. So far, I have been having tons of meetings going through every single one of them just writing down notes. I’ve got at least a page of notes if not two for every single person I’ve talked to and have a demo with. I’ve had a couple of calls that have gone like in an hour and a half, two hours before. I’m getting a lot of responses from them. Honestly, it’s kind of hard to keep up with them to be frank about it. I still have to keep going through those. I actually backed off and turned it off just so I could catch up a little bit but I’ve turned it back on and started sending those emails back out.
Rob: Yeah. The high response rate was because they’re warm, right?
Mike: Yes.
Rob: They have some connection to you. You said that it was like a personal email list, LinkedIn connections, and sales leads that never converted. That’s cool. That’s a nice resource to have. Are any of these converting to sales or trials? Or are they conversations? Are they all rejections that you’re then essentially doing customer development with?
Mike: Surprisingly—maybe not surprisingly—some of them have actually turned into customers. That’s probably part of the uptick and revenue for this month. I think the tactic I’ve taken with some of these were like the person is in a sales role. I say, “Look, I’m going to show you the product. I’m not going to tell you what it’s used for. I’m just going to show you what the features and functionality are. I want you to tell me what you would use it for.” In that way, I’m not leading the witness.
I’ve found that the people who are in the sales positions, I don’t want to say that it resonates with them as a sales tactic, but it really helps me because then they’re not being lead by me in terms of the things that I’m telling them they could be used for. They’re coming to me within their own words with what they would use it for. Yeah, some of those have definitely turned into sales.
I have one person who said, “Yeah. I would use it for this. I would use it for this. I’d use it for this. These couple of other things.” We talked about getting on and have them starting on a trial. Even offered me to introduce the product and do a demo for a couple of sales managers at their company where they’ve got I think 60 or 70 sales reps, something like that.
The thought was, “Hey. I can put you in front of these people because we’ve known each other. I trust that this is a decent product and does what you say it does.” I held back on that a little bit just because adding that many all at once is a little disconcerting, I’ll say, but I also want to be able to put him in a position where he’s using the product himself personally for his sales outreach efforts. Then, when they have an internal meeting, it’s not just, “Oh hey, my friend developed this and I think that you guys should use it,” but he can say, “I’m using it for these situations and these are the results. It’s working for that.”
Rob: Yeah, got it. It sounds like this has been going well. Is this a win? Is this the high of the last month, you think?
Mike: Oh, totally. I have one customer who’s onboard right now. Their billing just went through a couple of days ago. They’re in an organization where there’s either 10 sales reps and the manager of that person is looking at Bluetick directly and saying, “I want to see what the results are from this. I’m interested because the rest of the team might be able to use it, too.”
My previous thought have been, if I can get more into these situations where the multiuser counts are providing value, then obviously the revenue will follow from that. It looks like that is probably the right direction to go. I’m still having a lot of these conversations. I just want to see any of these direct outreach efforts. Any little bit helps, to be honest.
Rob: I would agree. I’m stoked to hear that you’re getting response rates up to 50% because that’s really nice. It sounds like you’re learning a ton, which is really nice, and you’re getting some prospects and potential customers, which I think is good. This is forward progress. It is more forward progress than you’ve had in the past several months. Bravo to that and glad that it’s working out. For me, it’s motivating to hear.
Does this motivate you? I know you’ve said there’s been a lot of conversations, but does this gear you up like, “Oh man, this is working,” like, “This is exciting”?
Mike: It does, yeah. I implemented a pause feature several months ago where customers, instead of cancelling, they can pause their accounts for a nominal fee on a monthly basis. I don’t know if I mentioned this about this part of the Google Audit. They’re really cagey about if you cancel a customer’s account and you keep their data around because Google says that it’s their data, not yours and the customers.
What I did was I said, “Well, in order to bypass that, I’ll implement this feature where you can pause your account,” at which point you’re technically still a customer of mine. I don’t need to delete your data. Four to five people who would cancel over the recent time period, switched over, and said, “Yeah. I’d like to pause my account.”
This week I have one of them came back. I had a call with them later this afternoon. Then another customer from a couple of years ago have come back as well. Yeah, that’s growth. You’re right. To answer your question directly, it is motivating to see this kind of stuff come through. Part of it is a mindset shift for some of the conclusions I came through over the holiday break. Some of it is just seeing quantifiable results from the things that I”m doing.
Rob: Yeah. You’re doing things in public again. You’re not just dealing with Google Audit and building some features. You’re out there and you’re taking risks by sending warm/cold email. You’re having conversations with customers, which can be a lot of work. It can be scary, you can get negative feedback, but you’re doing it and it’s working to at least some degree. I don’t know, I’m pretty excited about that.
Does coming on this show and recording this every month or two make you feel accountable to something? Do you ever think, “Man, I need to make some progress so that Rob does not bust my chops”?
Mike: You know that’s a really interesting question. I feel like before when I was on every week, not as much. If that makes sense. I feel like coming on less frequently, I feel like I should hold myself more accountable because I come on less frequently. If that makes sense.
Rob: Yeah. It’s easy when we’re here every seven days, it’s like how much can I get done, and talk about during that time? You’re always thinking, “Well, I got to talk about something,” but you can let yourself off the hook. So, good. That makes sense.
That was an aside, but I was thinking about that and listening to the last episode. I had said, “Hey, I’m going to ask you about this next time.” It truly was an accountability and has been. I’ve been trying to do that, so it’s good to hear it. So, cool. We’ll call that a win. I’ll obviously going to ask it again next time. It sounds like it’s working. Keep doing it, man. I’m totally rooting for you on that.
Then there’s the emails for podcast tour or to just go on podcast and those had started sending already. I believe you said you might’ve had one response or whatever. How’s all that going?
Mike: I scale that back a little bit because of the LinkedIn prospect that I was doing. I am starting to ramp that back up again. I’ve got a call next week with somebody. We’ll see what the schedule shakes out with. There’s a couple of others that I’m trying to figure out where on the schedule we can get together just because we’ve exchange calendars, go back and forth and stuff. That seems to be moving forward as well, but my list for that is much shorter as well. I don’t have 900 of them.
Rob: Yeah. If I were to choose between going on podcast and talking to customer prospects, guess which one I would do? It’s what you’re doing if one of those has to be scaled back. A podcast tour is a nice thing to do. I do feel like you could probably get it going at some point. As I said earlier, that’s not going to drive a bunch of customers. What’ll drive a bunch of customers is cold outreach, warm outreach, marketing funnels, and all the things we know about. I don’t have much of an issue with that.
I’m curious. I’m meant to ask when you were saying that some of the folks you’re talking to are interested. They’re either coming back on or they’re signing up. Why Bluetick? In their words. We’ve talked a lot about differentiation. I kept saying you either need a unique marketing channel. You need to rank number one in Google or you need to rank number one in some type of channel where you are capturing the customers.
Or you need to have this pretty unique selling proposition or a unique feature or some unique positioning when someone looks at your other nine or 109 competitors filling the space you’re in, that they say, “Wow, Bluetick is best at this and this is my need.” How do you differentiate? I’m curious what has come out of these conversations, if anything, that makes you think, “This is exactly why they’re signing up for Bluetick and not the other tools.”
Mike: I haven’t teased out some of the specifics of that. I’ve got some ideas. When people switch from other tools to Bluetick, most of the time it’s because they run into a problem that those tools aren’t very good at. Whether they can only have contact in one sequence at a time, or they’re missing emails because it relies on the Gmail API and it’s not checking the spam folder, or the notifications and stuff don’t get triggered.
I have direct access to the mailbox, so every email that comes in, I can process it versus years in Gmail API. You’re very dependent upon their scheduling on all of those things. Whereas Bluetick, it checks the mailbox every 10 minutes. And longer term, I have other plans to make that even faster, and reduce the process in time on my site.
That’s one of those things where I actively decided it’s good enough for now. It doesn’t need to be that good. Every 10 minutes is fine. There’s other ones out there, they take upwards an hour, or 6, or 12 hours. They get by, so what difference does it make? I’m already faster than that. It doesn’t make a difference.
I think one of the other things is that the workflow itself inside Bluetick, it’s weird because some people say it makes complete sense. Some people say, “I don’t understand this at all. I’d rather go use these other tools that work on the same way.”
Rob: Okay. I wonder long-term—I don’t think we’ve dived into this now—you’re saying you check more often. Is that right? Your data is more up-to-date or fresh? That’s a feature, not a benefit. I’m thinking, what’s the next thing on top of that? Is it like your data is always synced? Unlike other tools, you’re near real time acts. There’s a way to position it where Bluetick is the real neartime version that’s always accurate and everything you just listed. I don’t even remember. You were saying spam, trash, and folders. How does all that get combined into one or two bullets that are true benefits?
Mike: The benefit of it is if Bluetick sees the email, like a reply, it will pull the person out of the sequence. If there’s a delay, let’s say that there’s a four hour delay for some other tool, a reply can come in within that four hours. If the tool doesn’t see it, it can send out a follow-up. What happens is you receive an email that says, “Hey, you sent somebody an email replying to something.” Then they come back with an email and it says, “Hey. I haven’t heard back from you.” I’m just like, “I literally just sent you an email an hour or two ago. Why are you saying that you didn’t see it and that you haven’t heard back from me?” That’s the situation that you go in every 10 minutes […]
Rob: Yeah, that makes sense. It’s something we can look at and talk through in future episodes as you get more data. Something I wanted to touch on is the last episode, I asked about your motivation. I said, “How’s your motivation over the past six weeks?” You said, “It’s okay.” You said, “Sleep was fine but not great.” Then you started talking about front-end code. That’s what you launched into something like, “I get discouraged when I do that. Should I hire someone part time? I threw that out.” Has that come up again?
I get the feeling that if you get demotivated by thinking about front-end code, it takes a bunch of time. That’s something you naturally shy away from like a hot stove, even if it’s only your lizard brain and you’re not actively thinking or realizing that you’re shying away from that. Has that been an issue or are you so much in sales and marketing mode that it doesn’t matter because you’re really not building features right now?
Mike: I think it matters more when I run into problems with the front-end code. I’m struggling to get some of the CSS right or some of the pages to show up in a way that I want. I’ve kind of coached myself to be less anxious or particular about some of that stuff. It’s like, “This doesn’t look perfect but you know what? It works.” The interesting thing I also realized was that Bluetick works really well for the people who use it in the way that it’s supposed to be, which means that you’re not logging in into it very much, which is a really bizarre way to position your SaaS app.
Most of the time I think you want people to log into your app and use it as much as possible because you’re getting the most value out of it. Bluetick is actually the opposite where the less you login, the more value it could provide you because you got things automated and setup to run into the background. If something doesn’t look quite right or if there’s a dropdown that’s slightly on the wrong spot, it actually probably doesn’t matter nearly as much as I use to feel like it does.
As long as the data that you need shows up in the UI, that’s one of those that I kind of backed off and said that this doesn’t really matter as much. I agree there’s probably some of that that is influenced by the fact that I’m doing much more of the sales and marketing. Just showing the products to people and saying, “This is what it can do,” and less front-end development.
Rob: Right, cool. Other than that, how was your overall motivation? I think sleep ties into that. How was your sleep and your motivation? You sound up. You sound up to me. Last time, you didn’t. You sounded down. This is the roller coaster of entrepreneurship. That’s the beauty of doing this every month and two for months. Presumably, if you do these for years, you just see the ups and downs, and the ups and downs. Has that been reflected over the past six weeks? Or is it just the last week or few days that you felt that?
Mike: I felt really good for the past couple of weeks. Part of it could be just the result of getting past some of that front-end code. I had to redesign the UI. I put all the navigation at the top of the page. That was probably part of where my frustrations last time where coming from. I had to move everything and at the same time, not break all the code that was currently in place for it. It wasn’t quite as simple as I would’ve liked to move the navigation. Now that it’s done, I even enjoy going into the app more myself just because the navigation has been moved to the top. It’s easier to get around and less clicks to do different things. I definitely feel like that factors into it. Obviously, increasing MRR also helps. There’s that.
Rob: That’s a huge motivator and when things are going up in another right, you can put up with a lot of other stuff. That’s the mental battle.
Next, I’m curious about the sealed untestable .NET component. I’m curious on a couple of fronts because when I listen to backdoor conversations, we’ve gotten back and forth. I’ve been like, you should either do this and get it done. Don’t let it hang around. Either decide not to do it or decide to do it and do it soon. It sounds like it keeps you from building features that you need.
Then when I hear this update today where it’s like, “No, you’re selling. You’ve grown MRR substantially.” It makes me think, why are we even talking about this .NET component? Leave it and just keep going. Push it down the line. What’s your current thinking on it?
Mike: I feel the same way. I’ve gone back and forth on it a bunch of times. It’s like, “Do I really need to do that? Do I need to do it now?” The answer is, probably not. Do I want to because it’s technical debt that has been hanging over my head over for a while? It is distracting. I rather have it out of the way but at the same time it is a chunk of work to get done. It’s not stopping the product from doing what it does. I don’t know. I don’t have a great answer for you.
I think if I buckled down, just did it, knocked it out, and got it out of the way, I wouldn’t have to ever worry about it again. Or at least until other stuff happens. I do feel like I would probably have to address it in a semi near future if I’m starting to add in substantially larger accounts just because the back-end I don’t know.
I don’t know how far I can scale it up without adding more servers in which would mean that I need to reengineer how some of that stuff works. At that point, it would be a hornet’s nest to get into that code and start working with it, to try and separate it among multiple servers. I don’t know. I don’t have a great answer for you. I just don’t.
Rob: I don’t either, in this case. Given how limited you are, my bet is to leave it where it is, and sell. Revenue solves everything. In this case, profit really solves everything. In your case, just growing MRR, if you can keep doing that and focus 100% of your time on conversations, 100% of your time on selling, and grow another 50% over the next two months, technically that sucks. I hate it. It’s something you can circle back to.
I think the thing that I’m going to bust your chops about is when you get the point and you’re like, “I need to build these features in order to get these bigger customers on. I can’t because the sealed .NET component is keeping me from doing it. But I still don’t want to do it.” There’s going to come a time where you have to do this, I think. The technical debt is going to sink you, at least based on how you described it.
I think that’s in the bank of my mind of don’t worry about it until you need to. Once you do, buckle down and do it. In two or three weeks, it’s done. You know what I mean? Stop everything. That’s how performance used to go.
Like with Drip, you just don’t do much work on it because you’re cranking on features, you’re selling it, you’re marketing it, you’re doing this stuff, and you’re grow, grow, grow. Then you hit the point where it’s like, “Oh, no. The database is about to fall over.” Unfortunately, it was a fire drill and it was all hands on deck. We pulled people off features, we go and upgrade the database. We do a lot of stuff. It bought us about 4–6 months more. That’s not sustainable. You don’t want to grow a business long-term over that. About the time you’re at $1 million or 20 employees, it’s too much. It’s too jarring and you needed a better process.
But when you’re as early, as scrappy, and as agile as you are, and you’re just trying to get to default alive or you have enough money to basically buy out your own time, I think you just have to. That’s how you have to operate.
Mike: Yeah. I would love to have that off out of the back of my head. For now, I’m kicking it down the road even more.
Rob: Yup. I think when you get there, it would be amazing if you could hire someone to do it. If you could bring in high-end senior engineer, you just bite the bullet, and eat some money. You show him what it is, you say it needed to go from there to there, you write up the spec to tell him exactly how you’re going to do it, and again, it’ll cost you. It’s not a $10 an hour developer.
Mike: Yeah. I hate to interrupt you at that one. I don’t know if I could outsource that. The reason is because there’s a lot of domain knowledge that I acquired based on just having written different prototypes and doing different things that I think would be difficult for somebody else to have or acquire. I’m not saying they couldn’t come up with a plan that I could interject and say, “Hey, if you do it this way, these things are going to break.” I don’t know.
Rob: Yeah, I hear you. Said every developer ever, Mike. This is really hard to do. I know you have domain knowledge. I know it’s not easy. I just think it’s possible and something you should consider.
This is the same thing that I think we both thought about MicroConf, that we brought Zander on. I thought that about marketing before I met people who are way better in marketing than I was. I was like, “I’m the only one that knows how to market this product. All the copies are my own.” Then I’d meet someone and I’m like, “Well, they’re better at this.”
It’s not cut and dry. I don’t really think we should go down this road right now, but it’s something I just know that it’s going to derail you for probably a month if I were to guess. Maybe longer. If you’re going full speed with marketing and sales, and you really are landing customers and growing, it would be a shame for you to have just put the brakes on that and switch over.
Mike: The fortunate thing is I think the way things are, I think you’re right. I think there’s definitely ways for me to make that work. One of which is if I hand it over to somebody, the interesting thing in Bluetick is I have a flag in the database that says, “What version of the backend storage extension are you using? If it’s version one, use this code. If it’s version two, use this code.” I could switch on an individual mailbox level. I could just use my mailboxes like a test, switch it over, and then upgrade it.
If things are working great, I could roll it out slowly to other customers as opposed to doing everything all at once. That’s what the real kicker. It’s a critical core […]. I can do it individually. It took a while to get to that point.
Rob: I think that’s the way you do it. That’s the speed bump way of doing it versus the […] way. Cool. That’s good.
Someone wrote in and made a comment. They asked if you ever took the Enneagram? I sent you, just for the record, I went, and paid $12. I said, “Merry Christmas,” and sent you an email with the link. I’m curious if you took it.
Mike: Yeah. I saw that email and I’m like, “You bastard.” I have no way out of it.
Rob: Because you gave me crap the last time. I was like, “Look. I’ll pay for it Mike. Just take and bust chops, right?” and you’re like, “Oh. No, you won’t.” I was like, “Can I pay for this in advance?” This is the best.
Mike: Yeah, I saw that. I did spent the time. I went through and took it. It was interesting. It was definitely better than the previous time I took it where everything came out even. This time, it gave me a spread of the different types. One that came to the top with a score of 22 was Type 6, the loyalist. Then the next one, both of them was the score of 20, it was Type 9, the peacemaker and Type 1, the reformer.
I read through it. I actually thought it was interesting enough that I printed it out, and I’m going back through it and highlight different things. I felt like after reading through the results and the description of the things, I felt like it was pretty dead on.
Rob: That’s cool. What is a key motivation? You’re like a 6 with 9 or 6 with, what was the third one you said?
Mike: 6 with 9 and 1.
Rob: Yeah. I’m looking through this description. If you’re on a computer, you can just Google Enneagram Type 6 with Type 9 and it will give you a combined thing, like loyalist and peacemaker. Some 6s and 9s find it difficult to say what is actually on their minds. There is a great tendency in this relationship to clam up, to be silently stubborn, defensive, and to make the other person guess what’s going on.
The thing I like about the Enneagram is there’s some positive but they definitely talk about blindspots a lot. Potential trip spots or issues. It can callout things that I think it’s that know yourself and try to figure out how to be better for it. If you think it’s pretty accurate, are there things that you’re going to do or have started doing that you think can help overcome some of these?
Mike: That’s what I was looking at. That’s why I printed it out and I was going back through it. The printout of the results for me was about 20 pages. It’s because there’s the top level one, then there’s two that are tied for second.
Rob: Yeah. That makes it complicated.
Mike: It does make it a little bit more complicated. Then things dropped off after these top three. I have to go through it a little bit more. I plan on highlighting different things that stick out to me, that they resonate really well with me. I just haven’t done that yet.
Rob: Yeah, that’s cool. Do that because I’m curious. The whole point of this was when I took it, some people on a leadership team that I’m on took it, it really dead point out that some of them, they were a couple threes. That’s the achiever, the success-oriented, pragmatic type, driven, images-conscious, their motivation is to achieve. They’re probably never going to stop wanting to achieve. Whether it’s nature or nurture or it’s something their parents said or did to them when they were kids or whether it’s just genetics, that’s what they want.
It was interesting to work with them because I kind of don’t care about that. I don’t need to make a dent in the universe. My thing was creating, building, and doing interesting things. I can’t remember. I was trying to look through, find what my number is. I don’t have the report. My memory’s mind was like a creator. It was a creative type. You’re motivated by creating things, putting them into the world, and having people using them.
Of course, there’s a bunch of negatives to that, too. You can bee too introverted. I don’t know. There’s stuff. All that to say, that was once again a confirmation, it helped me know myself a little more like, “Yeah, that’s right. I do need to be creating things.” I am most excited when I am creating new things rather than taking a company from $5–$50 million. In my opinion, not creating very much. That tends to be the place I really get bored with it, so it’s good for me to know that.
Running things for the long term, building processes, and have them on a scale, I’m going to do the same thing for 5 or 10 years. I can exist in an org like that but I need to be a person that’s creating things. That was the whole point of, “Hey, have you thought about taking it? So you can learn a little bit more about what motivates you.” Really, the motivation you talked about was flexibility. You’re like, “I want the flexibility that entrepreneurship offers.” I’m concerned that that’s just not enough motivation to keep you going when times get really tough and when sleep gets hard.
Mike: Yeah. I think what I like the most about the Enneagram was that it talked about different levels of the personality types. Within the levels, it’s essentially how healthy you are as a person within that level. They say, “If you’re unhealthy, you could turn into this other personality type at this level.” Or, “If you’re healthy, you can turn into this other personality type at a certain level.” I thought that that was the most interesting piece to me.
Like I said, when I was reading through some of these things, it was shocking to me how dead on it was. I’ll read a very little excerpt here from the personality Type 6 where it says, “Sixes do their best to be solid and responsible, but they are often troubled by an undercurrent of doubt and anxiety. In fact, sixes often seem a bit jittery and uneasy in general. They live in a state of worry then find something to worry about.” I’m like, “Yeah, I kind of do that sometimes.”
Like I said, some things just jumped out of me. It’s like that totally describes me. Then there were other ones like, “Yeah. That’s not really me.”
Rob: Yeah, cool. I’m glad you did that. I hope you’ll look through it. Maybe come back through their findings in terms of things that you think might motivate you.
That kind of wraps us up for today. I think the one question that I would like to find out is your high and your low over the past six weeks. Your high sound like the fact that it’s growth. The cold outreach is working. What’s been the lowest point for you, where you felt most discouraged, the biggest loss or whatever?
Mike: I think that implementing the client site. Some of the client-side features that I was working on before which I finished probably shortly after our call was just the trouble I was having with reorganizing the navigation to help better support some of the multi-user functions that I’m adding. That was just a real nightmare. It sucks.
Rob: Discouraging and that was what you touched on last month as you were doing it.
Mike: Yeah, there was that. I think there was one feature that I wanted to get to this other feature to implement. It ended up taking longer to finish the client-side navigation changes. I implemented this feature that allows customers to skip sending emails on public holidays. Christmas, for example. There’s a toggle in there that just says, “Don’t send these emails during the holidays,” and that happens to be one of them. It’s shocking how simple that code was to write on the back-end, but it just took way longer than I wanted it to to get into the product. It didn’t get in until after Christmas, which I really wanted to get in there beforehand, but it is what it is.
Rob: Cool, man. Thanks again for coming back. We’ll circle up with you here in the next month or two.
Mike: Sounds good.
Rob: All right, take it easy.
Mike: All right, bye.
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It’s been about six weeks since we last spoke. Frankly, the last update was a little disappointing. Mike was not moving forward with the marketing things that I had encouraged him to do in October, November. He was kind of stuck and his motivation was not at an all time high. He’s definitely having a down month.
I appreciated the conversation this week. I think you’ll enjoy it. Things are definitely starting to tick up from Mike as I talk about in our conversation. The roller coaster metaphor (as completely cliche as it is) really matches up with our conversations. It’s 1–2 months, it tends to be about six weeks. You’ll just hear some episodes he’s crushing it and moving forward, in other episodes he’s not and his motivation’s low.
This week, he’s no different, but I hope you’ll enjoy this conversation. This is one that left me feeling a little better about things. My hope is that our conversations after this carries through. I think that’s something that Mike really needs and has really struggled with over the years—his momentum. He’ll have these good months—one, two, three months. But then, he hits this roadblock and can’t get past it. It really trips him up and stops momentum.
When you’re building a startup, as a founder, momentum is just so important. It’s important for your team. It’s important for your morale. It’s important just to stay sane while you’re trying to push this boulder up the hill once you get that momentum. It’s a lot easier to keep it going.
If you have no idea what I’m talking about. Mike Taber was essentially a former weekly co-host of Startups for the Rest of Us for about the first 450 episodes. He took a step back to focus on his startup, Bluetick, which is warm and cold email engagement. I enjoy these conversations because I think they’re valuable for you as a listener, to hear someone going through struggles, to hear them have to persevere as a founder, not have as much success as they’re trying to get. It is becoming more and more of me helping him think through things.
I think and hope I could give him some clarity so that he knows what he’s doing over the next four to six weeks. I try to cheer him on but also give him some tough love and accountability of, “You should have done that.” It’s not directly every episode an accountability session, but it definitely is a longitudinal look at a founder. I think we started these eight or nine months ago now, so it’s interesting. I’ve listened back to two or three episodes at a time to try to make sure I ask the right questions on the next one. It’s going to make a fascinating case study (I think) if we stitched this out over an extended period of time.
Mike has not committed to doing that over an extended period of time. I think it depends on a lot of factors, but it’s definitely becoming an interesting story (I think) that each of us can dip into every once in a while. He’s quite being open and honest. I’ll vouch for him that offline before and after, he and I had just a few minutes of conversation. It really isn’t other stuff going on that he’s not talking about both good and bad. There’s always some stuff in the works that’s a little early that we don’t touch on.
Really, this is what’s happening with him. I don’t have this big prepped conversation where we picked out the good or bad or whatever. He’s being an open book and I really appreciate that about Mike. I think it helps him think things through and keep moving forward. I also think that it helps all of us to follow someone’s story, to hear the struggles, and to hear how he’s pushing himself to make it through those. With that, let’s hear an update from Mike Taber on what he’s been up to on Bluetick.
Mikey T, how’s it going, man?
Mike: It’s going well. How are you?
Rob: Doing all right. Just wrapped up the State of Independent SaaS report and did my first livestream ever yesterday. I will just say it was really nerve-wracking. It was a 30 minute essentially with producers. Sander was there, of course, doing stuff, then there was a video guy that had the lower third. It felt like a cable access, new show or something. It was very intense. There were cameras, lights, and all that stuff. Fun, exhilarating, but completely adrenaline-filled and exhausting, just sitting and talking for 30 minutes. It was fun.
How about you? What have you been up to for the last six weeks since we talked?
Mike: Lots of stuff going on. I’m sure we’ll cover the vast majority over the next 30–40 minutes or so.
Rob: I’m excited to get into it. After the last episode, I did receive some feedback. There’s some comments on the website startupsfortherestofus.com/episodes/episode-475-a-bluetick-update-from-mike-taber. You can read those in there. There were mixed comments. Some people were really down on the fact that you hadn’t started the cold email outreach, the podcast tour, email outreach, or I guess it just started but there were no results. Other people were like, “Hang in there, Mike. Don’t let these things drag on forever. We’re rooting for you.”
My hope today is to dig into some of that stuff. I did listen back to some of our older conversations over the past. It’s been six or eight months now since we’ve been doing this kind of format. We retouch base every four to six weeks. The Google Audit stuff started a long time ago. That sealed .NET component has hung around in a very long time.
I think that’s the thing I want to look at today. I mentioned this a little bit last episode. I want to figure out how we can have things hang around for shorter amounts of time. We talked about them for months on hand. It feels like you’re not making progress on those fronts even though you might be on to some.
Before we were recording, my memory was, your big wins over the past six months have really been getting the Google Audit done and wrapped. Am I correct that that’s completely done? You haven’t had to spend any time on that?
Mike: Yes it is.
Rob: Cool, that’s good. Then, the other thing is something that we talked about last conversation where you said a new larger customer has signed up. I think it’s your biggest customer, actually. You were building some features, trying to keep them onboard. How has that gone since then over the past six weeks?
Mike: That customer is using the product. So far, it seems to be working well. I’d like to obviously see more of their users a little bit more actively engaged, but it’s kind of an ongoing process. So far, things are working out as far as I can tell. In terms of generally held, Bluetick is going well. Revenue is up in November, December, and it looks like it’ll be up in January as well. That’s a good sign, I guess. We’ll see how things go. I don’t know. It’s hard to put it in words as to not where things are at, but expectations do not always align with reality.
Rob: Sure. Even if you look back over the past three months, you’re saying revenues ticked up each month, which has not been the case a couple years prior to that. It’s been stagnant. It had been stagnant or slow the client from time to time. Can you give us any idea of scale? Probably without mentioning exact dollar amounts. When you say revenues up, is it up a few percentage points? Is it up pretty dramatically over that time period?
Mike: Over the past couple of months, I have to say it’s up maybe 30% or 40%, something like that. Maybe 50%.
Rob: Okay. How are you feeling about that?
Mike: I’m feeling good but it’s still short of where I would like. Revenue’s always going to be short of where you would like it to be. I feel really good about where things are headed. I spent a lot of time over a holiday break thinking about different things. You’ve mentioned how there were a couple of large things that were hanging over my head or Bluetick’s head in terms of where the product is at. It’s just not getting certain things done like Google Audit, for example. I made it a concerted effort to fully finish some of the things that I started now.
If I worked on the Google Audit, for example, my goal was to finish it, put a line in the sand, and say, “Look, even though there’s other things going on that are important, it needed to be paid attention to, I can’t just do 80% of this or 60% of it, then let it drop, and then move on to something else.” I need to take it all the way to the finish line as opposed to letting other things that maybe just as important to distract me. I’ve been making more of an effort to take things all the way to the finish line.
Rob: Yeah. I think that’s good to know about yourself. I have seen that in you for sure, the tendency to bounce from one thing to the next, to have that stuff that you do talk about for six months on podcast interview, and they feel like they hang around. There’s certainly a mental weight on your psyche if not in completely most things.
Mike: Yeah. That’s what I recognized, just the mental weight of those things. If there’s a couple of them, they start to stack up even though I’m bouncing back and forth between some of those things. I may be making progress on them, it doesn’t mean that they’re gone and out of the way. They still weigh on my mind. I think about them and there are times where I really shouldn’t be. It’s very distracting.
I got to a point where I made a list of distractions and said, “Look, I’m going to make an active decision to not pursue these things.” These are known distractions I basically written down. It’s like those shiny object syndrome for entrepreneurial ADD like, “Look. Recognize that these things are there, but I’ve made the decision to not go on this direction, and just walk away.”
Rob: Yeah. A really hard part about entrepreneurship is knowing what to work on next and try to prioritize. When you don’t have a boss, a lot of us came up through grammar school, high school, and college. Then you get through a job. Everyone’s telling you what to do. “Do this project.” “Do these worksheets.” “Write this code.” “Build this thing.”
Then, you’re a founder. It’s like, “I have 100 things I could work on. What do I do next?” It’s very, very hard to get used to. I think what you’re doing—locking it down and saying, “Whatever I decide to work on, I’m going to be deliberate about it. I’m going to see that through until it’s done.”—is a very strong way to do it.
A second topic are the distractions that then try to pull you away from those things. I’m curious to hear, you said you made a list of them. Is it stuff that we would expect like Twitter, Facebook, podcasts, audio books? Or was it other stuff?
Mike: It’s a combination of things. It’s stuff like that. It’s also things within the product where it’s like, “Look, this feels important but it actually doesn’t matter.” For example, there are certain new features that are on the list of things to do where I don’t feel that the features would be nice to have, but they’re not going to be things that drive revenue in any way, shape, or form. They would make the product better, but it’s not going to do anything for me, so don’t spend time on those things because that time could be better spent doing marketing, sales, demos and things like that.
Rob: Yeah. You’ve gone even a layer deeper. It’s not the superficial distractions of the world. You’re literally thinking, “Within my business, I have distractions that are so tantalizing,” like the siren song of, “We’re builders. We’re developers.” The siren song of building that next feature is always calling. We can always justify that our product isn’t as far along as it needs to be. That’s cool then.
You have two marketing efforts we talked about last time that you hadn’t started in mid-December. I’ll say I was disappointed or busting your chops. I really wished you had started these because I want you to get moving faster. The first one is this kind of warm/cold email where you’re sending it out, you have LinkedIn connections, Bluetick cancellations, other sales leads and all that stuff. I believed I have a quote in the dock. “It will definitely get kicked off by then,” because I said, “Do you think they will get kicked off by our next call?” You want to update us on that and what the status is?
Mike: Yes. I have started on that. Like I said, I was fortunate. I don’t know who I told this to and haven’t. I don’t remember if I messed this on the podcast last time, but I was fortunate enough to export my LinkedIn contacts before LinkedIn basically eliminated the ability to take the email addresses with them. I have all these email addresses. What I did is I went through, prioritize them, and said, “Who do I want to reach out to first? Who do I think is going to be either a contact who might be interested in purchasing Bluetick, or who would be interested in a position to either refer me to somebody else, or just give me direct feedback on a product and tell me whether or not it would be applicable in their business?”
Part of this was the discovery effort. Obviously, people that I’m connected to on LinkedIn are going to be more likely to respond to my emails. Even if I’m just saying, “Hey, can you take a look at this? Let me know whether it would be useful in your business or not? If so, I’d love to give you demo and try to get you onboarded as a customer. If not, I still want to have that conversation because I want to know why. Why would this product not be a good fit for your business?”
And use those essentially as votes. An affirmation of things I already believe or potentially new information about where Bluetick does fit in different businesses and where it doesn’t. Even if I hear something that I intuitively know or have already thought of before, I don’t care. It’s still a vote in that direction that is external. I can sit in my office all day long and think about these things. But getting those external votes to say X, Y, or Z, that’s important because it means that it’s more objective than me sitting there than looking at it and thinking about it.
I have kicked those off. My response rate is upwards of 50%. So far, I have been having tons of meetings going through every single one of them just writing down notes. I’ve got at least a page of notes if not two for every single person I’ve talked to and have a demo with. I’ve had a couple of calls that have gone like in an hour and a half, two hours before. I’m getting a lot of responses from them. Honestly, it’s kind of hard to keep up with them to be frank about it. I still have to keep going through those. I actually backed off and turned it off just so I could catch up a little bit but I’ve turned it back on and started sending those emails back out.
Rob: Yeah. The high response rate was because they’re warm, right?
Mike: Yes.
Rob: They have some connection to you. You said that it was like a personal email list, LinkedIn connections, and sales leads that never converted. That’s cool. That’s a nice resource to have. Are any of these converting to sales or trials? Or are they conversations? Are they all rejections that you’re then essentially doing customer development with?
Mike: Surprisingly—maybe not surprisingly—some of them have actually turned into customers. That’s probably part of the uptick and revenue for this month. I think the tactic I’ve taken with some of these were like the person is in a sales role. I say, “Look, I’m going to show you the product. I’m not going to tell you what it’s used for. I’m just going to show you what the features and functionality are. I want you to tell me what you would use it for.” In that way, I’m not leading the witness.
I’ve found that the people who are in the sales positions, I don’t want to say that it resonates with them as a sales tactic, but it really helps me because then they’re not being lead by me in terms of the things that I’m telling them they could be used for. They’re coming to me within their own words with what they would use it for. Yeah, some of those have definitely turned into sales.
I have one person who said, “Yeah. I would use it for this. I would use it for this. I’d use it for this. These couple of other things.” We talked about getting on and have them starting on a trial. Even offered me to introduce the product and do a demo for a couple of sales managers at their company where they’ve got I think 60 or 70 sales reps, something like that.
The thought was, “Hey. I can put you in front of these people because we’ve known each other. I trust that this is a decent product and does what you say it does.” I held back on that a little bit just because adding that many all at once is a little disconcerting, I’ll say, but I also want to be able to put him in a position where he’s using the product himself personally for his sales outreach efforts. Then, when they have an internal meeting, it’s not just, “Oh hey, my friend developed this and I think that you guys should use it,” but he can say, “I’m using it for these situations and these are the results. It’s working for that.”
Rob: Yeah, got it. It sounds like this has been going well. Is this a win? Is this the high of the last month, you think?
Mike: Oh, totally. I have one customer who’s onboard right now. Their billing just went through a couple of days ago. They’re in an organization where there’s either 10 sales reps and the manager of that person is looking at Bluetick directly and saying, “I want to see what the results are from this. I’m interested because the rest of the team might be able to use it, too.”
My previous thought have been, if I can get more into these situations where the multiuser counts are providing value, then obviously the revenue will follow from that. It looks like that is probably the right direction to go. I’m still having a lot of these conversations. I just want to see any of these direct outreach efforts. Any little bit helps, to be honest.
Rob: I would agree. I’m stoked to hear that you’re getting response rates up to 50% because that’s really nice. It sounds like you’re learning a ton, which is really nice, and you’re getting some prospects and potential customers, which I think is good. This is forward progress. It is more forward progress than you’ve had in the past several months. Bravo to that and glad that it’s working out. For me, it’s motivating to hear.
Does this motivate you? I know you’ve said there’s been a lot of conversations, but does this gear you up like, “Oh man, this is working,” like, “This is exciting”?
Mike: It does, yeah. I implemented a pause feature several months ago where customers, instead of cancelling, they can pause their accounts for a nominal fee on a monthly basis. I don’t know if I mentioned this about this part of the Google Audit. They’re really cagey about if you cancel a customer’s account and you keep their data around because Google says that it’s their data, not yours and the customers.
What I did was I said, “Well, in order to bypass that, I’ll implement this feature where you can pause your account,” at which point you’re technically still a customer of mine. I don’t need to delete your data. Four to five people who would cancel over the recent time period, switched over, and said, “Yeah. I’d like to pause my account.”
This week I have one of them came back. I had a call with them later this afternoon. Then another customer from a couple of years ago have come back as well. Yeah, that’s growth. You’re right. To answer your question directly, it is motivating to see this kind of stuff come through. Part of it is a mindset shift for some of the conclusions I came through over the holiday break. Some of it is just seeing quantifiable results from the things that I”m doing.
Rob: Yeah. You’re doing things in public again. You’re not just dealing with Google Audit and building some features. You’re out there and you’re taking risks by sending warm/cold email. You’re having conversations with customers, which can be a lot of work. It can be scary, you can get negative feedback, but you’re doing it and it’s working to at least some degree. I don’t know, I’m pretty excited about that.
Does coming on this show and recording this every month or two make you feel accountable to something? Do you ever think, “Man, I need to make some progress so that Rob does not bust my chops”?
Mike: You know that’s a really interesting question. I feel like before when I was on every week, not as much. If that makes sense. I feel like coming on less frequently, I feel like I should hold myself more accountable because I come on less frequently. If that makes sense.
Rob: Yeah. It’s easy when we’re here every seven days, it’s like how much can I get done, and talk about during that time? You’re always thinking, “Well, I got to talk about something,” but you can let yourself off the hook. So, good. That makes sense.
That was an aside, but I was thinking about that and listening to the last episode. I had said, “Hey, I’m going to ask you about this next time.” It truly was an accountability and has been. I’ve been trying to do that, so it’s good to hear it. So, cool. We’ll call that a win. I’ll obviously going to ask it again next time. It sounds like it’s working. Keep doing it, man. I’m totally rooting for you on that.
Then there’s the emails for podcast tour or to just go on podcast and those had started sending already. I believe you said you might’ve had one response or whatever. How’s all that going?
Mike: I scale that back a little bit because of the LinkedIn prospect that I was doing. I am starting to ramp that back up again. I’ve got a call next week with somebody. We’ll see what the schedule shakes out with. There’s a couple of others that I’m trying to figure out where on the schedule we can get together just because we’ve exchange calendars, go back and forth and stuff. That seems to be moving forward as well, but my list for that is much shorter as well. I don’t have 900 of them.
Rob: Yeah. If I were to choose between going on podcast and talking to customer prospects, guess which one I would do? It’s what you’re doing if one of those has to be scaled back. A podcast tour is a nice thing to do. I do feel like you could probably get it going at some point. As I said earlier, that’s not going to drive a bunch of customers. What’ll drive a bunch of customers is cold outreach, warm outreach, marketing funnels, and all the things we know about. I don’t have much of an issue with that.
I’m curious. I’m meant to ask when you were saying that some of the folks you’re talking to are interested. They’re either coming back on or they’re signing up. Why Bluetick? In their words. We’ve talked a lot about differentiation. I kept saying you either need a unique marketing channel. You need to rank number one in Google or you need to rank number one in some type of channel where you are capturing the customers.
Or you need to have this pretty unique selling proposition or a unique feature or some unique positioning when someone looks at your other nine or 109 competitors filling the space you’re in, that they say, “Wow, Bluetick is best at this and this is my need.” How do you differentiate? I’m curious what has come out of these conversations, if anything, that makes you think, “This is exactly why they’re signing up for Bluetick and not the other tools.”
Mike: I haven’t teased out some of the specifics of that. I’ve got some ideas. When people switch from other tools to Bluetick, most of the time it’s because they run into a problem that those tools aren’t very good at. Whether they can only have contact in one sequence at a time, or they’re missing emails because it relies on the Gmail API and it’s not checking the spam folder, or the notifications and stuff don’t get triggered.
I have direct access to the mailbox, so every email that comes in, I can process it versus years in Gmail API. You’re very dependent upon their scheduling on all of those things. Whereas Bluetick, it checks the mailbox every 10 minutes. And longer term, I have other plans to make that even faster, and reduce the process in time on my site.
That’s one of those things where I actively decided it’s good enough for now. It doesn’t need to be that good. Every 10 minutes is fine. There’s other ones out there, they take upwards an hour, or 6, or 12 hours. They get by, so what difference does it make? I’m already faster than that. It doesn’t make a difference.
I think one of the other things is that the workflow itself inside Bluetick, it’s weird because some people say it makes complete sense. Some people say, “I don’t understand this at all. I’d rather go use these other tools that work on the same way.”
Rob: Okay. I wonder long-term—I don’t think we’ve dived into this now—you’re saying you check more often. Is that right? Your data is more up-to-date or fresh? That’s a feature, not a benefit. I’m thinking, what’s the next thing on top of that? Is it like your data is always synced? Unlike other tools, you’re near real time acts. There’s a way to position it where Bluetick is the real neartime version that’s always accurate and everything you just listed. I don’t even remember. You were saying spam, trash, and folders. How does all that get combined into one or two bullets that are true benefits?
Mike: The benefit of it is if Bluetick sees the email, like a reply, it will pull the person out of the sequence. If there’s a delay, let’s say that there’s a four hour delay for some other tool, a reply can come in within that four hours. If the tool doesn’t see it, it can send out a follow-up. What happens is you receive an email that says, “Hey, you sent somebody an email replying to something.” Then they come back with an email and it says, “Hey. I haven’t heard back from you.” I’m just like, “I literally just sent you an email an hour or two ago. Why are you saying that you didn’t see it and that you haven’t heard back from me?” That’s the situation that you go in every 10 minutes […]
Rob: Yeah, that makes sense. It’s something we can look at and talk through in future episodes as you get more data. Something I wanted to touch on is the last episode, I asked about your motivation. I said, “How’s your motivation over the past six weeks?” You said, “It’s okay.” You said, “Sleep was fine but not great.” Then you started talking about front-end code. That’s what you launched into something like, “I get discouraged when I do that. Should I hire someone part time? I threw that out.” Has that come up again?
I get the feeling that if you get demotivated by thinking about front-end code, it takes a bunch of time. That’s something you naturally shy away from like a hot stove, even if it’s only your lizard brain and you’re not actively thinking or realizing that you’re shying away from that. Has that been an issue or are you so much in sales and marketing mode that it doesn’t matter because you’re really not building features right now?
Mike: I think it matters more when I run into problems with the front-end code. I’m struggling to get some of the CSS right or some of the pages to show up in a way that I want. I’ve kind of coached myself to be less anxious or particular about some of that stuff. It’s like, “This doesn’t look perfect but you know what? It works.” The interesting thing I also realized was that Bluetick works really well for the people who use it in the way that it’s supposed to be, which means that you’re not logging in into it very much, which is a really bizarre way to position your SaaS app.
Most of the time I think you want people to log into your app and use it as much as possible because you’re getting the most value out of it. Bluetick is actually the opposite where the less you login, the more value it could provide you because you got things automated and setup to run into the background. If something doesn’t look quite right or if there’s a dropdown that’s slightly on the wrong spot, it actually probably doesn’t matter nearly as much as I use to feel like it does.
As long as the data that you need shows up in the UI, that’s one of those that I kind of backed off and said that this doesn’t really matter as much. I agree there’s probably some of that that is influenced by the fact that I’m doing much more of the sales and marketing. Just showing the products to people and saying, “This is what it can do,” and less front-end development.
Rob: Right, cool. Other than that, how was your overall motivation? I think sleep ties into that. How was your sleep and your motivation? You sound up. You sound up to me. Last time, you didn’t. You sounded down. This is the roller coaster of entrepreneurship. That’s the beauty of doing this every month and two for months. Presumably, if you do these for years, you just see the ups and downs, and the ups and downs. Has that been reflected over the past six weeks? Or is it just the last week or few days that you felt that?
Mike: I felt really good for the past couple of weeks. Part of it could be just the result of getting past some of that front-end code. I had to redesign the UI. I put all the navigation at the top of the page. That was probably part of where my frustrations last time where coming from. I had to move everything and at the same time, not break all the code that was currently in place for it. It wasn’t quite as simple as I would’ve liked to move the navigation. Now that it’s done, I even enjoy going into the app more myself just because the navigation has been moved to the top. It’s easier to get around and less clicks to do different things. I definitely feel like that factors into it. Obviously, increasing MRR also helps. There’s that.
Rob: That’s a huge motivator and when things are going up in another right, you can put up with a lot of other stuff. That’s the mental battle.
Next, I’m curious about the sealed untestable .NET component. I’m curious on a couple of fronts because when I listen to backdoor conversations, we’ve gotten back and forth. I’ve been like, you should either do this and get it done. Don’t let it hang around. Either decide not to do it or decide to do it and do it soon. It sounds like it keeps you from building features that you need.
Then when I hear this update today where it’s like, “No, you’re selling. You’ve grown MRR substantially.” It makes me think, why are we even talking about this .NET component? Leave it and just keep going. Push it down the line. What’s your current thinking on it?
Mike: I feel the same way. I’ve gone back and forth on it a bunch of times. It’s like, “Do I really need to do that? Do I need to do it now?” The answer is, probably not. Do I want to because it’s technical debt that has been hanging over my head over for a while? It is distracting. I rather have it out of the way but at the same time it is a chunk of work to get done. It’s not stopping the product from doing what it does. I don’t know. I don’t have a great answer for you.
I think if I buckled down, just did it, knocked it out, and got it out of the way, I wouldn’t have to ever worry about it again. Or at least until other stuff happens. I do feel like I would probably have to address it in a semi near future if I’m starting to add in substantially larger accounts just because the back-end I don’t know.
I don’t know how far I can scale it up without adding more servers in which would mean that I need to reengineer how some of that stuff works. At that point, it would be a hornet’s nest to get into that code and start working with it, to try and separate it among multiple servers. I don’t know. I don’t have a great answer for you. I just don’t.
Rob: I don’t either, in this case. Given how limited you are, my bet is to leave it where it is, and sell. Revenue solves everything. In this case, profit really solves everything. In your case, just growing MRR, if you can keep doing that and focus 100% of your time on conversations, 100% of your time on selling, and grow another 50% over the next two months, technically that sucks. I hate it. It’s something you can circle back to.
I think the thing that I’m going to bust your chops about is when you get the point and you’re like, “I need to build these features in order to get these bigger customers on. I can’t because the sealed .NET component is keeping me from doing it. But I still don’t want to do it.” There’s going to come a time where you have to do this, I think. The technical debt is going to sink you, at least based on how you described it.
I think that’s in the bank of my mind of don’t worry about it until you need to. Once you do, buckle down and do it. In two or three weeks, it’s done. You know what I mean? Stop everything. That’s how performance used to go.
Like with Drip, you just don’t do much work on it because you’re cranking on features, you’re selling it, you’re marketing it, you’re doing this stuff, and you’re grow, grow, grow. Then you hit the point where it’s like, “Oh, no. The database is about to fall over.” Unfortunately, it was a fire drill and it was all hands on deck. We pulled people off features, we go and upgrade the database. We do a lot of stuff. It bought us about 4–6 months more. That’s not sustainable. You don’t want to grow a business long-term over that. About the time you’re at $1 million or 20 employees, it’s too much. It’s too jarring and you needed a better process.
But when you’re as early, as scrappy, and as agile as you are, and you’re just trying to get to default alive or you have enough money to basically buy out your own time, I think you just have to. That’s how you have to operate.
Mike: Yeah. I would love to have that off out of the back of my head. For now, I’m kicking it down the road even more.
Rob: Yup. I think when you get there, it would be amazing if you could hire someone to do it. If you could bring in high-end senior engineer, you just bite the bullet, and eat some money. You show him what it is, you say it needed to go from there to there, you write up the spec to tell him exactly how you’re going to do it, and again, it’ll cost you. It’s not a $10 an hour developer.
Mike: Yeah. I hate to interrupt you at that one. I don’t know if I could outsource that. The reason is because there’s a lot of domain knowledge that I acquired based on just having written different prototypes and doing different things that I think would be difficult for somebody else to have or acquire. I’m not saying they couldn’t come up with a plan that I could interject and say, “Hey, if you do it this way, these things are going to break.” I don’t know.
Rob: Yeah, I hear you. Said every developer ever, Mike. This is really hard to do. I know you have domain knowledge. I know it’s not easy. I just think it’s possible and something you should consider.
This is the same thing that I think we both thought about MicroConf, that we brought Zander on. I thought that about marketing before I met people who are way better in marketing than I was. I was like, “I’m the only one that knows how to market this product. All the copies are my own.” Then I’d meet someone and I’m like, “Well, they’re better at this.”
It’s not cut and dry. I don’t really think we should go down this road right now, but it’s something I just know that it’s going to derail you for probably a month if I were to guess. Maybe longer. If you’re going full speed with marketing and sales, and you really are landing customers and growing, it would be a shame for you to have just put the brakes on that and switch over.
Mike: The fortunate thing is I think the way things are, I think you’re right. I think there’s definitely ways for me to make that work. One of which is if I hand it over to somebody, the interesting thing in Bluetick is I have a flag in the database that says, “What version of the backend storage extension are you using? If it’s version one, use this code. If it’s version two, use this code.” I could switch on an individual mailbox level. I could just use my mailboxes like a test, switch it over, and then upgrade it.
If things are working great, I could roll it out slowly to other customers as opposed to doing everything all at once. That’s what the real kicker. It’s a critical core […]. I can do it individually. It took a while to get to that point.
Rob: I think that’s the way you do it. That’s the speed bump way of doing it versus the […] way. Cool. That’s good.
Someone wrote in and made a comment. They asked if you ever took the Enneagram? I sent you, just for the record, I went, and paid $12. I said, “Merry Christmas,” and sent you an email with the link. I’m curious if you took it.
Mike: Yeah. I saw that email and I’m like, “You bastard.” I have no way out of it.
Rob: Because you gave me crap the last time. I was like, “Look. I’ll pay for it Mike. Just take and bust chops, right?” and you’re like, “Oh. No, you won’t.” I was like, “Can I pay for this in advance?” This is the best.
Mike: Yeah, I saw that. I did spent the time. I went through and took it. It was interesting. It was definitely better than the previous time I took it where everything came out even. This time, it gave me a spread of the different types. One that came to the top with a score of 22 was Type 6, the loyalist. Then the next one, both of them was the score of 20, it was Type 9, the peacemaker and Type 1, the reformer.
I read through it. I actually thought it was interesting enough that I printed it out, and I’m going back through it and highlight different things. I felt like after reading through the results and the description of the things, I felt like it was pretty dead on.
Rob: That’s cool. What is a key motivation? You’re like a 6 with 9 or 6 with, what was the third one you said?
Mike: 6 with 9 and 1.
Rob: Yeah. I’m looking through this description. If you’re on a computer, you can just Google Enneagram Type 6 with Type 9 and it will give you a combined thing, like loyalist and peacemaker. Some 6s and 9s find it difficult to say what is actually on their minds. There is a great tendency in this relationship to clam up, to be silently stubborn, defensive, and to make the other person guess what’s going on.
The thing I like about the Enneagram is there’s some positive but they definitely talk about blindspots a lot. Potential trip spots or issues. It can callout things that I think it’s that know yourself and try to figure out how to be better for it. If you think it’s pretty accurate, are there things that you’re going to do or have started doing that you think can help overcome some of these?
Mike: That’s what I was looking at. That’s why I printed it out and I was going back through it. The printout of the results for me was about 20 pages. It’s because there’s the top level one, then there’s two that are tied for second.
Rob: Yeah. That makes it complicated.
Mike: It does make it a little bit more complicated. Then things dropped off after these top three. I have to go through it a little bit more. I plan on highlighting different things that stick out to me, that they resonate really well with me. I just haven’t done that yet.
Rob: Yeah, that’s cool. Do that because I’m curious. The whole point of this was when I took it, some people on a leadership team that I’m on took it, it really dead point out that some of them, they were a couple threes. That’s the achiever, the success-oriented, pragmatic type, driven, images-conscious, their motivation is to achieve. They’re probably never going to stop wanting to achieve. Whether it’s nature or nurture or it’s something their parents said or did to them when they were kids or whether it’s just genetics, that’s what they want.
It was interesting to work with them because I kind of don’t care about that. I don’t need to make a dent in the universe. My thing was creating, building, and doing interesting things. I can’t remember. I was trying to look through, find what my number is. I don’t have the report. My memory’s mind was like a creator. It was a creative type. You’re motivated by creating things, putting them into the world, and having people using them.
Of course, there’s a bunch of negatives to that, too. You can bee too introverted. I don’t know. There’s stuff. All that to say, that was once again a confirmation, it helped me know myself a little more like, “Yeah, that’s right. I do need to be creating things.” I am most excited when I am creating new things rather than taking a company from $5–$50 million. In my opinion, not creating very much. That tends to be the place I really get bored with it, so it’s good for me to know that.
Running things for the long term, building processes, and have them on a scale, I’m going to do the same thing for 5 or 10 years. I can exist in an org like that but I need to be a person that’s creating things. That was the whole point of, “Hey, have you thought about taking it? So you can learn a little bit more about what motivates you.” Really, the motivation you talked about was flexibility. You’re like, “I want the flexibility that entrepreneurship offers.” I’m concerned that that’s just not enough motivation to keep you going when times get really tough and when sleep gets hard.
Mike: Yeah. I think what I like the most about the Enneagram was that it talked about different levels of the personality types. Within the levels, it’s essentially how healthy you are as a person within that level. They say, “If you’re unhealthy, you could turn into this other personality type at this level.” Or, “If you’re healthy, you can turn into this other personality type at a certain level.” I thought that that was the most interesting piece to me.
Like I said, when I was reading through some of these things, it was shocking to me how dead on it was. I’ll read a very little excerpt here from the personality Type 6 where it says, “Sixes do their best to be solid and responsible, but they are often troubled by an undercurrent of doubt and anxiety. In fact, sixes often seem a bit jittery and uneasy in general. They live in a state of worry then find something to worry about.” I’m like, “Yeah, I kind of do that sometimes.”
Like I said, some things just jumped out of me. It’s like that totally describes me. Then there were other ones like, “Yeah. That’s not really me.”
Rob: Yeah, cool. I’m glad you did that. I hope you’ll look through it. Maybe come back through their findings in terms of things that you think might motivate you.
That kind of wraps us up for today. I think the one question that I would like to find out is your high and your low over the past six weeks. Your high sound like the fact that it’s growth. The cold outreach is working. What’s been the lowest point for you, where you felt most discouraged, the biggest loss or whatever?
Mike: I think that implementing the client site. Some of the client-side features that I was working on before which I finished probably shortly after our call was just the trouble I was having with reorganizing the navigation to help better support some of the multi-user functions that I’m adding. That was just a real nightmare. It sucks.
Rob: Discouraging and that was what you touched on last month as you were doing it.
Mike: Yeah, there was that. I think there was one feature that I wanted to get to this other feature to implement. It ended up taking longer to finish the client-side navigation changes. I implemented this feature that allows customers to skip sending emails on public holidays. Christmas, for example. There’s a toggle in there that just says, “Don’t send these emails during the holidays,” and that happens to be one of them. It’s shocking how simple that code was to write on the back-end, but it just took way longer than I wanted it to to get into the product. It didn’t get in until after Christmas, which I really wanted to get in there beforehand, but it is what it is.
Rob: Cool, man. Thanks again for coming back. We’ll circle up with you here in the next month or two.
Mike: Sounds good.
Rob: All right, take it easy.
Mike: All right, bye.
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Episode 480 | Stairstepping Your Way to SaaS with Christopher Gimmer
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Show Notes
In this episode of Startups For The Rest Of Us, Rob talks with Christopher Gimmer of Snappa, about his journey to making SaaS his full-time income. He details how he stair-stepped his way from small apps and products to 7 figure SaaS.
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Rob: In this episode of Startups for the Rest of Us, I talk with Christopher Gimmer about stair-stepping your way to SaaS. This is Startups for the Rest of Us Episode 480.
Welcome to Startups for the Rest of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing ambitious startups, whether you’ve built your fifth startup or you’re thinking about your first. I’m Rob and today with Chris Gimmer, we are here to share our experiences to help you avoid the mistakes we made.
Welcome back to the show. Thanks for joining me this week. Pretty interesting story this week, Christopher Gimmer did a talk at MicroConf Starter back in April. He and his co-founder really stair-stepped. They launched an app that had one-time sales, it was a marketplace. They grew that to where it plateaued which wasn’t enough they could live on, and they saw an opportunity and started a B2C type stock photo site. I guess it’s not B2C, but kind of B2b and used that to parlay into a SaaS app.
I don’t want to belabor it as we get into Chris’ entire experience in the interview. One thing I really liked about Chris’ story is that he and his co-founder learned small things first and they didn’t try to go play in the major leagues when they didn’t have the skills to do that. They went and they played little league, then they went and played highschool ball, then they played college ball, then they played minor leagues, and then they played major leagues, that is that repeatable meticulous disciplined way that I’ve always believed in starting startups.
It’s not trying to raise hundreds of millions and take this bid luckshot that you may or may not have the skills or the confidence or whatever to do, but after listening to Chris’ story, you know that even if he were to exit his company today that he has the skill set that he can take with him to the next thing and it becomes this repeatable startups, building real products, selling to real customers for real money. Without further ado, let’s dive into our conversation.
Christopher Gimmer, thank you so much for joining me on this show today.
Christopher: Thanks for having me.
Rob: We are here today to talk about Snappa. Your startup that’s at snappa.com and your headline is, “Create online graphics in a snap. Whip up graphics for social media, ads, blogs and more even if you are not a graphic designer.” You did a talk about nine months ago at MicroConf Starter and it was a really interesting tale of your journey with your co-founder across six or seven years, multiple apps to how you got to where you are today. You and I were just talking before with a call, that you expect to hit a million dollars in ARR in the next month or two. Congratulations on that.
Christopher: Thanks very much.
Rob: You guys launched Snappa in November of 2015. You had $4000 MRR at the end of the first month, is that right?
Christopher: Yeah, we have built up a bit of a list before we officially launched and we had a beta period, so we had an audience launch too. Within a month of launching, we did hit about $4000 in MRR.
Rob: Which is obviously good. We are going to dig into that in this episode of how you got there and how you parlayed and stair-stepped your way up multiple apps. It’s a pretty interesting story. By April of 2019 which is about nine months ago, you guys were about $62,000 MRR, that’s what you mentioned in the talk and then you are just about to hit the magic $83,333.33 and for those who wanted to know, that is one million ARR.
It sounds odd when you say it in MRR, but in ARR it’s so cool to say, “Yeah, I run a seven figure business.” You are looking forward to that day?
Christopher: Yeah. Marc (my co-founder) and I remember when we first started Snappa, we are like, “Man, if we could just get to $10,000 MRR, life would just be magical.” Obviously, you end up hitting that and then everyone just talks about the $1 million in ARR and the seven figure. Once we […] full-time on Snappa and we are making a living off it, that next yardstick is super arbitrary, but I love to get to that $1 million ARR. So, we’ll definitely celebrate when we hit it most likely next month.
Rob: That’s cool. Do you have plans of what you’ll do? Are you and your co-founder remote? Are you able to get together and have a glass of champagne together?
Christopher: We both live in Ottawa. We are pretty much like bestfriends so we hang out quite a bit. We might do something special, we haven’t planned exactly what yet, but we will definitely do something.
Rob: If there’s anything I’ve learned from my wife who is (for folks who do not know) Sherry Walling, she’s a psychologist and she works with founders is to celebrate those wins because they are (unfortunately) few and far between. There’s a lot more struggle than there is the wins and I have never been good at celebrating the wins. She has forced me to do it and I think it’s a good thing for everybody. Frankly, the win is not just you and your co-founder. It’s like taking your wife out to dinner or your fiancée out to a great dinner or a great trip.
That’s the thing, the whole family had to put up with me when I was growing up my app. I’m sure your girlfriend (now your fiancée) has had to put up with a lot of crap from you as well. I think we all deserve to have those wins when they come in.
Christopher: Yeah, definitely. She’ll be excited to hear that.
Rob: Yeah, totally. Something about your story lines up with both stair-stepping that I talk about a lot, but also this concept or quote that I keep throwing out of, “Doing things in public creates opportunity.” You went through multiple apps to get to where you are now. You had one in 2012 that is unrelated, but was it in 2013 where you launched BootstrapBay?
Christopher: It was 2014.
Rob: That was a theme marketplace for bootstrap which is a CSS Framework. Tell me about how you guys thought what the goal was there in launching that. Was it, “We want to launch a business. Very much the dream of us is to get to the point where it’s supporting us full-time”?
Christopher: Yeah, that was definitely the goal of BootstrapBay. Marc and I were actually both working in the government. That’s how we met and it was funny because we were two of the youngest guys in the office. Naturally, we just started hanging out and became friends.
One day, Marc pulled me into his office and he was like, “I want to show you something.” It was almost a Zillow type of website, like a real estate website, and I was like, “Wow, you can actually program.” I had no idea because he was doing something not related at work. That kicked off the journey of me and him just trying to figure stuff out and see if we can launch a business that could enable to support our jobs.
The goal of BootstrapBay was something that we could do while we are still working in our jobs full-time and hopefully the idea was we can make enough money from it so that we can quit and go full-time on it. It wasn’t necessarily a project that we are super passionate about and that we were planning on running for the next 10 or 20 years.
Rob: That’s interesting. Why start it as a marketplace where you have to essentially get buyers and sellers rather than build out a bunch of your themes and sell them. You are basically a digital product company instead of a marketplace.
Christopher: Essentially, funnily enough we started reading about keyword research and SEO. Initially, we are actually looking for things that we can draw up […] or whatever. Marc stumbled across this bootstrap themes and bootstrap templates as a keyword that was getting a lot of search volume. At the time didn’t have crazy competition like ThemeForest, then you can have its own own bootstrap category. There was one major market place at that time which is called WrapBootstrap. I think it’s still really big today. For a variety of reasons and being super naive, we thought we could build something better than this.
In order to exceed the market place, Marc designed the first three or four themes. But we just thought it would be more scalable if we were able to get other theme authors on board and add more supply to the market place than we could generate on our own. That’s how it happened.
Rob: Was BootstrapBay a successful business? Can you give us an idea of how much revenue it brought in for you?
Christopher: The peak month was during about $8000 to $10,000. Once we paid out all the theme authors, I think we are profiting maybe $4000 or something. It was maybe a decent side hustle business, but we essentially got to the point where we are having trouble growing strictly through our SEO because our margins and lifetime value wasn’t high enough. We just couldn’t put any money into paid ads. We just started plateauing after a bout a year. We knew it was going to be an uphill battle from there which was why we started thinking about other stuff that we can launch.
Rob: No recurring revenue and the funnel is only so wide. There’s only so many people searching for bootstrap themes.
Christopher: The other problem was (like I mentioned) being the top marketplace and as you know, […] and it was something I learned after the fact is when you are the dominant marketplace and you got the first […] advantage, it was just so hard to unsee them, so we were ranking number two or three and the number one guy was just cleaning up. We knew it was going to be a really tough battle. One that we really didn’t want to keep fighting.
Rob: As you said, a nice side hustle because obviously $4000 a month is nothing to sneeze at. I have this concept of four competitive advantages when you launch a SaaS app. One is who you know, so it’s your network. The second is who knows you, so it’s your audience. The third is being early to a space, say Josh with Barametrics was early. In this case you guys were early. You were able to get in. You weren’t the first, but you were early enough that you were able to get in. Can you imagine launching a bootstrap themes marketplace now?
Christopher: It would be really difficult. We were even too late, but we were still early enough where the really big players hadn’t specifically focused on it. If we were to do that today, there’s no way we would have gotten any traction at all, quite frankly.
Rob: Yeah, It’ll be painful. You plateaued with that business and I think of it as a step one if I were to overlay this stair-step approach in bootstrapping. It was a nice step one on business. It brought in non recurring revenue. It brought in enough money that it made it worthwhile and it was a success. You gained experience, probably gained confidence in your skills both you and your co-founder.
You had a little bit of audience, I’ll say. Not audience in the blog or podcast type where people are looking at you as a personal brand but audience in the sense of traffic. You just had a lot of traffic coming in. Then you built out your SEO and your content skill set. You went from there and you started a StockSnap, stocksnap.io. Can you tell us about the unique opportunity you almost stumbled upon that led you from BootstrapBay to StockSnap?
Christopher: One of the ways we ended up growing BootstrapBay was primarily through content marketing and SEO. We ended up writing a blogpost about where to find free stock photos. This is when a lot of these really new creative comments started popping up like on […] today are really big. So when we had written that blogpost of where to get free stock photos, we started sharing it around Reddit, social media and whatnot. Out of all places, it went viral on StumbleUpon which I don’t even know if that site still exists today.
Next thing you know, we start ranking on the first page of Google for free stock photos. I figured it out at some point that would die off, but the traffic just kept increasing month over month. We were in this interesting position where we are getting so much traffic with just this one blogpost and we looked at all the websites that were linking to at the time and we noticed—again this is in the early days—that none of them had search functionality. A lot of them were releasing 10 new photos every 10 days or something to that effect. We thought, “Why don’t we just create our own stock photo site that you can actually search?”
Marc went ahead and I think it took them about three months and he ended up building what became StockSnap. Of course because we have all of that traffic coming to the blogpost, we just linked to ourselves as source and the next thing you know, we started getting a bunch of traffic to stocksnap.io.
Rob: At that point, were you thinking, “We want to start another business. BookstrapBay has plateaued and we are going to autopilot it. If we launch StockSnap, we are going to turn that into a business”? Or was it just a fun larch that you went, “Hey, I got all this traffic might as well put a website up”?
Christopher: Yes, that was the thinking. At this point, BootstrapBay was plateauing. We knew that it wasn’t going to be the business that would enable us to quit our jobs and everything. We just saw this opportunity and we knew that a free stock photo site is just something that is always going to have value. We just saw it as an opportunity that is like, “Hey, if we build this up now and we start getting a lot of traffic to this website, we will almost certainly be able to either monetize the website itself through ads or use that as a springboard to launch some other app down the road.”
To be honest, we started thinking about SaaS at that point and I had this idea in the back of my head for this graphic design tool for marketers or entrepreneurs, if you will, because I was always struggling to put these images together whenever I needed to add a featured image to whatever blogspot. That was the thinking of, “We are getting all this traffic to the blog post. Why not divert some of it to one of our properties which could be very valuable to us down the line?”
Rob: That makes sense. Did you wind up making revenue from StockSnap?
Christopher: Yes. After we launched StockSnap, like I said at that point we really started exploring the idea of a SaaS app which obviously became Snappa. I think we had one […] ad placement or something like that, which was bringing in maybe $1000 or $2000 a month in advertising, but almost from the start, we started using StockSnap as a way of promoting Snappa as opposed to really trying to monetize the website as much as we can.
Rob: That makes sense. With BootstrapBay and StockSnap, obviously people know the end result that you started Snappa […]. Do you still own those other properties or did you exit from them?
Christopher: We ended up selling them off. StockSnap was a bit of a more difficult decision in the sense that it’s still bringing in quite a bit of traffic, but when we first launched Snappa, probably 80% or maybe 90% of our leads were coming in from StockSnap whereas by the time we sold it, I think it only made up 10% or 15% of our leads because we had really built up our content and SEO and word of mouth. At that point, we decided that it just makes much more sense to put a bunch of cash in our bank account and focus on one thing as opposed to trying to maintain two separate properties.
Rob: That makes sense and by that time you had a SaaS app that you are focused on which we know takes a lot of attention. I’m curious. We glossed over several years of work here. We almost made it sound easy, like you stumbled into this thing and you ranked number one in Google for this free stock photos, which is very hard to do. In my experience, this kind of stuff is a grind, especially when you are learning it from scratch. Learning SEO to get as good as you guys are as well as content side of things, that’s really what your wheelhouse has become, is this social promotion of getting organic traffic for high competition terms.
How long did that take you to learn and did you feel like it was something where you are just grinding it out, not getting results for a while and it suddenly clicked? Or what is that process like?
Christopher: As you mentioned at the top of the interview, the first thing we ever launched back in 2012 was actually a […] website. Without going to much into it, that was basically a year of work that was not successful ultimately. Then there is actually another app in 2013 which didn’t go anywhere. There is basically two years that we are working on stuff and we got absolutely nowhere. I think a lot of people might have just given up at that point. So before BootstrapBay is when I realized I don’t know what I’m doing regards to marketing and I just read tons of blogpost and listened to tons of podcasts and videos.
At least with BootstrapBay at that point, I had built up some knowledge in terms of how to do it, but obviously you have to put that practice into motion. But even with BootstrapBay, the first three or four months, as you know SEO takes a long time. It was a lot of trial and error. A lot of blogpost didn’t end up working out, but the more you try and the more content you put out there, you start to realize what works and you get a little bit of process and a little bit of formula going.
I would say about six month to a year into it, at least in BootstrapBay we started figuring out the content side of things. With that being said, we did plateau and what was the next frustrating thing was we are a year into this business, it’s still spinning off a couple of thousand for the both of us. How are we going to get to that next level? At that time, we didn’t know that everything will work out, but we start questioning, “Is it worth it? Should we really be spending our nights and weekends trying to get this going?” We just have to persevere.
Rob: That’s what I like about your story is you really didn’t have these marketing skills and you went out and through founder forum you just learned things that were probably difficult trial and error. You grounded out and you start this site and it’s in a small niche. I’ll say bootstrap is not the most massive niche in the world and you learned the skill set in a less competitive space.
You didn’t start an ESP. You didn’t start a CRM. You didn’t start some massive SaaS app as your first effort. You started a couple of small things, BootstrapBay gets some traction, then you learned SEO and content really well, and then StockPhotos is one level harder than that. The Snappa stuff is still on the same boat, but it’s a very wide funnel, and if you didn’t have the four or five years of learning before that, starting Snappa would have been really hard without the skills. Do you think you could have even succeeded without the knowledge you have gained from the other failed and successful efforts?
Christopher: I think there’s two things that made Snappa successful. Number one was everything that you alluded to. The first couple of things that we launched, we just didn’t really know what we are doing. It took awhile to really learn those content and SEO skills and how to get traction. Just how to actually grow a software application or any kind of website to be frank.
The second thing that made it possible was having that existing funnel of traffic through StockSnap. As you know, the lower the price point, the more customers you need to make an app sustainable. It would have been extremely difficult if day one of launching Snappa we have no existing list or no existing user base that we can tap into to kind of get that going. That’s really why we were able to get up to $4000 MRR just after a month, because we had all of that list and that user base built up already.
Rob: Talk to me then about Snappa. You mentioned in your MicroConf talk, I remember you mentioned it. You built it to solve a problem that you yourself were facing. What was that problem?
Christopher: As you mentioned, I was doing a lot of content marketing for BootstrapBay. For each blog post, we need to create a featured image, and also some images within the content itself. I was doing a lot of this stuff and Photoshop. We didn’t really have the money at the time to hire a designer. Mark was pretty good with Photoshop, but he’s working on development which is more of a top priority.
I just thought, “Man, it would be nice if there was a tool that just made a lot of this easier.” When I did some brief market research at that time, I found that the tools are either too simplistic—it was essentially a code generator—or they were still too complicated. I thought there was a need to create something that was kind of in the middle where it was still super easy to use but still not overly complicated, that really anyone can just pick up and use it.
Rob: Talk me through the customer development you did to validate that, because there’s the old adage, “You should build stuff for yourself, solve a problem you have,” but I always caveat that with, “Yeah, but make sure other people have it, too, and make sure they’re willing to pay for that.” How did you do those things?
Christopher: Because we had StockSnap, we had an email list of people. The first thing that I did was email our list and just asked what they were using their stock photos for. As I kind of expected, a good percentage of those were using it for either social media or content marketing, which was kind of our target audience or what we thought would be our target audience.
For the people that did answer saying that they were using it for content and social media, I asked if anyone would be willing to hop on at 10-15 minute call just to learn about how they’re using the software, those and whatnot.
I ended up getting a call with (I think) around 15-20 people in the end. I was just asking them questions about exactly what they’re using the photos for and then going a step further in terms of what tools they were currently using to create graphics, what their process was like, who’s involved with that process, and taking a lot of the questions that I learned from the Lean Customer Development book.
The number one takeaway from that book is basically not to ask leading questions. I never once asked, “Hey, this is what I’m building, do you think this is a good idea?” or any kind of those leading questions. I was essentially trying to see if they would mention (without me poking them) whether or not they had pain points with the existing solutions.
After about 15-20 of those calls, a lot of people did mention or said things like, “Yeah, right now I’m using Photoshop and it’s a huge pain and takes too much time,” or, “Yeah, I tried this app out, but it’s not really that great,” or, “Yeah, we use an in-house graphic designer, but the turnaround time is sometimes 2-3 days. I wish I can just do it myself.”
When I heard enough of those kinds of comments, it gave us enough confidence to at least go ahead and start building some sort of MVP for Snappa.
Rob: Super cool. Mark is a developer. Did he just sit down and start hacking it out?
Christopher: Yeah, that was pretty much it. Like I said, we’ve built things in the past that didn’t really work out. We wanted to make sure that there is going to be a market for this because this is by far going to be the biggest and most complicated thing that he’s ever built. We wanted to really make sure that this could be a viable business. Once we had that validation, then Mark went ahead and just locked himself in the basement and started hacking away.
Rob: It feels like the story kind of writes itself from there. You have a lot of SEO and content skills. You applied that, you cross promoted from StockSnap, you had this existing audience, existing traffic sources that you then promoted in order to grow Snappa. I am curious. A couple of things, a couple of questions that I want to touch on before we wrap. One is, early on you said, “When we first started talking about building an app, we said, ‘Wouldn’t it be magical to hit $10,000?’” Was it magical when you hit $10,000?
Christopher: Yeah, it was actually. I don’t remember if it was exactly $10,000 but it was magical the moment that we knew that this was going to sustain us. We didn’t have to go back to our jobs, the business has legs. At some point, we would be able to probably hire more team members just to know that we had done it. It had taken us, like I said, the first thing we had launched in 2012. This is several years in the making. It truly did feel magical and we still feel very fortunate today that we’re able to do this.
Rob: Yeah, I agree. How large is your team at this point?
Christopher: Now we have four full-time team members and they’re awesome. Another thing that I really didn’t anticipate was how much more fun it is working with a team. We’re really fortunate to have such awesome people working with us at this point. We have four full-time and then we also work with a couple like freelancers and writers and stuff like that.
Rob: That’s good, that’s a pretty capital-efficient business to only have four folks working on it. Another question for you is your price points. On an annual basis, you’re $10 and $20 a month on a monthly basis, you’re $15 and $30. When I see an app like that, I think ouch. You’re probably going to have (just from the outside, I don’t know all your numbers) high churn, I would expect a low average revenue per user, which means you’re pretty limited in how you can market like you’re not going to run AdWords as an example because you don’t have the lifetime value. How has that been? Am I relatively on the mark? How has that been for you guys?
Christopher: Well, 100% you’re definitely on the mark. As you can imagine, we have probably higher churn than some of the other apps or founders that you’ve had on the show and that just goes with the territory of the low price point. That’s always been a challenge and enough reason why we had to get really good in organic (in particular) and why we focus a lot of time and effort on content marketing and SEO.
At this point, we don’t do any paid advertising whatsoever. We really do rely on word of mouth, SEO, and content, just giving a really good experience so that people talk about us. We get mentioned in blog posts and just have a sustainable and repeatable way of acquiring users.
One thing that’s interesting, though, that maybe not a lot of people think about is I think you had the founder of, was it Userlist that you had? That you were talking to a couple…
Rob: Jane Portman?
Christopher: Yeah. It was funny because I remember she was talking about how it’s difficult to get people to either try the app or switch to Userlist. I think on one hand, it’s really nice to have a low churn app, because once they kind of get in, usually they stick around and maybe it’s easier to build a sustainable business that way. But on the other hand with an app like Snappa, we’re premium, you can try it out, and really within a couple of minutes of even trying out Snappa, you’re going to know whether it’s going to provide value to you. The flip side of high churn is that our activation rates and the top of the funnel converts super well. That’s one thing that maybe some people don’t consider with these types of apps.
Rob: Yeah, there’s almost no switching cost. It’s just learning which buttons to click, but they don’t have to migrate stuff over. I agree, I think that’s a real advantage to it and I think longer term, I think an app like a Userlist or my experiences with Drip was, there was a lot of switching cost. It was harder to get people in. The churn was really low once they got in, but you’re right, the growth was tough. The growth was hard fought, but once you got that growth, it was there. It was locked in.
I think that’s where it cuts two ways. At Snappa, your funnel is so much wider. The number of people that visit your website, the number of people that sign up for a trial, and the number of people that probably start paying you is astronomically higher than what we had at Drip, as an example. I think that that is a unique advantage especially when your skill set is SEO and content, which tend to be wide funnel things. Not always, but especially in these spaces, you’ve been playing deliberately, these are wide funnels. That allows you to have this low price point and it allows you to not need to run ads but still grow business to seven figures.
Christopher: Yeah, I’d say that’s super accurate. Don’t get me wrong with low churns to go along with what we have. You learn that the market that you choose (to some extent) controls how high a churn’s going to be and that kind of stuff. We’ve learned to just embrace and accept it, and just stick to our lane, so to speak.
Rob: Yeah, it makes sense. I’m going to assume that if we look back, let’s say over the past year or even I guess ahead two months, you’re about to hit $1 million in ARR and I’m going to assume that that might be the high point of the year in terms of the business. What was a low point or the hardest part about the past year? A specific time that you felt like you were really grinding it out.
Christopher: I would say the last year. There wasn’t too much low point, but in 2018, I think it was around 2018, growth is really slow and we’re ready to start to plateau. At that point, we had, I don’t know if it was a combination of shiny object syndrome or we were so scared of competition because there’s actually quite a bit of competition in our space and we have a lot of really well-funded competitors.
We went down this rabbit hole of, we need to find a new business or we need to find another route because at some point, we’re just going to plateau and we’re not going to grow. I think we really took our eye off the prize, so to speak. That was a really tough year just seeing growth plateauing a little bit, trying to get these other projects and spinning our wheels there. I think that was tough.
In 2019 funny enough, we realized, “Hey, we’re in a really good position. We have this app.” I almost felt like we were taking it for granted or we realized that we were taking it for granted, so we said, “We’re not going to start any new side projects. We’re going to buckle down, we’re going to figure out how to get growth back on track.” We really focused back on the business and we promised ourselves that we would never consider launching another project until we hit $1 million ARR. It’s funny how that worked out.
Rob: Yeah, that makes sense, just refocusing. That’s the thing, these founder stories are almost never straight lines. It’s very, very rare. You hear the myth of people starting whatever, Uber, Facebook, Lyft, these big companies and they do a lot of side projects, there was a lot of uncertainty, and I think our stories in our own ecosystem are very similar where you often have multiple projects going at once. You don’t really know which one’s going to succeed often and you’re just trying to figure it out as you go.
I think the last question before we wrap is, you mentioned something to me about a pricing experiment that you ran, that goes against that “charge more” idea. As I said, when we talked about it, well yeah, you can always charge more until you can’t, or until people aren’t willing to pay that. There’s always a ceiling to this stuff. Talk us through what you did with your annual and your monthly pricing, and how that worked out.
Christopher: I’ve obviously been to a few MicroConfs now and one of our recurring themes is always to charge more. I’ve just always been really scared to do that again, especially because we’re serving the lower end of the SMB market. We’re in a really competitive space, but I thought, whatever. There’s enough people telling me to just charge more. We’ll go ahead and run the experiment.
What we did was we kept our annual price the same which is $120 a year for the program and then we bumped up the price of the monthly prescription from $15 to $19 a month. We were thinking more people and to send the annual plan which would obviously help out with the churn. Assuming that our conversion stay relatively the same because we’re getting the $19 a month price point even if the churn is a bit higher, all in all it should work out.
After running that—we ran it for a couple months—we realized pretty quickly that the churn had just spiked up way too high for our comfort, and the conversion rates had actually dropped more than we had anticipated. We ended up reverting back to the pricing.
I’m glad that we ran the experiment because at least now we can put that to rest, but it was just more proof that charge more, or charge less, or whatever isn’t always the best advice. It’s really a case-by-case basis, and that it just depends on a variety of factors really.
Rob: Sure. Charge more is a really great advice if you’ve never heard it before, because most people tend to charge too little when they launch. Most of us think our apps are not worth what they actually are. It’s definitely good advice. But obviously, the further you get in, if you’ve experimented, if you know your customers, there’s a certain point where pricing elasticity may or may not be there, and you’re also in a pretty price-sensitive space. You’re in a prosumer, I’d like to think one notch above consumers, so there’s going to be price sensitivity there.
The lesson I take away from it is: (a) experiment because now you know. You don’t have to think about it every month, every week, “Should I be charging more?” and, (b) you were scared to do it, but you did it anyway, and it sounds like it was a relatively easy experiment to undo which are the best. You just revert back. You just change the pricing back. Now, you have one cohort of people or something who are paying a little less I’d imagine, but that’s a small price to pay to have the knowledge that you probably are towards the top of your range right now.
Christopher: Yeah, for sure. The way that we did it was basically any new customers, they would see that new price point, and then once we reverted back, if there were any customers that were on that $19 a month plan, we just put them back on that $15 month. Now there’s no one on that increased price. It was a relatively safe way to do it and obviously, there’s no backlash as a result.
Rob: Yeah, that makes sense. I said people paying less at the pricing reverse, but whatever. Cool. We’re going to wrap up. If folks want to check out Snappa, it’s at snappa.com just like it sounds. You are @cgimmer on Twitter. Any place else folks should check out?
Christopher: That’s about it. I’m trying to make an effort to do more blogging on my personal site this year chrisgimmer.com. There’s only a few posts on there. Twitter is probably the best place for now.
Rob: Aren’t we all trying to blog a little more? I say that every year. It’s just so hard to find the time to write.
Christopher: Yeah. Essentially, my goal for this year is one post a month which I think is super reasonable and I think I’ll be able to hold myself to that and then we’ll see how that goes.
Rob: Sounds good man. Thanks again for coming on the show.
Christopher: My pleasure. I’m a huge fan of the podcast, so I’m happy to be on here.
Rob: Awesome. Thanks again to Chris for coming on the show. If you have a question, if you’re curious about part of Chris’s story, if you have questions about SEO or content marketing, feel free to either tweet me @robwalling or send them into questions@startupsfortherestofus.com. If I get questions, I might invite Chris back on the show to share some of the skills, because he has hard technical skills in this SEO and content space, and he’s done a lot to grow. This business has really wide funnels and has a lot of knowledge there. If you want to hear more about that, I’m happy to have another conversation with Chris.
You can also leave me a voicemail at (888) 801-9690 or just email that question to our email address and attach a file via Dropbox or Google Drive. This podcast’s theme music is an excerpt from We’re Outta Control by MoOt. It’s used under Creative Commons. Subscribe to us by searching for Startups and we would love a 5-star review in whatever pod catcher you use. If you want a full transcript to this episode, wait a couple of days after it goes live then head to startupsfortherestofus.com, full, searchable transcripts of every episode. Thank you for listening. I’ll see you next time.
Welcome to Startups for the Rest of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing ambitious startups, whether you’ve built your fifth startup or you’re thinking about your first. I’m Rob and today with Chris Gimmer, we are here to share our experiences to help you avoid the mistakes we made.
Welcome back to the show. Thanks for joining me this week. Pretty interesting story this week, Christopher Gimmer did a talk at MicroConf Starter back in April. He and his co-founder really stair-stepped. They launched an app that had one-time sales, it was a marketplace. They grew that to where it plateaued which wasn’t enough they could live on, and they saw an opportunity and started a B2C type stock photo site. I guess it’s not B2C, but kind of B2b and used that to parlay into a SaaS app.
I don’t want to belabor it as we get into Chris’ entire experience in the interview. One thing I really liked about Chris’ story is that he and his co-founder learned small things first and they didn’t try to go play in the major leagues when they didn’t have the skills to do that. They went and they played little league, then they went and played highschool ball, then they played college ball, then they played minor leagues, and then they played major leagues, that is that repeatable meticulous disciplined way that I’ve always believed in starting startups.
It’s not trying to raise hundreds of millions and take this bid luckshot that you may or may not have the skills or the confidence or whatever to do, but after listening to Chris’ story, you know that even if he were to exit his company today that he has the skill set that he can take with him to the next thing and it becomes this repeatable startups, building real products, selling to real customers for real money. Without further ado, let’s dive into our conversation.
Christopher Gimmer, thank you so much for joining me on this show today.
Christopher: Thanks for having me.
Rob: We are here today to talk about Snappa. Your startup that’s at snappa.com and your headline is, “Create online graphics in a snap. Whip up graphics for social media, ads, blogs and more even if you are not a graphic designer.” You did a talk about nine months ago at MicroConf Starter and it was a really interesting tale of your journey with your co-founder across six or seven years, multiple apps to how you got to where you are today. You and I were just talking before with a call, that you expect to hit a million dollars in ARR in the next month or two. Congratulations on that.
Christopher: Thanks very much.
Rob: You guys launched Snappa in November of 2015. You had $4000 MRR at the end of the first month, is that right?
Christopher: Yeah, we have built up a bit of a list before we officially launched and we had a beta period, so we had an audience launch too. Within a month of launching, we did hit about $4000 in MRR.
Rob: Which is obviously good. We are going to dig into that in this episode of how you got there and how you parlayed and stair-stepped your way up multiple apps. It’s a pretty interesting story. By April of 2019 which is about nine months ago, you guys were about $62,000 MRR, that’s what you mentioned in the talk and then you are just about to hit the magic $83,333.33 and for those who wanted to know, that is one million ARR.
It sounds odd when you say it in MRR, but in ARR it’s so cool to say, “Yeah, I run a seven figure business.” You are looking forward to that day?
Christopher: Yeah. Marc (my co-founder) and I remember when we first started Snappa, we are like, “Man, if we could just get to $10,000 MRR, life would just be magical.” Obviously, you end up hitting that and then everyone just talks about the $1 million in ARR and the seven figure. Once we […] full-time on Snappa and we are making a living off it, that next yardstick is super arbitrary, but I love to get to that $1 million ARR. So, we’ll definitely celebrate when we hit it most likely next month.
Rob: That’s cool. Do you have plans of what you’ll do? Are you and your co-founder remote? Are you able to get together and have a glass of champagne together?
Christopher: We both live in Ottawa. We are pretty much like bestfriends so we hang out quite a bit. We might do something special, we haven’t planned exactly what yet, but we will definitely do something.
Rob: If there’s anything I’ve learned from my wife who is (for folks who do not know) Sherry Walling, she’s a psychologist and she works with founders is to celebrate those wins because they are (unfortunately) few and far between. There’s a lot more struggle than there is the wins and I have never been good at celebrating the wins. She has forced me to do it and I think it’s a good thing for everybody. Frankly, the win is not just you and your co-founder. It’s like taking your wife out to dinner or your fiancée out to a great dinner or a great trip.
That’s the thing, the whole family had to put up with me when I was growing up my app. I’m sure your girlfriend (now your fiancée) has had to put up with a lot of crap from you as well. I think we all deserve to have those wins when they come in.
Christopher: Yeah, definitely. She’ll be excited to hear that.
Rob: Yeah, totally. Something about your story lines up with both stair-stepping that I talk about a lot, but also this concept or quote that I keep throwing out of, “Doing things in public creates opportunity.” You went through multiple apps to get to where you are now. You had one in 2012 that is unrelated, but was it in 2013 where you launched BootstrapBay?
Christopher: It was 2014.
Rob: That was a theme marketplace for bootstrap which is a CSS Framework. Tell me about how you guys thought what the goal was there in launching that. Was it, “We want to launch a business. Very much the dream of us is to get to the point where it’s supporting us full-time”?
Christopher: Yeah, that was definitely the goal of BootstrapBay. Marc and I were actually both working in the government. That’s how we met and it was funny because we were two of the youngest guys in the office. Naturally, we just started hanging out and became friends.
One day, Marc pulled me into his office and he was like, “I want to show you something.” It was almost a Zillow type of website, like a real estate website, and I was like, “Wow, you can actually program.” I had no idea because he was doing something not related at work. That kicked off the journey of me and him just trying to figure stuff out and see if we can launch a business that could enable to support our jobs.
The goal of BootstrapBay was something that we could do while we are still working in our jobs full-time and hopefully the idea was we can make enough money from it so that we can quit and go full-time on it. It wasn’t necessarily a project that we are super passionate about and that we were planning on running for the next 10 or 20 years.
Rob: That’s interesting. Why start it as a marketplace where you have to essentially get buyers and sellers rather than build out a bunch of your themes and sell them. You are basically a digital product company instead of a marketplace.
Christopher: Essentially, funnily enough we started reading about keyword research and SEO. Initially, we are actually looking for things that we can draw up […] or whatever. Marc stumbled across this bootstrap themes and bootstrap templates as a keyword that was getting a lot of search volume. At the time didn’t have crazy competition like ThemeForest, then you can have its own own bootstrap category. There was one major market place at that time which is called WrapBootstrap. I think it’s still really big today. For a variety of reasons and being super naive, we thought we could build something better than this.
In order to exceed the market place, Marc designed the first three or four themes. But we just thought it would be more scalable if we were able to get other theme authors on board and add more supply to the market place than we could generate on our own. That’s how it happened.
Rob: Was BootstrapBay a successful business? Can you give us an idea of how much revenue it brought in for you?
Christopher: The peak month was during about $8000 to $10,000. Once we paid out all the theme authors, I think we are profiting maybe $4000 or something. It was maybe a decent side hustle business, but we essentially got to the point where we are having trouble growing strictly through our SEO because our margins and lifetime value wasn’t high enough. We just couldn’t put any money into paid ads. We just started plateauing after a bout a year. We knew it was going to be an uphill battle from there which was why we started thinking about other stuff that we can launch.
Rob: No recurring revenue and the funnel is only so wide. There’s only so many people searching for bootstrap themes.
Christopher: The other problem was (like I mentioned) being the top marketplace and as you know, […] and it was something I learned after the fact is when you are the dominant marketplace and you got the first […] advantage, it was just so hard to unsee them, so we were ranking number two or three and the number one guy was just cleaning up. We knew it was going to be a really tough battle. One that we really didn’t want to keep fighting.
Rob: As you said, a nice side hustle because obviously $4000 a month is nothing to sneeze at. I have this concept of four competitive advantages when you launch a SaaS app. One is who you know, so it’s your network. The second is who knows you, so it’s your audience. The third is being early to a space, say Josh with Barametrics was early. In this case you guys were early. You were able to get in. You weren’t the first, but you were early enough that you were able to get in. Can you imagine launching a bootstrap themes marketplace now?
Christopher: It would be really difficult. We were even too late, but we were still early enough where the really big players hadn’t specifically focused on it. If we were to do that today, there’s no way we would have gotten any traction at all, quite frankly.
Rob: Yeah, It’ll be painful. You plateaued with that business and I think of it as a step one if I were to overlay this stair-step approach in bootstrapping. It was a nice step one on business. It brought in non recurring revenue. It brought in enough money that it made it worthwhile and it was a success. You gained experience, probably gained confidence in your skills both you and your co-founder.
You had a little bit of audience, I’ll say. Not audience in the blog or podcast type where people are looking at you as a personal brand but audience in the sense of traffic. You just had a lot of traffic coming in. Then you built out your SEO and your content skill set. You went from there and you started a StockSnap, stocksnap.io. Can you tell us about the unique opportunity you almost stumbled upon that led you from BootstrapBay to StockSnap?
Christopher: One of the ways we ended up growing BootstrapBay was primarily through content marketing and SEO. We ended up writing a blogpost about where to find free stock photos. This is when a lot of these really new creative comments started popping up like on […] today are really big. So when we had written that blogpost of where to get free stock photos, we started sharing it around Reddit, social media and whatnot. Out of all places, it went viral on StumbleUpon which I don’t even know if that site still exists today.
Next thing you know, we start ranking on the first page of Google for free stock photos. I figured it out at some point that would die off, but the traffic just kept increasing month over month. We were in this interesting position where we are getting so much traffic with just this one blogpost and we looked at all the websites that were linking to at the time and we noticed—again this is in the early days—that none of them had search functionality. A lot of them were releasing 10 new photos every 10 days or something to that effect. We thought, “Why don’t we just create our own stock photo site that you can actually search?”
Marc went ahead and I think it took them about three months and he ended up building what became StockSnap. Of course because we have all of that traffic coming to the blogpost, we just linked to ourselves as source and the next thing you know, we started getting a bunch of traffic to stocksnap.io.
Rob: At that point, were you thinking, “We want to start another business. BookstrapBay has plateaued and we are going to autopilot it. If we launch StockSnap, we are going to turn that into a business”? Or was it just a fun larch that you went, “Hey, I got all this traffic might as well put a website up”?
Christopher: Yes, that was the thinking. At this point, BootstrapBay was plateauing. We knew that it wasn’t going to be the business that would enable us to quit our jobs and everything. We just saw this opportunity and we knew that a free stock photo site is just something that is always going to have value. We just saw it as an opportunity that is like, “Hey, if we build this up now and we start getting a lot of traffic to this website, we will almost certainly be able to either monetize the website itself through ads or use that as a springboard to launch some other app down the road.”
To be honest, we started thinking about SaaS at that point and I had this idea in the back of my head for this graphic design tool for marketers or entrepreneurs, if you will, because I was always struggling to put these images together whenever I needed to add a featured image to whatever blogspot. That was the thinking of, “We are getting all this traffic to the blog post. Why not divert some of it to one of our properties which could be very valuable to us down the line?”
Rob: That makes sense. Did you wind up making revenue from StockSnap?
Christopher: Yes. After we launched StockSnap, like I said at that point we really started exploring the idea of a SaaS app which obviously became Snappa. I think we had one […] ad placement or something like that, which was bringing in maybe $1000 or $2000 a month in advertising, but almost from the start, we started using StockSnap as a way of promoting Snappa as opposed to really trying to monetize the website as much as we can.
Rob: That makes sense. With BootstrapBay and StockSnap, obviously people know the end result that you started Snappa […]. Do you still own those other properties or did you exit from them?
Christopher: We ended up selling them off. StockSnap was a bit of a more difficult decision in the sense that it’s still bringing in quite a bit of traffic, but when we first launched Snappa, probably 80% or maybe 90% of our leads were coming in from StockSnap whereas by the time we sold it, I think it only made up 10% or 15% of our leads because we had really built up our content and SEO and word of mouth. At that point, we decided that it just makes much more sense to put a bunch of cash in our bank account and focus on one thing as opposed to trying to maintain two separate properties.
Rob: That makes sense and by that time you had a SaaS app that you are focused on which we know takes a lot of attention. I’m curious. We glossed over several years of work here. We almost made it sound easy, like you stumbled into this thing and you ranked number one in Google for this free stock photos, which is very hard to do. In my experience, this kind of stuff is a grind, especially when you are learning it from scratch. Learning SEO to get as good as you guys are as well as content side of things, that’s really what your wheelhouse has become, is this social promotion of getting organic traffic for high competition terms.
How long did that take you to learn and did you feel like it was something where you are just grinding it out, not getting results for a while and it suddenly clicked? Or what is that process like?
Christopher: As you mentioned at the top of the interview, the first thing we ever launched back in 2012 was actually a […] website. Without going to much into it, that was basically a year of work that was not successful ultimately. Then there is actually another app in 2013 which didn’t go anywhere. There is basically two years that we are working on stuff and we got absolutely nowhere. I think a lot of people might have just given up at that point. So before BootstrapBay is when I realized I don’t know what I’m doing regards to marketing and I just read tons of blogpost and listened to tons of podcasts and videos.
At least with BootstrapBay at that point, I had built up some knowledge in terms of how to do it, but obviously you have to put that practice into motion. But even with BootstrapBay, the first three or four months, as you know SEO takes a long time. It was a lot of trial and error. A lot of blogpost didn’t end up working out, but the more you try and the more content you put out there, you start to realize what works and you get a little bit of process and a little bit of formula going.
I would say about six month to a year into it, at least in BootstrapBay we started figuring out the content side of things. With that being said, we did plateau and what was the next frustrating thing was we are a year into this business, it’s still spinning off a couple of thousand for the both of us. How are we going to get to that next level? At that time, we didn’t know that everything will work out, but we start questioning, “Is it worth it? Should we really be spending our nights and weekends trying to get this going?” We just have to persevere.
Rob: That’s what I like about your story is you really didn’t have these marketing skills and you went out and through founder forum you just learned things that were probably difficult trial and error. You grounded out and you start this site and it’s in a small niche. I’ll say bootstrap is not the most massive niche in the world and you learned the skill set in a less competitive space.
You didn’t start an ESP. You didn’t start a CRM. You didn’t start some massive SaaS app as your first effort. You started a couple of small things, BootstrapBay gets some traction, then you learned SEO and content really well, and then StockPhotos is one level harder than that. The Snappa stuff is still on the same boat, but it’s a very wide funnel, and if you didn’t have the four or five years of learning before that, starting Snappa would have been really hard without the skills. Do you think you could have even succeeded without the knowledge you have gained from the other failed and successful efforts?
Christopher: I think there’s two things that made Snappa successful. Number one was everything that you alluded to. The first couple of things that we launched, we just didn’t really know what we are doing. It took awhile to really learn those content and SEO skills and how to get traction. Just how to actually grow a software application or any kind of website to be frank.
The second thing that made it possible was having that existing funnel of traffic through StockSnap. As you know, the lower the price point, the more customers you need to make an app sustainable. It would have been extremely difficult if day one of launching Snappa we have no existing list or no existing user base that we can tap into to kind of get that going. That’s really why we were able to get up to $4000 MRR just after a month, because we had all of that list and that user base built up already.
Rob: Talk to me then about Snappa. You mentioned in your MicroConf talk, I remember you mentioned it. You built it to solve a problem that you yourself were facing. What was that problem?
Christopher: As you mentioned, I was doing a lot of content marketing for BootstrapBay. For each blog post, we need to create a featured image, and also some images within the content itself. I was doing a lot of this stuff and Photoshop. We didn’t really have the money at the time to hire a designer. Mark was pretty good with Photoshop, but he’s working on development which is more of a top priority.
I just thought, “Man, it would be nice if there was a tool that just made a lot of this easier.” When I did some brief market research at that time, I found that the tools are either too simplistic—it was essentially a code generator—or they were still too complicated. I thought there was a need to create something that was kind of in the middle where it was still super easy to use but still not overly complicated, that really anyone can just pick up and use it.
Rob: Talk me through the customer development you did to validate that, because there’s the old adage, “You should build stuff for yourself, solve a problem you have,” but I always caveat that with, “Yeah, but make sure other people have it, too, and make sure they’re willing to pay for that.” How did you do those things?
Christopher: Because we had StockSnap, we had an email list of people. The first thing that I did was email our list and just asked what they were using their stock photos for. As I kind of expected, a good percentage of those were using it for either social media or content marketing, which was kind of our target audience or what we thought would be our target audience.
For the people that did answer saying that they were using it for content and social media, I asked if anyone would be willing to hop on at 10-15 minute call just to learn about how they’re using the software, those and whatnot.
I ended up getting a call with (I think) around 15-20 people in the end. I was just asking them questions about exactly what they’re using the photos for and then going a step further in terms of what tools they were currently using to create graphics, what their process was like, who’s involved with that process, and taking a lot of the questions that I learned from the Lean Customer Development book.
The number one takeaway from that book is basically not to ask leading questions. I never once asked, “Hey, this is what I’m building, do you think this is a good idea?” or any kind of those leading questions. I was essentially trying to see if they would mention (without me poking them) whether or not they had pain points with the existing solutions.
After about 15-20 of those calls, a lot of people did mention or said things like, “Yeah, right now I’m using Photoshop and it’s a huge pain and takes too much time,” or, “Yeah, I tried this app out, but it’s not really that great,” or, “Yeah, we use an in-house graphic designer, but the turnaround time is sometimes 2-3 days. I wish I can just do it myself.”
When I heard enough of those kinds of comments, it gave us enough confidence to at least go ahead and start building some sort of MVP for Snappa.
Rob: Super cool. Mark is a developer. Did he just sit down and start hacking it out?
Christopher: Yeah, that was pretty much it. Like I said, we’ve built things in the past that didn’t really work out. We wanted to make sure that there is going to be a market for this because this is by far going to be the biggest and most complicated thing that he’s ever built. We wanted to really make sure that this could be a viable business. Once we had that validation, then Mark went ahead and just locked himself in the basement and started hacking away.
Rob: It feels like the story kind of writes itself from there. You have a lot of SEO and content skills. You applied that, you cross promoted from StockSnap, you had this existing audience, existing traffic sources that you then promoted in order to grow Snappa. I am curious. A couple of things, a couple of questions that I want to touch on before we wrap. One is, early on you said, “When we first started talking about building an app, we said, ‘Wouldn’t it be magical to hit $10,000?’” Was it magical when you hit $10,000?
Christopher: Yeah, it was actually. I don’t remember if it was exactly $10,000 but it was magical the moment that we knew that this was going to sustain us. We didn’t have to go back to our jobs, the business has legs. At some point, we would be able to probably hire more team members just to know that we had done it. It had taken us, like I said, the first thing we had launched in 2012. This is several years in the making. It truly did feel magical and we still feel very fortunate today that we’re able to do this.
Rob: Yeah, I agree. How large is your team at this point?
Christopher: Now we have four full-time team members and they’re awesome. Another thing that I really didn’t anticipate was how much more fun it is working with a team. We’re really fortunate to have such awesome people working with us at this point. We have four full-time and then we also work with a couple like freelancers and writers and stuff like that.
Rob: That’s good, that’s a pretty capital-efficient business to only have four folks working on it. Another question for you is your price points. On an annual basis, you’re $10 and $20 a month on a monthly basis, you’re $15 and $30. When I see an app like that, I think ouch. You’re probably going to have (just from the outside, I don’t know all your numbers) high churn, I would expect a low average revenue per user, which means you’re pretty limited in how you can market like you’re not going to run AdWords as an example because you don’t have the lifetime value. How has that been? Am I relatively on the mark? How has that been for you guys?
Christopher: Well, 100% you’re definitely on the mark. As you can imagine, we have probably higher churn than some of the other apps or founders that you’ve had on the show and that just goes with the territory of the low price point. That’s always been a challenge and enough reason why we had to get really good in organic (in particular) and why we focus a lot of time and effort on content marketing and SEO.
At this point, we don’t do any paid advertising whatsoever. We really do rely on word of mouth, SEO, and content, just giving a really good experience so that people talk about us. We get mentioned in blog posts and just have a sustainable and repeatable way of acquiring users.
One thing that’s interesting, though, that maybe not a lot of people think about is I think you had the founder of, was it Userlist that you had? That you were talking to a couple…
Rob: Jane Portman?
Christopher: Yeah. It was funny because I remember she was talking about how it’s difficult to get people to either try the app or switch to Userlist. I think on one hand, it’s really nice to have a low churn app, because once they kind of get in, usually they stick around and maybe it’s easier to build a sustainable business that way. But on the other hand with an app like Snappa, we’re premium, you can try it out, and really within a couple of minutes of even trying out Snappa, you’re going to know whether it’s going to provide value to you. The flip side of high churn is that our activation rates and the top of the funnel converts super well. That’s one thing that maybe some people don’t consider with these types of apps.
Rob: Yeah, there’s almost no switching cost. It’s just learning which buttons to click, but they don’t have to migrate stuff over. I agree, I think that’s a real advantage to it and I think longer term, I think an app like a Userlist or my experiences with Drip was, there was a lot of switching cost. It was harder to get people in. The churn was really low once they got in, but you’re right, the growth was tough. The growth was hard fought, but once you got that growth, it was there. It was locked in.
I think that’s where it cuts two ways. At Snappa, your funnel is so much wider. The number of people that visit your website, the number of people that sign up for a trial, and the number of people that probably start paying you is astronomically higher than what we had at Drip, as an example. I think that that is a unique advantage especially when your skill set is SEO and content, which tend to be wide funnel things. Not always, but especially in these spaces, you’ve been playing deliberately, these are wide funnels. That allows you to have this low price point and it allows you to not need to run ads but still grow business to seven figures.
Christopher: Yeah, I’d say that’s super accurate. Don’t get me wrong with low churns to go along with what we have. You learn that the market that you choose (to some extent) controls how high a churn’s going to be and that kind of stuff. We’ve learned to just embrace and accept it, and just stick to our lane, so to speak.
Rob: Yeah, it makes sense. I’m going to assume that if we look back, let’s say over the past year or even I guess ahead two months, you’re about to hit $1 million in ARR and I’m going to assume that that might be the high point of the year in terms of the business. What was a low point or the hardest part about the past year? A specific time that you felt like you were really grinding it out.
Christopher: I would say the last year. There wasn’t too much low point, but in 2018, I think it was around 2018, growth is really slow and we’re ready to start to plateau. At that point, we had, I don’t know if it was a combination of shiny object syndrome or we were so scared of competition because there’s actually quite a bit of competition in our space and we have a lot of really well-funded competitors.
We went down this rabbit hole of, we need to find a new business or we need to find another route because at some point, we’re just going to plateau and we’re not going to grow. I think we really took our eye off the prize, so to speak. That was a really tough year just seeing growth plateauing a little bit, trying to get these other projects and spinning our wheels there. I think that was tough.
In 2019 funny enough, we realized, “Hey, we’re in a really good position. We have this app.” I almost felt like we were taking it for granted or we realized that we were taking it for granted, so we said, “We’re not going to start any new side projects. We’re going to buckle down, we’re going to figure out how to get growth back on track.” We really focused back on the business and we promised ourselves that we would never consider launching another project until we hit $1 million ARR. It’s funny how that worked out.
Rob: Yeah, that makes sense, just refocusing. That’s the thing, these founder stories are almost never straight lines. It’s very, very rare. You hear the myth of people starting whatever, Uber, Facebook, Lyft, these big companies and they do a lot of side projects, there was a lot of uncertainty, and I think our stories in our own ecosystem are very similar where you often have multiple projects going at once. You don’t really know which one’s going to succeed often and you’re just trying to figure it out as you go.
I think the last question before we wrap is, you mentioned something to me about a pricing experiment that you ran, that goes against that “charge more” idea. As I said, when we talked about it, well yeah, you can always charge more until you can’t, or until people aren’t willing to pay that. There’s always a ceiling to this stuff. Talk us through what you did with your annual and your monthly pricing, and how that worked out.
Christopher: I’ve obviously been to a few MicroConfs now and one of our recurring themes is always to charge more. I’ve just always been really scared to do that again, especially because we’re serving the lower end of the SMB market. We’re in a really competitive space, but I thought, whatever. There’s enough people telling me to just charge more. We’ll go ahead and run the experiment.
What we did was we kept our annual price the same which is $120 a year for the program and then we bumped up the price of the monthly prescription from $15 to $19 a month. We were thinking more people and to send the annual plan which would obviously help out with the churn. Assuming that our conversion stay relatively the same because we’re getting the $19 a month price point even if the churn is a bit higher, all in all it should work out.
After running that—we ran it for a couple months—we realized pretty quickly that the churn had just spiked up way too high for our comfort, and the conversion rates had actually dropped more than we had anticipated. We ended up reverting back to the pricing.
I’m glad that we ran the experiment because at least now we can put that to rest, but it was just more proof that charge more, or charge less, or whatever isn’t always the best advice. It’s really a case-by-case basis, and that it just depends on a variety of factors really.
Rob: Sure. Charge more is a really great advice if you’ve never heard it before, because most people tend to charge too little when they launch. Most of us think our apps are not worth what they actually are. It’s definitely good advice. But obviously, the further you get in, if you’ve experimented, if you know your customers, there’s a certain point where pricing elasticity may or may not be there, and you’re also in a pretty price-sensitive space. You’re in a prosumer, I’d like to think one notch above consumers, so there’s going to be price sensitivity there.
The lesson I take away from it is: (a) experiment because now you know. You don’t have to think about it every month, every week, “Should I be charging more?” and, (b) you were scared to do it, but you did it anyway, and it sounds like it was a relatively easy experiment to undo which are the best. You just revert back. You just change the pricing back. Now, you have one cohort of people or something who are paying a little less I’d imagine, but that’s a small price to pay to have the knowledge that you probably are towards the top of your range right now.
Christopher: Yeah, for sure. The way that we did it was basically any new customers, they would see that new price point, and then once we reverted back, if there were any customers that were on that $19 a month plan, we just put them back on that $15 month. Now there’s no one on that increased price. It was a relatively safe way to do it and obviously, there’s no backlash as a result.
Rob: Yeah, that makes sense. I said people paying less at the pricing reverse, but whatever. Cool. We’re going to wrap up. If folks want to check out Snappa, it’s at snappa.com just like it sounds. You are @cgimmer on Twitter. Any place else folks should check out?
Christopher: That’s about it. I’m trying to make an effort to do more blogging on my personal site this year chrisgimmer.com. There’s only a few posts on there. Twitter is probably the best place for now.
Rob: Aren’t we all trying to blog a little more? I say that every year. It’s just so hard to find the time to write.
Christopher: Yeah. Essentially, my goal for this year is one post a month which I think is super reasonable and I think I’ll be able to hold myself to that and then we’ll see how that goes.
Rob: Sounds good man. Thanks again for coming on the show.
Christopher: My pleasure. I’m a huge fan of the podcast, so I’m happy to be on here.
Rob: Awesome. Thanks again to Chris for coming on the show. If you have a question, if you’re curious about part of Chris’s story, if you have questions about SEO or content marketing, feel free to either tweet me @robwalling or send them into questions@startupsfortherestofus.com. If I get questions, I might invite Chris back on the show to share some of the skills, because he has hard technical skills in this SEO and content space, and he’s done a lot to grow. This business has really wide funnels and has a lot of knowledge there. If you want to hear more about that, I’m happy to have another conversation with Chris.
You can also leave me a voicemail at (888) 801-9690 or just email that question to our email address and attach a file via Dropbox or Google Drive. This podcast’s theme music is an excerpt from We’re Outta Control by MoOt. It’s used under Creative Commons. Subscribe to us by searching for Startups and we would love a 5-star review in whatever pod catcher you use. If you want a full transcript to this episode, wait a couple of days after it goes live then head to startupsfortherestofus.com, full, searchable transcripts of every episode. Thank you for listening. I’ll see you next time.
Episode 479 | Two-Sided Marketplaces, Hotseats, Forgotten Subscriptions, and More Listener Questions
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Show Notes
In this episode of Startups For The Rest Of Us, Rob along with Tracy Osborn , answer a number of listener questions on topics including founder hotseats, forgotten subscriptions, two-sided market places and more.
Items mentioned in this episode:
Rob: Welcome to this week’s episode of Startups for the Rest of Us. I’m your host, Rob Walling. Today I’m joined by Tracy Osborn and we answer listener questions on two-sided marketplaces, mastermind hotseats, forgotten subscriptions, and more questions from listeners like yourself. This is Startups for the Rest of Us episode 479.
Welcome to Startups for the Rest of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing startups, whether you’ve built your fifth startup or you’re thinking about your first. I’m Rob and today with Tracy Osborn, we’re here to share our experiences to help you avoid the mistakes we’ve made.
Welcome back to the show. Each week, on the show, we cover topics relating to building and growing startups. We’re ambitious founders, but we’re not willing to sacrifice our life or health to grow our company. This week, we dig into the mail bag and we answer four or five listener questions. Some good questions came through this week.
I hope you enjoy my conversation with Tracy Osborn, who’s been on the show several times. She’s answered listener questions with me, she’s also was the founder of WeddingLovely, which was a two-sided wedding marketplace. I had interviewed her maybe 20 episodes ago if you want to go back and check that out for her expertise. I always like to save the two-sided marketplace questions for her since she lived that dream (so to speak) for four or five years.
We have several different show formats, oftentimes I will interview a founder and dig into their struggles, their failures, and their victories. We have these listener question episodes, sometimes we have breaking news, we get updates from a founder, Mike Taber, every 4-6 weeks. And of course we have our seats now and again.
The 2020 State of Independent SaaS Report is almost done. I’m putting the finishing touches on that. I’ve commented last episode how much time that’s taken. I’m super proud of what we put together, I’m stoked every revision I get back from the designers, gets me more excited.
I’m doing a live video stream of some key takeaways of that report in about two weeks. If you want to be sure to hear about that, head to stateofindiesaas.com and that’ll redirect you into MicroConf to a landing page. Enter your email and you’ll definitely get an email when that livestream is going to go live. It’s going to be about 20-30 minutes.
I’m doing it kind of a conference doc where I’m really presenting findings and what I think they mean and there has been some surprises that we’ve seen in the data and then some not so surprises. It’s fun to cover both sides of those. I hope you join me for that in just a couple of weeks. With that, let’s dive into this episode.
Tracy, thanks so much for coming back on the show.
Tracy: Happy to be here.
Rob: I am excited to dig into some listener questions today and specifically, I handpicked the first two because they’re about two-sided marketplaces. As people heard in the intro, you ran one for several years. I was saving those for when you’re back on the show.
Tracy: Very cool. I’m really excited to answer those.
Rob: Let’s dive into the first one. Unfortunately, it was a voicemail that we received several months ago and due to some technical glitches, I can no longer get at the audio file. But in essence the caller sent a voicemail in, and he said, “Look, I’m starting a two-sided marketplace. Obviously, we need both sides to be successful and only the businesses pay.” It’s a business on one side and consumers on the other. The business is I believe pay the subscription. Which side should they focus their marketing budget on?
Tracy: This is a fun one. It goes to the problem of marketplaces where the beginning part, the start of a marketplace is really hard because you need to get both sides of the marketplace. For WeddingLovely, the marketplace I’ve ran before, I need to get both the businesses on WeddingLovely, but also the consumers for those businesses so that they would have customers through my marketplace.
What I did to WeddingLovely and this is probably why I recommend to anyone who is running a marketplace, is to focus on bringing in as much revenue as possible, especially if you’re doing a bootstrap business, which means that you need to focus your marketing budget on the business side. But obviously you need to have some way of bringing in the other side of the marketplace.
What I recommend here is to look for ways that you can use, the side that you’re spending your marketing budget on, for instance, the businesses. What can you do to incentivize them to bring in the other side of the marketplace?
For example with WeddingLovely, I worked with the business on WeddingLovely, the wedding businesses, to give them the tools to bring in the people that they worked with, to bring them on the platform and encourage them to use WeddingLovely on the other side. My marketing budget was going to those businesses, but those in essence trickling down the other side by utilizing those businesses to bring in the people that they’re working with.
In essence I would recommend to spend your marketing budget on the people who are bringing you revenue, but do your best to incentivize the people that you’re working with, that you’re spending those revenue dollars on, bring in the customers that they work with, bring in the other side of the marketplace. So that you’re more efficient with the money that you’re spending on the marketing budget, but you’re still bringing in both sides of that marketplace.
Rob: I think that’s a savvy way to do it. The way I think about this is oftentimes, businesses marketing to other businesses need to spend a lot of money. You need to have higher quality content, you need to spend ads, nurture, and convince them why they should pay. There’s a huge job, and that’s just the job of any standard SaaS app.
On the flip side, businesses market to consumers frequently do it with virality, they do it with content, they do it with Instagram posts, giveaways. There’s things that you can do that they’re just so different. They’re so different in terms of the approaches. I think it’s not that you can do it more inexpensively with consumers, but I do think that given that we see people selling B2C ebooks for $10, $20 or $30, there’s obviously ways to acquire customers that are a lot cheaper than there are to acquire that big SaaS customer, where you’re paying $100, $500, or $1000 to close that account versus acquire someone for $10, $20, or $30. It’s such a different game.
In that sense, I agree with you and then I would put marketing budget towards the folks who are going to be paying you. I think there are guerilla, scrappy, bootstrappery ways to go after the consumer side of it. One of them is what you said, it’s to get the businesses to bring their critical mass to you. I think that’s a great way to do it. There’s models for B2C marketing. We won’t go there, but that’s what I would focus on as the cheaper and more expensive ways to get consumers to join up.
Tracy: Next question comes in from Anthony. He says, “Hi. I listen to a bunch of episodes, so I apologize if this was covered. I heard a couple episodes on marketplaces and how to get them going from a cold start, but I don’t think you’ve touched on the ‘come for the tools, stay for the network’ strategy, where you build a SaaS tool for one or both sides of the marketplace, and is useful regardless of the existence of the marketplace.” He also brings in a link to a Strife article that covers a little of this, which is a really cool link and I’m pretty sure you can add it to the show notes. What do you think?
Rob: I think it’s a great idea. In fact, if I personally were to go after a two-sided marketplace, which I tell people not to do, don’t do it. If you’re listening to this, don’t do it. It’s just so hard. Unless you have funding, or unless you’re a second-time founder, or unless you really have a unique insight or unique reach, or you already have an audience that essentially makes it more of a one-sided marketplace.
If you look at how Joel Spolsky and Jeff Atwood started Stack Overflow, that’s very much a two-sided marketplace. You need people asking questions and answering them. It’s both one-sided and two-sided because it’s the same audience, but they’re doing two things. They didn’t just go start from scratch. Community sites, two-sided marketplace is very hard to start, but they brought their massive blog audiences to it.
If you have that type of unique reach into a space, I would say consider doing this. All that said, if I were going to do it, start a two-sided marketplace, I would do it in a space where I have reach. If you think about TinySeed, it’s a two-sided marketplace because you need to bring investors in and get them to put money into a fund, and then you need to have enough reach into the founder space that folks will come to you. You essentially have a deal saying, “Hey, we want to be funded by you.” It’s a tough thing to manage from a cold stop.
I would do it in a space where I have reach or I would do it with a tool like this because having that utility, having a SaaS app that these businesses need, that you either give away just to draw them or that you give at an inexpensive price point in order to get the network effect going, is really an interesting way to do it.
Sean Ellis did this in reverse. He essentially started growthhackers.com and he used his reputation as a marketing expert (and he had a bit of an audience). He got a network effect and built it up—it’s like a social news site for growth hackers in essence—then, he built software on top of that. Actually, I believe later just totally pivoted into the SaaS aspect of it. It’s an interesting reverse model of what the question asker was asking, but I do think there are many ways to go about this.
Tracy: The one thing I would caution, the article on Strife talks about Hipcamp and how Hipcamp now allows you to book private campsites. I’m not totally familiar with Hipcamp. It’s a two-sided marketplace for private campgrounds, but it started out as a tool for people to find what campgrounds are out there, what’s available, and they sounded like they scraped a bunch of publicly available list in order to take all those data into one place.
The two-sided marketplace didn’t exist in the beginning, and we are talking about adding a tool or a launcher of two-sided marketplace. I feel like one needs to come after another, they can’t really do them concurrently because then you’re splitting your focus between two separate products, two different things you have to work about. One leads into the other.
That was one of the problems I had with WeddingLovely. There was a wedding at the marketplace when I launched a tool for people to plan their wedding. Then, all of a sudden I was a solo founder with two products that I was working on, two products to support, and it became really hard to do both. A marketplace is hard on its own. Supporting a tool and a marketplace can be tougher, especially if your tool is pretty significant.
That’s just one thing I want to bring up to caution against. It could be a good way. I agree that marketplaces are really, really hard. It’s part of the reason why WeddingLovely didn’t succeed, especially since I was a semi-bootstrapped founder, trying to run everything myself. Adding a tool on my own plate, did not help the situation actually. That probably significantly hurt it.
Rob: It’s like doing it on hard mode.
Tracy: Totally.
Rob: It’s like, let’s start a SaaS app and have all these other stuff, two-sided marketplace stuff to worry about. Like it’s not hard enough just starting and marketing a SaaS app. With that said, still, that’s what I would do. But I’m a SaaS person. That’s what would draw me to a two-sided marketplace, is the appeal of being able to build a product. There is a little bit of personal preference in there. It’s like know what you’re getting into. I think that’s really the moral.
Tracy: Actually, now that you mentioned this, building the app was me just being frustrated about running the marketplace and being something else to focus on, which leads into it, some of the other issues I had running this business. But it was a fun, different project to work on that would also help my business. I agree on that aspect.
Next question comes in from Simon. Simon writes, “Hey, Rob. I received the TinySeed update. I went through the list of podcast because I was curious about one thing. What is the type of mastermind you’re running with the hot seat implementation? I heard a bit about it on Peter Suhm/Matt Wensing episodes in Croatia, which is out of beta, but it left me curious, maybe you have some more info for me. Thanks and keep rocking.”
I find this question actually really interesting because before I started at TinySeed, I, myself, wasn’t totally aware about hotseats, masterminds, and these other things. I never participated in the mastermind myself. One of the things we’re doing at TinySeed for the next incoming batch is I wrote a little bit of a guide. I thought when I didn’t know what the hotseats were, I’m like, “Oh, but of course. Everyone else knows,” and just rolled with it. But we did find that a few of the founders were also unaware about how they work, so I wrote this little guide. Maybe you can go ahead and give an overview. I just want to say that I feel like it’s not obvious and not completely common that everyone knows how hotseats work.
Rob: Totally, yeah. It’s that shorthand where we get and we talk MRR and LTV, and the first time you listen to this podcast, you’re like, “What are all these acronyms mean? I think masterminds, hotseats, founder treats and all that stuff is the same.”
Mastermind is really just a phrase that we’ve adopted from Internet marketers, to be honest. In that context, there are people that would start these like, “$5000 a month mastermind and you worked with the Internet marketer, and he’s going to help you grow this big business.” I think they have a reputation that I don’t love, but in the startup space, it really does capture this idea of two, three, four founders are getting the other on on a regular basis, whether via Zoom or other video chat or whether it’s in person, really going deep on their businesses and having that implied NDA, confidentiality, and sharing their struggles.
This is especially helpful if you don’t have a co-founder. That someone’s along on the journey that is not your spouse, not your significant other, that you can complain to, that you can rant about, that you can celebrate wins with, who’s there on the journey so you don’t have to call someone and say, “Hey. I’m running this company and here’s the background for the past 12 months on what I’ve been doing and here’s my headspace.” It’s so hard to do that.
In the mastermind context, whether it’s weekly, biweekly, monthly, people know what’s going on and they’re following your story in a way that you can’t share on a podcast, because you need ultra-transparency and that kind of stuff. That’s in general how I think about a startup mastermind, and we actually did a whole episode on what they are. Go to startupsfortherestofus.com, search for startups mastermind, and Mike and I went through that a few years ago.
Within a mastermind, so what do you do? You’re on a call for an hour or 90 minutes. What do you actually do? There’s two formats that I’ve seen. One is just pure round-robin. If there are three people and you’re on it for 45 minutes, then each person gets 15 minutes.
The other format that I’ve experienced with and been familiar with is a hot seat format. That’s where, if there are three people, 45 minutes, two of the founders maybe give five-minute updates; this is what’s going on. Then, the other founder takes the other 35 minutes and go way deep on a single issue or a single problem they’re facing. They ask for advice and thoughts, it’s a white board session, they’re thinking that through, and how can you help. It’s all the stuff. So, a hotseat really just means I have a lot of time to dig into something. You can talk about how we’ve implemented that with the TinySeed batch calls because it’s evolved a little bit over time, but there’s different value from each format, right?
Tracy: Yeah. It’s nice to hear what we do with the TinySeed call formats and we’ve gotten a lot of questions about that actually in the application since how we run our calls. It’s 50%, maybe 70% hotseat format and then 30% the round robin everyone gets a chance to talk. The way I look at it with the round robin is that I want to say people are going to get their problems solved, but really it’s harder in the round robin format because everyone’s concentrating on their own issues, and it’s a way for us to give people a place to talk out loud, to think about their own issues, because there is less feedback when you have short amount of time and everyone is participating. You have less time for people to give feedback.
With the hotseats, that’s when it’s really like, “Okay, cool. We’re going to sit down, we’re actually going to solve the problem.” That doesn’t mean you can’t have that problem solving part on those round robin formats, but it’s a lot harder when you’re telling everybody you have an even small period of time in order to share your problem as compared to being like, “Okay, cool. We’re really going to think over this one thing.”
That’s one of the things that I think about a lot with the TinySeed calls and how they work. Again, I want to emphasize that I totally want people to have their problem solved more on the round robin format, but the shorter amount of time makes it a little bit harder.
Rob: I hope that was helpful. That’s our rundown. We actually have two episodes where we spent the whole episode talking about it. Episode 167 from 2014, How to Organize and Run a Startup Mastermind, and episode 277, Five Ways to Structure Your Startup Mastermind. And I believe that’s when Mike and I went back and forth because I like round robin in general for the weekly or monthly masterminds that I’m in. And he likes a hotseat, I believe. We were going back and forth. Then I’ve since changed my opinions on that as well. If you want to know more about masterminds, head to those episodes.
Tracy: Awesome. Next question comes from Mike and he asks, “Has there ever been any public numbers on how much a SaaS’ monthly revenue comes from forgotten subscriptions or lost users? Those users who are paying, but never use the service/content. As an owner, do you think there’s any moral responsibility for us to stop charging these people at a certain point?”
Rob: Good question, Mike. I’ve never heard of public data. I know that I’ve seen private data across the number of SaaS apps and it really depends on the niche. In all honesty, if you are doing high pressure sales tactics to that Internet marketee, aspiring entrepreneur audience, and you’re selling annual plans, these numbers are 50%–60% of people who have paid for that year, maybe even 70%, and never use that much like the ebooks people buy that they never read, the video courses people buy that they want to get to and never do.
I think a normal range depends on exactly how you measure inactivity, but I’d say between about 15% and 25% is the healthy SaaS app range, which sounds really high. Even right now, I’m paying for a couple of SaaS subscriptions and we’re technically inactive. I believe I have three right now that one I’m leaving for data purposes until we totally transition to a new system, another one I signed up, the trial ended, I’m just extending my trial, so I’m like two months of paying and I haven’t yet flipped the switch in moving something live.
With those, I don’t feel like I wouldn’t want the owner of that SaaS company to come to me and say, “Hey, I want to shut these down because I’m leaving it on purpose.” Obviously, someone forgets about it. Moral responsibility, I guess you could ping people. It’s more about moral responsibility to get people activated. It’s how it think about it.
I build apps to provide value to people, and if they’re not getting that value out of it, then I feel like I’m failing them in the sense that I didn’t educate them well enough to learn how to use it, they don’t know what to do next. That’s how I think about it. I don’t know what you think about it, Tracy.
Tracy: I think this goes from, I can’t remember who, but I feel like there has been a few services out there that have gotten public to say, “We had a certain amount of customers who aren’t using our app. We’re going to do the right thing and make sure they’re not being charged or they’ve been removed or whatnot.” They’re promoting it as, look how moral we are being.
If you want to go that way, then sure, but if you’re a large company, you have the privilege to: (a) remove that revenue and not have to worry about that, and (b) also, we have the analytics and the things in place so they can see who is actively using the app, they have the time to dig into those numbers, they have the time to spend the time to remove those people. Anyone who is a small business who’s bootstrapped or whatnot, that doesn’t have a lot of time, has to be really efficient with our time, I want to say, “Hey, cool. That’s a great moral thing to do,” but I don’t think a lot of small businesses have the time to do that. If that makes sense.
I want to say that it’s totally fine if you don’t feel like you have to spend the time working on those kind of things that is going to lose you revenue when you could be spending the time, like you said, improving your app, improving your activation number, spending your marketing dollars, and working on getting the word out. I just want to reassure that there’s no problem with not having the time to do this moral revenue losing thing as a small app, even though there are people out there who have that ability.
Rob: I think it’s a good point you raised, is just to even look into it, it takes time. And time is the most valuable asset of a founder, especially when you’re a one-person or a three-person team. The revenue is an issue as well. What if you went out and sought everyone out and you email them, and you double check, “Hey, I’m going to cancel your account. Do you want to cancel? Are you sure, are you sure?” That is a campaign on its own. You’re going to do that and then you’re going to lose 15% or 20% of your MRR.
If that’s something you want to do, then go do it. I don’t know anyone that’s done it. You mentioned examples of folks that do it. I certainly don’t think there’s anything wrong with that. It’s interesting just to look across the landscape of the way we used to buy software as paid as a one time fee, and then you had to buy it when the next major version came out.
You bought Microsoft Word and then you had it for three or four years, and it didn’t matter if you used it or not, you paid that fee up front, $100 or $200. Microsoft Office was so cost prohibitive that they have student versions and they’re giving it away in India and Africa and stuff because it is expensive. Whether you paid for it and used it five times, or whether you paid for it and used it solid for three years, you paid the same amount.
We’ve transitioned to subscription things, and I think that’s way better for the consumer, because now we can cancel. That’s why SaaS is so hard to grow. When people aren’t using it, you haven’t got that big chunk of money up front. In my opinion, if you make it easy for people to cancel and with every app I’ve ever had, we email a monthly receipt. Every month, you get an email that you’ve been charged this month, this is your bill date, and this and that. You’re getting notified. I’d imagine there’s some apps out there that don’t do that and they try to hide behind it or they hope you forget and never check your credit card statements. Don’t do that. I don’t think that’s ethical.
But if you’re pinging people, when email receipts go out, we used to get a response and it’s like, “Hey, I meant to cancel this. Can I get a refund?” which we would do. We would definitely get cancellations from receipts. If we’re optimizing for non-cancellation, we would have removed our email receipts, we would have removed the cancellation button in the app and made you email support or you haven’t […] call support like Comcast or whoever does.
That’s the way to game things and that’s where I think you get on the immoral or unethical approach. I think what I’ve outlined, which is you’re notifying them, they’re well aware you’re doing it, you’re trying to get people onboarded, I feel like you’re doing what you can. You can’t force someone to use your app.
Tracy: Totally. Next question comes from Poco. He writes, “Firstly, thank you so much for all the great work and resources you offer. Do you know of any podcast similar to yours that specializes or also covers B2C stuff?”
Rob: Shorter answer is no. The long answer is the reason is because there is really no such thing as B2C SaaS. I think Lars […] said this on an early mentor call, but I’ve thought about this for years. What company can you think of that is not an entertainment company. Netflix and Spotify, I wouldn’t consider SaaS, they’re more content delivery.
Even Dropbox, which started as a consumer company, look at their public filings now. There’s a reason they went after enterprise. They are an enterprise company, the consumers that is lead gen. It’s just so we all are comfortable using their software, so that when you go to the company, and they want to sell to a 10,000-person enterprise, everybody’s already familiar with it.
It’s the same reason Apple computer gave away an Apple IIe back in 1980–1981. They gave an Apple IIe to every public school in California. They did it so that kids could learn computers, but also, they were familiar with the Apple operating system in essence and that when they went home, if their parents said, “Oh, what kind of computer we should get?” The kid would say, “I bought an Apple IIe,” they’re familiar with it.
I’m totally open to listening to this and you know of a B2C software. It’s basically what he’s saying, a podcast that focuses on B2C software, please write in questions@startupsfortherestofus.com or post a comment on this episode. Do you know of any, Tracy?
Tracy: I’m glad that you didn’t because I didn’t as well. I was wracking my brain and hoping that you had a good one to respond with. But yeah, I agree with you on all those points.
Rob: I’m sure there’s someone building mobile apps out there who’s doing a podcast. The B2C side tends to be training courses, information, sometimes it’s dietary stuff like I need a paleo meal planning app, or meditation, wellness. I think that’s the kind of stuff that focus on and I don’t know of any podcast that focus on that. Aside from one-off, like if you listen to This Week In Startups, Jason Calacanis interviews founders and you’ll see B2C founders come through there. That might be the one place that I’d go if I were looking for this.
Tracy: I think that’s all the questions we have.
Rob: We’re wrapped up for the day. That’s great. Short episode. Folks want to find you online, tracymakes.com or @tracymakes on Twitter.
Tracy: I’m off to correct you. It’s tracyosborn.com.
Rob: Oh, good. I’m glad you corrected me. I’m confused when the domain doesn’t match the twitter handle.
Tracy: If I could get @tracyosborn on Twitter, I would. Alas, there is another person.
Rob: There is another Tracy Osborn. I went out and bought robwalling.com two years ago from a different Rob Walling, and one of the bigger reasons is I just wanted all my handles to match and I got tired of saying, no one could remember what my website was softwarebyrob.com, because back in 2005, that was what you did. You didn’t just put your name.com, I don’t know why. It just wasn’t a common thing to do and now it makes so much more sense.
Thanks again to Tracy for joining me on the show today. We answered a lot of listener questions. And if you have a question that you’d like to hear answered on the show whether by me or myself with a guest, leave us a voicemail at (888) 801-9690. You can always email us, it’s questions@startupsfortherestofus.com. You can attach a Dropbox link, what have you.
Our theme music is an excerpt from We’re Outta Control by MoOt. It’s used under Creative Commons. Subscribe to us by searching for startups in any pod catcher. Visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening. I’ll see you next time.
Welcome to Startups for the Rest of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing startups, whether you’ve built your fifth startup or you’re thinking about your first. I’m Rob and today with Tracy Osborn, we’re here to share our experiences to help you avoid the mistakes we’ve made.
Welcome back to the show. Each week, on the show, we cover topics relating to building and growing startups. We’re ambitious founders, but we’re not willing to sacrifice our life or health to grow our company. This week, we dig into the mail bag and we answer four or five listener questions. Some good questions came through this week.
I hope you enjoy my conversation with Tracy Osborn, who’s been on the show several times. She’s answered listener questions with me, she’s also was the founder of WeddingLovely, which was a two-sided wedding marketplace. I had interviewed her maybe 20 episodes ago if you want to go back and check that out for her expertise. I always like to save the two-sided marketplace questions for her since she lived that dream (so to speak) for four or five years.
We have several different show formats, oftentimes I will interview a founder and dig into their struggles, their failures, and their victories. We have these listener question episodes, sometimes we have breaking news, we get updates from a founder, Mike Taber, every 4-6 weeks. And of course we have our seats now and again.
The 2020 State of Independent SaaS Report is almost done. I’m putting the finishing touches on that. I’ve commented last episode how much time that’s taken. I’m super proud of what we put together, I’m stoked every revision I get back from the designers, gets me more excited.
I’m doing a live video stream of some key takeaways of that report in about two weeks. If you want to be sure to hear about that, head to stateofindiesaas.com and that’ll redirect you into MicroConf to a landing page. Enter your email and you’ll definitely get an email when that livestream is going to go live. It’s going to be about 20-30 minutes.
I’m doing it kind of a conference doc where I’m really presenting findings and what I think they mean and there has been some surprises that we’ve seen in the data and then some not so surprises. It’s fun to cover both sides of those. I hope you join me for that in just a couple of weeks. With that, let’s dive into this episode.
Tracy, thanks so much for coming back on the show.
Tracy: Happy to be here.
Rob: I am excited to dig into some listener questions today and specifically, I handpicked the first two because they’re about two-sided marketplaces. As people heard in the intro, you ran one for several years. I was saving those for when you’re back on the show.
Tracy: Very cool. I’m really excited to answer those.
Rob: Let’s dive into the first one. Unfortunately, it was a voicemail that we received several months ago and due to some technical glitches, I can no longer get at the audio file. But in essence the caller sent a voicemail in, and he said, “Look, I’m starting a two-sided marketplace. Obviously, we need both sides to be successful and only the businesses pay.” It’s a business on one side and consumers on the other. The business is I believe pay the subscription. Which side should they focus their marketing budget on?
Tracy: This is a fun one. It goes to the problem of marketplaces where the beginning part, the start of a marketplace is really hard because you need to get both sides of the marketplace. For WeddingLovely, the marketplace I’ve ran before, I need to get both the businesses on WeddingLovely, but also the consumers for those businesses so that they would have customers through my marketplace.
What I did to WeddingLovely and this is probably why I recommend to anyone who is running a marketplace, is to focus on bringing in as much revenue as possible, especially if you’re doing a bootstrap business, which means that you need to focus your marketing budget on the business side. But obviously you need to have some way of bringing in the other side of the marketplace.
What I recommend here is to look for ways that you can use, the side that you’re spending your marketing budget on, for instance, the businesses. What can you do to incentivize them to bring in the other side of the marketplace?
For example with WeddingLovely, I worked with the business on WeddingLovely, the wedding businesses, to give them the tools to bring in the people that they worked with, to bring them on the platform and encourage them to use WeddingLovely on the other side. My marketing budget was going to those businesses, but those in essence trickling down the other side by utilizing those businesses to bring in the people that they’re working with.
In essence I would recommend to spend your marketing budget on the people who are bringing you revenue, but do your best to incentivize the people that you’re working with, that you’re spending those revenue dollars on, bring in the customers that they work with, bring in the other side of the marketplace. So that you’re more efficient with the money that you’re spending on the marketing budget, but you’re still bringing in both sides of that marketplace.
Rob: I think that’s a savvy way to do it. The way I think about this is oftentimes, businesses marketing to other businesses need to spend a lot of money. You need to have higher quality content, you need to spend ads, nurture, and convince them why they should pay. There’s a huge job, and that’s just the job of any standard SaaS app.
On the flip side, businesses market to consumers frequently do it with virality, they do it with content, they do it with Instagram posts, giveaways. There’s things that you can do that they’re just so different. They’re so different in terms of the approaches. I think it’s not that you can do it more inexpensively with consumers, but I do think that given that we see people selling B2C ebooks for $10, $20 or $30, there’s obviously ways to acquire customers that are a lot cheaper than there are to acquire that big SaaS customer, where you’re paying $100, $500, or $1000 to close that account versus acquire someone for $10, $20, or $30. It’s such a different game.
In that sense, I agree with you and then I would put marketing budget towards the folks who are going to be paying you. I think there are guerilla, scrappy, bootstrappery ways to go after the consumer side of it. One of them is what you said, it’s to get the businesses to bring their critical mass to you. I think that’s a great way to do it. There’s models for B2C marketing. We won’t go there, but that’s what I would focus on as the cheaper and more expensive ways to get consumers to join up.
Tracy: Next question comes in from Anthony. He says, “Hi. I listen to a bunch of episodes, so I apologize if this was covered. I heard a couple episodes on marketplaces and how to get them going from a cold start, but I don’t think you’ve touched on the ‘come for the tools, stay for the network’ strategy, where you build a SaaS tool for one or both sides of the marketplace, and is useful regardless of the existence of the marketplace.” He also brings in a link to a Strife article that covers a little of this, which is a really cool link and I’m pretty sure you can add it to the show notes. What do you think?
Rob: I think it’s a great idea. In fact, if I personally were to go after a two-sided marketplace, which I tell people not to do, don’t do it. If you’re listening to this, don’t do it. It’s just so hard. Unless you have funding, or unless you’re a second-time founder, or unless you really have a unique insight or unique reach, or you already have an audience that essentially makes it more of a one-sided marketplace.
If you look at how Joel Spolsky and Jeff Atwood started Stack Overflow, that’s very much a two-sided marketplace. You need people asking questions and answering them. It’s both one-sided and two-sided because it’s the same audience, but they’re doing two things. They didn’t just go start from scratch. Community sites, two-sided marketplace is very hard to start, but they brought their massive blog audiences to it.
If you have that type of unique reach into a space, I would say consider doing this. All that said, if I were going to do it, start a two-sided marketplace, I would do it in a space where I have reach. If you think about TinySeed, it’s a two-sided marketplace because you need to bring investors in and get them to put money into a fund, and then you need to have enough reach into the founder space that folks will come to you. You essentially have a deal saying, “Hey, we want to be funded by you.” It’s a tough thing to manage from a cold stop.
I would do it in a space where I have reach or I would do it with a tool like this because having that utility, having a SaaS app that these businesses need, that you either give away just to draw them or that you give at an inexpensive price point in order to get the network effect going, is really an interesting way to do it.
Sean Ellis did this in reverse. He essentially started growthhackers.com and he used his reputation as a marketing expert (and he had a bit of an audience). He got a network effect and built it up—it’s like a social news site for growth hackers in essence—then, he built software on top of that. Actually, I believe later just totally pivoted into the SaaS aspect of it. It’s an interesting reverse model of what the question asker was asking, but I do think there are many ways to go about this.
Tracy: The one thing I would caution, the article on Strife talks about Hipcamp and how Hipcamp now allows you to book private campsites. I’m not totally familiar with Hipcamp. It’s a two-sided marketplace for private campgrounds, but it started out as a tool for people to find what campgrounds are out there, what’s available, and they sounded like they scraped a bunch of publicly available list in order to take all those data into one place.
The two-sided marketplace didn’t exist in the beginning, and we are talking about adding a tool or a launcher of two-sided marketplace. I feel like one needs to come after another, they can’t really do them concurrently because then you’re splitting your focus between two separate products, two different things you have to work about. One leads into the other.
That was one of the problems I had with WeddingLovely. There was a wedding at the marketplace when I launched a tool for people to plan their wedding. Then, all of a sudden I was a solo founder with two products that I was working on, two products to support, and it became really hard to do both. A marketplace is hard on its own. Supporting a tool and a marketplace can be tougher, especially if your tool is pretty significant.
That’s just one thing I want to bring up to caution against. It could be a good way. I agree that marketplaces are really, really hard. It’s part of the reason why WeddingLovely didn’t succeed, especially since I was a semi-bootstrapped founder, trying to run everything myself. Adding a tool on my own plate, did not help the situation actually. That probably significantly hurt it.
Rob: It’s like doing it on hard mode.
Tracy: Totally.
Rob: It’s like, let’s start a SaaS app and have all these other stuff, two-sided marketplace stuff to worry about. Like it’s not hard enough just starting and marketing a SaaS app. With that said, still, that’s what I would do. But I’m a SaaS person. That’s what would draw me to a two-sided marketplace, is the appeal of being able to build a product. There is a little bit of personal preference in there. It’s like know what you’re getting into. I think that’s really the moral.
Tracy: Actually, now that you mentioned this, building the app was me just being frustrated about running the marketplace and being something else to focus on, which leads into it, some of the other issues I had running this business. But it was a fun, different project to work on that would also help my business. I agree on that aspect.
Next question comes in from Simon. Simon writes, “Hey, Rob. I received the TinySeed update. I went through the list of podcast because I was curious about one thing. What is the type of mastermind you’re running with the hot seat implementation? I heard a bit about it on Peter Suhm/Matt Wensing episodes in Croatia, which is out of beta, but it left me curious, maybe you have some more info for me. Thanks and keep rocking.”
I find this question actually really interesting because before I started at TinySeed, I, myself, wasn’t totally aware about hotseats, masterminds, and these other things. I never participated in the mastermind myself. One of the things we’re doing at TinySeed for the next incoming batch is I wrote a little bit of a guide. I thought when I didn’t know what the hotseats were, I’m like, “Oh, but of course. Everyone else knows,” and just rolled with it. But we did find that a few of the founders were also unaware about how they work, so I wrote this little guide. Maybe you can go ahead and give an overview. I just want to say that I feel like it’s not obvious and not completely common that everyone knows how hotseats work.
Rob: Totally, yeah. It’s that shorthand where we get and we talk MRR and LTV, and the first time you listen to this podcast, you’re like, “What are all these acronyms mean? I think masterminds, hotseats, founder treats and all that stuff is the same.”
Mastermind is really just a phrase that we’ve adopted from Internet marketers, to be honest. In that context, there are people that would start these like, “$5000 a month mastermind and you worked with the Internet marketer, and he’s going to help you grow this big business.” I think they have a reputation that I don’t love, but in the startup space, it really does capture this idea of two, three, four founders are getting the other on on a regular basis, whether via Zoom or other video chat or whether it’s in person, really going deep on their businesses and having that implied NDA, confidentiality, and sharing their struggles.
This is especially helpful if you don’t have a co-founder. That someone’s along on the journey that is not your spouse, not your significant other, that you can complain to, that you can rant about, that you can celebrate wins with, who’s there on the journey so you don’t have to call someone and say, “Hey. I’m running this company and here’s the background for the past 12 months on what I’ve been doing and here’s my headspace.” It’s so hard to do that.
In the mastermind context, whether it’s weekly, biweekly, monthly, people know what’s going on and they’re following your story in a way that you can’t share on a podcast, because you need ultra-transparency and that kind of stuff. That’s in general how I think about a startup mastermind, and we actually did a whole episode on what they are. Go to startupsfortherestofus.com, search for startups mastermind, and Mike and I went through that a few years ago.
Within a mastermind, so what do you do? You’re on a call for an hour or 90 minutes. What do you actually do? There’s two formats that I’ve seen. One is just pure round-robin. If there are three people and you’re on it for 45 minutes, then each person gets 15 minutes.
The other format that I’ve experienced with and been familiar with is a hot seat format. That’s where, if there are three people, 45 minutes, two of the founders maybe give five-minute updates; this is what’s going on. Then, the other founder takes the other 35 minutes and go way deep on a single issue or a single problem they’re facing. They ask for advice and thoughts, it’s a white board session, they’re thinking that through, and how can you help. It’s all the stuff. So, a hotseat really just means I have a lot of time to dig into something. You can talk about how we’ve implemented that with the TinySeed batch calls because it’s evolved a little bit over time, but there’s different value from each format, right?
Tracy: Yeah. It’s nice to hear what we do with the TinySeed call formats and we’ve gotten a lot of questions about that actually in the application since how we run our calls. It’s 50%, maybe 70% hotseat format and then 30% the round robin everyone gets a chance to talk. The way I look at it with the round robin is that I want to say people are going to get their problems solved, but really it’s harder in the round robin format because everyone’s concentrating on their own issues, and it’s a way for us to give people a place to talk out loud, to think about their own issues, because there is less feedback when you have short amount of time and everyone is participating. You have less time for people to give feedback.
With the hotseats, that’s when it’s really like, “Okay, cool. We’re going to sit down, we’re actually going to solve the problem.” That doesn’t mean you can’t have that problem solving part on those round robin formats, but it’s a lot harder when you’re telling everybody you have an even small period of time in order to share your problem as compared to being like, “Okay, cool. We’re really going to think over this one thing.”
That’s one of the things that I think about a lot with the TinySeed calls and how they work. Again, I want to emphasize that I totally want people to have their problem solved more on the round robin format, but the shorter amount of time makes it a little bit harder.
Rob: I hope that was helpful. That’s our rundown. We actually have two episodes where we spent the whole episode talking about it. Episode 167 from 2014, How to Organize and Run a Startup Mastermind, and episode 277, Five Ways to Structure Your Startup Mastermind. And I believe that’s when Mike and I went back and forth because I like round robin in general for the weekly or monthly masterminds that I’m in. And he likes a hotseat, I believe. We were going back and forth. Then I’ve since changed my opinions on that as well. If you want to know more about masterminds, head to those episodes.
Tracy: Awesome. Next question comes from Mike and he asks, “Has there ever been any public numbers on how much a SaaS’ monthly revenue comes from forgotten subscriptions or lost users? Those users who are paying, but never use the service/content. As an owner, do you think there’s any moral responsibility for us to stop charging these people at a certain point?”
Rob: Good question, Mike. I’ve never heard of public data. I know that I’ve seen private data across the number of SaaS apps and it really depends on the niche. In all honesty, if you are doing high pressure sales tactics to that Internet marketee, aspiring entrepreneur audience, and you’re selling annual plans, these numbers are 50%–60% of people who have paid for that year, maybe even 70%, and never use that much like the ebooks people buy that they never read, the video courses people buy that they want to get to and never do.
I think a normal range depends on exactly how you measure inactivity, but I’d say between about 15% and 25% is the healthy SaaS app range, which sounds really high. Even right now, I’m paying for a couple of SaaS subscriptions and we’re technically inactive. I believe I have three right now that one I’m leaving for data purposes until we totally transition to a new system, another one I signed up, the trial ended, I’m just extending my trial, so I’m like two months of paying and I haven’t yet flipped the switch in moving something live.
With those, I don’t feel like I wouldn’t want the owner of that SaaS company to come to me and say, “Hey, I want to shut these down because I’m leaving it on purpose.” Obviously, someone forgets about it. Moral responsibility, I guess you could ping people. It’s more about moral responsibility to get people activated. It’s how it think about it.
I build apps to provide value to people, and if they’re not getting that value out of it, then I feel like I’m failing them in the sense that I didn’t educate them well enough to learn how to use it, they don’t know what to do next. That’s how I think about it. I don’t know what you think about it, Tracy.
Tracy: I think this goes from, I can’t remember who, but I feel like there has been a few services out there that have gotten public to say, “We had a certain amount of customers who aren’t using our app. We’re going to do the right thing and make sure they’re not being charged or they’ve been removed or whatnot.” They’re promoting it as, look how moral we are being.
If you want to go that way, then sure, but if you’re a large company, you have the privilege to: (a) remove that revenue and not have to worry about that, and (b) also, we have the analytics and the things in place so they can see who is actively using the app, they have the time to dig into those numbers, they have the time to spend the time to remove those people. Anyone who is a small business who’s bootstrapped or whatnot, that doesn’t have a lot of time, has to be really efficient with our time, I want to say, “Hey, cool. That’s a great moral thing to do,” but I don’t think a lot of small businesses have the time to do that. If that makes sense.
I want to say that it’s totally fine if you don’t feel like you have to spend the time working on those kind of things that is going to lose you revenue when you could be spending the time, like you said, improving your app, improving your activation number, spending your marketing dollars, and working on getting the word out. I just want to reassure that there’s no problem with not having the time to do this moral revenue losing thing as a small app, even though there are people out there who have that ability.
Rob: I think it’s a good point you raised, is just to even look into it, it takes time. And time is the most valuable asset of a founder, especially when you’re a one-person or a three-person team. The revenue is an issue as well. What if you went out and sought everyone out and you email them, and you double check, “Hey, I’m going to cancel your account. Do you want to cancel? Are you sure, are you sure?” That is a campaign on its own. You’re going to do that and then you’re going to lose 15% or 20% of your MRR.
If that’s something you want to do, then go do it. I don’t know anyone that’s done it. You mentioned examples of folks that do it. I certainly don’t think there’s anything wrong with that. It’s interesting just to look across the landscape of the way we used to buy software as paid as a one time fee, and then you had to buy it when the next major version came out.
You bought Microsoft Word and then you had it for three or four years, and it didn’t matter if you used it or not, you paid that fee up front, $100 or $200. Microsoft Office was so cost prohibitive that they have student versions and they’re giving it away in India and Africa and stuff because it is expensive. Whether you paid for it and used it five times, or whether you paid for it and used it solid for three years, you paid the same amount.
We’ve transitioned to subscription things, and I think that’s way better for the consumer, because now we can cancel. That’s why SaaS is so hard to grow. When people aren’t using it, you haven’t got that big chunk of money up front. In my opinion, if you make it easy for people to cancel and with every app I’ve ever had, we email a monthly receipt. Every month, you get an email that you’ve been charged this month, this is your bill date, and this and that. You’re getting notified. I’d imagine there’s some apps out there that don’t do that and they try to hide behind it or they hope you forget and never check your credit card statements. Don’t do that. I don’t think that’s ethical.
But if you’re pinging people, when email receipts go out, we used to get a response and it’s like, “Hey, I meant to cancel this. Can I get a refund?” which we would do. We would definitely get cancellations from receipts. If we’re optimizing for non-cancellation, we would have removed our email receipts, we would have removed the cancellation button in the app and made you email support or you haven’t […] call support like Comcast or whoever does.
That’s the way to game things and that’s where I think you get on the immoral or unethical approach. I think what I’ve outlined, which is you’re notifying them, they’re well aware you’re doing it, you’re trying to get people onboarded, I feel like you’re doing what you can. You can’t force someone to use your app.
Tracy: Totally. Next question comes from Poco. He writes, “Firstly, thank you so much for all the great work and resources you offer. Do you know of any podcast similar to yours that specializes or also covers B2C stuff?”
Rob: Shorter answer is no. The long answer is the reason is because there is really no such thing as B2C SaaS. I think Lars […] said this on an early mentor call, but I’ve thought about this for years. What company can you think of that is not an entertainment company. Netflix and Spotify, I wouldn’t consider SaaS, they’re more content delivery.
Even Dropbox, which started as a consumer company, look at their public filings now. There’s a reason they went after enterprise. They are an enterprise company, the consumers that is lead gen. It’s just so we all are comfortable using their software, so that when you go to the company, and they want to sell to a 10,000-person enterprise, everybody’s already familiar with it.
It’s the same reason Apple computer gave away an Apple IIe back in 1980–1981. They gave an Apple IIe to every public school in California. They did it so that kids could learn computers, but also, they were familiar with the Apple operating system in essence and that when they went home, if their parents said, “Oh, what kind of computer we should get?” The kid would say, “I bought an Apple IIe,” they’re familiar with it.
I’m totally open to listening to this and you know of a B2C software. It’s basically what he’s saying, a podcast that focuses on B2C software, please write in questions@startupsfortherestofus.com or post a comment on this episode. Do you know of any, Tracy?
Tracy: I’m glad that you didn’t because I didn’t as well. I was wracking my brain and hoping that you had a good one to respond with. But yeah, I agree with you on all those points.
Rob: I’m sure there’s someone building mobile apps out there who’s doing a podcast. The B2C side tends to be training courses, information, sometimes it’s dietary stuff like I need a paleo meal planning app, or meditation, wellness. I think that’s the kind of stuff that focus on and I don’t know of any podcast that focus on that. Aside from one-off, like if you listen to This Week In Startups, Jason Calacanis interviews founders and you’ll see B2C founders come through there. That might be the one place that I’d go if I were looking for this.
Tracy: I think that’s all the questions we have.
Rob: We’re wrapped up for the day. That’s great. Short episode. Folks want to find you online, tracymakes.com or @tracymakes on Twitter.
Tracy: I’m off to correct you. It’s tracyosborn.com.
Rob: Oh, good. I’m glad you corrected me. I’m confused when the domain doesn’t match the twitter handle.
Tracy: If I could get @tracyosborn on Twitter, I would. Alas, there is another person.
Rob: There is another Tracy Osborn. I went out and bought robwalling.com two years ago from a different Rob Walling, and one of the bigger reasons is I just wanted all my handles to match and I got tired of saying, no one could remember what my website was softwarebyrob.com, because back in 2005, that was what you did. You didn’t just put your name.com, I don’t know why. It just wasn’t a common thing to do and now it makes so much more sense.
Thanks again to Tracy for joining me on the show today. We answered a lot of listener questions. And if you have a question that you’d like to hear answered on the show whether by me or myself with a guest, leave us a voicemail at (888) 801-9690. You can always email us, it’s questions@startupsfortherestofus.com. You can attach a Dropbox link, what have you.
Our theme music is an excerpt from We’re Outta Control by MoOt. It’s used under Creative Commons. Subscribe to us by searching for startups in any pod catcher. Visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening. I’ll see you next time.
