unfair advantages

Startups For the Rest of Us

Episode 300 | The 4 Unfair Advantages for Faster SaaS Growth

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Show Notes

In this episode of Startups For The Rest Of Us, Rob and Mike talk live at MicroConf Europe about the four unfair advantages to faster SaaS growth. They also expand the topic to things that seem like unfair advantages but aren’t and how to improve your chances of getting an unfair advantage. At the end of the talk they do a short Q&A with some audience members.

Items mentioned in this episode:

Transcript

Rob [00:00]: In this episode of ‘Startups for the Rest of Us,’ Mike and I are going to discuss the four –

Mike [00:04]: Stop. You didn’t say it was episode 300.

Rob [00:06]: Then I say this is episode –

Mike [00:10]: All right.

Rob [00:10]: This is going to be good.

Mike [00:11]: We do stop like this on occasion.

Rob [00:13]: Oh, I love it.

Mike [00:13]: I’m not kidding.

Rob [00:14]: In this episode of ‘Startups for the Rest of Us,’ Mike and I discuss the four unfair advantages for faster SaaS growth. This is ‘Startups for the Rest of Us’ episode 300.

Welcome to ‘Startups for the Rest of Us,’ the podcast that helps developers, designers and entrepreneurs be awesome at building, launching and growing software products. Whether you’ve built your first product, or you’re just thinking about it. I’m Rob.

Mike [00:44]: And I’m Mike.

Rob [00:47]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, sir?

Mike [00:51]: Well, we are live with an episode. We’ve never done a live episode before. And we’re recording at the 10th MicroConf in Europe, in sunny Barcelona.

Rob [01:00]: Indeed. And we have some audience participation going on. We’re going to have a Q and A at the end. But I have to admit it feels very different to record here in front of 110 people, instead of sitting home alone in my office with the mic muted.

Mike [01:12]: Yes, very different. Not necessarily intimidating, but it’s just all eyes are one you, and you’re like all of our general screw-ups are going to visible to everyone.

Rob [01:21]: Right. So we do have an interesting announcement. A little top secret preview, both for the audience here and the folks that are going to hear it next week. MicroConf in Vegas this year is going to be two conferences back to back. So we’re doing MicroConf as usual – MicroConf that we’ve done for the past several years – April 10th and 11th at the Tropicana. And then we’re doing something called MicroConf Starter Edition. And that’s going to be on the 12th and the 13th. And there will be more info to come on that later. But if you’re interested in potentially coming to Vegas for either of those two day conferences that we’ll be running back to back – and they’ll have an evening reception that overlaps – come to MicroConf.com and enter your email.

Mike [02:02]: Awesome. So, anything else new this week?

Rob [02:05]: Hanging out in Barcelona.

Mike [02:05]: Awesome.

Rob [02:06]: Pretty cool.

Mike [02:06]: What are we talking about this week?

Rob [02:08]: We’re talking about the four unfair advantages for faster SaaS growth. And this is specifically the self-funded edition. This is based on a MicroConf talk I did in Las Vegas just about four or five months ago. We actually have some slides the folks here in the audience will see, and maybe we’ll publish these in the show notes or something, if Josh contacts us.

Mike [02:24]: Yes, that would be cool.

Rob [02:25]: That would be nice. The whole premise of this is that as I was putting together this talk, I was trying to think of – I’ve had a lot of software products over the years, and some that are not software products, and DRIP, of all of them, grew way faster than the others. I had a SaaS app called HitTail before this, Wedding Toolbox, DotNetInvoice, CMSthemer, Beach Towels. I wrote a book, ‘Conference.’ Just other stuff. And I started thinking, “Why is it that DRIP got such traction so quickly?” Once we had product market fit there was a lot of growth. How did this happen? What was the anomaly?

And so, I started thinking through the differences of how I had changed, how my skills had changed, and I was trying to attribute it to just, well, I got smarter, I had a little more money, I had a little more skills. Then I took a look at some other fast growing SaaS apps. I looked at things like Baremetrics, Balsamiq, Bidsketch, Woo Themes, Clarity, Basecamp – some of these aren’t SaaS apps, per se. Woo Themes is a subscription WordPress theme service – WP Engine and others. And was trying to pick out what was the advantage that these had over other apps that maybe launched around the same time, even in similar spaces or overlapping spaces, but didn’t have kind of this meteoric growth. A lot of these apps were growing 10, 20, 30% a month in the early months, and once they stopped reporting – because eventually most people do stop telling all the numbers once the table stakes get high. I’m trying to figure out what it was.

So I looked at these. I looked at a whole other list. This is from, I think, our Founder Café homepage, just looked through apps and did research. I talked to some founders. So, this is mostly anecdotal, but it’s based on my experience, my conversations with hundreds of SaaS founders and even other software product types. So, I dug in and I picked out four things I know are unfair advantages. And I think one of them is a requirement for fast, early growth. I couldn’t find an app that was growing quickly that didn’t have at least one of these things in place. When I say “quickly” I don’t mean it was growing three, four, five percent a month. I’m talking the ones that – remember when Baremetrics came out and Josh was publishing his early revenue? And we were like, “What in the world? This is really fast.” It’s that kind of growth. And it may not sustain forever, but at least in the early days how he got there. I’m sorry. We’re going to also talk about things that seem like unfair advantages but aren’t. And then we’re going to talk about how to improve your chances of getting an unfair advantage.

Mike [04:45]: Why don’t we talk a little bit about what an unfair advantage is. An unfair advantage is really a competitive advantage that you have over other people, and whether that’s other people or other businesses. And there’s a bunch of different ways to define this. Probably one of the better ones comes from Jason Cohen. He says that the only real competitive advantage is that which cannot be copied and cannot be bought. This encompasses a bunch of different things. And I think the really important piece here is that there’s a differentiation between those two sides of it. It cannot be copied and it cannot be bought. So, cannot be copied. There’s a lot of different reasons why something might not be able to be copied. You may have some insight or knowledge, for example, on a very specific type of business. Or you may have a background that relates to how a particular process is done, or a new roadmap for how version 2.0 or 3.0 of something is coming out, and you’re involved in the creation of that. Those are the types of things where you have that insider knowledge that nobody else has, and they could learn it but it’s going to take them a long time. The second side of that is it cannot be bought. If you get funding, you still are not going to be able to replicate that. Those two factors in place, I think Jason has got it brilliantly on at that point. The combination of those two factors, that’s what makes it a competitive advantage.

Rob [06:04]: So let’s dive into the first one. Unfair advantage number one is if you are early. So, it’s to be early. This is probably the most common as I looked through. As I ran through Baremetrics and – what was it? Woo Themes? – they were an early one. I think I actually talk about them in a second. I shouldn’t start naming the companies. But being early is a very common way. If you’re early into a niche, it’s a way to get fast early growth, because there’s just no other options for you at the time. The issue with being early is that it’s temporary, because typically – unless you’re in a very small niche – there’s going to be fast followers. So, if you’re the first one to launch into, let’s say Woo Themes as they created their first subscription premium themes, there were dozens of them by the next year. It doesn’t necessarily go away, because you can still keep that brand recognition, but you are going to bring competition. Especially if you talk a lot about your success, which we’ve seen some people do, and bring competitors into the space.

Mike [07:01]: And it seems like there’s places where just being involved in a particular space, or on a particular platform, just by virtue of being there you can almost make yourself early anyway. In some cases you just completely luck out. You happen to be in the right place at the right time, and there’s not necessarily an element of skill or your relationships involved. But if you are – let’s say that you’re working with Woo Themes and you already know the people – you know the founders personally – and they come to you and they say, “We’re building a platform, and we want to be able to build a mechanism for people to build plug-ins on our platform.” By virtue of having those relationships you are able to leverage yourself into being early there. There is a large element of luck involved. You can’t necessarily depend on being early all the time, or even most of the time. It’s something that is just going to happen, and you don’t really have a lot of control over it.

Rob [07:51]: Being early is basically feasible in very small markets, because at this point those tend to be the markets that are underserved in this day and age. In 2016, there are SaaS apps in all the major markets. So it’s going to be feasible in small markets, or in emerging markets. What I mean by that is markets that don’t really exist yet. So again, you think of Woo Themes premium – WordPress was around, but it was really kind of an emerging market when Woo Themes came out. And Stripe had been around a little while, but how many SaaS apps had built on it when Josh launched Baremetrics. Stripe Analytics was an emerging market when he hit that. The other thing is being early requires swift execution. So if you get out early and you build something and you get to market, if you’re still working your fulltime job and you only have five, ten hours a week to work on it, and you do get any type of pickup, you’re going to get trucked. You’re going to get caught and you’re going to get overtaken quickly. So, once you get out ahead, you really don’t want to lose this be early advantage. We look at our two criteria. What do you think, Mike? Can being early be copied or bought?

Mike [08:49]: Not easily. If you are able to quickly execute on something that you see it coming out, and you have the money to be able to do it, then yes. But by virtue of the type of company that would have that type of money, they don’t move quickly. You have that advantage of being small, being able to out-maneuver them and implement something fast that they’re not going to be able to get there in front of you. Now they may get there a little after you, and that poses a bit of a different challenge just because they come in after you and they do have more money than you, they do have more resources, but, hopefully, you can leverage yourself into a position of “dominance.” And if you are early, it’s probably in a small market anyway. And chances are good they won’t come after you.

Rob [09:24]: Very good. Some examples of folks who were early. I’ve already mentioned Baremetrics. It’s SaaS analytics for Stripe, Joshua’s first to market as far as I know. Balsamiq. So Peldi’s startup was a really early mockup tool, basically. If not the first one that I had heard about that was kind of made for the modern age, and wasn’t the old kind of Visio style. Bidsketch, a friend of MicroConf, Rubin Gamez, was really the first proposal software made for the web, and he got early traction with that. Woo Themes, as I said. And then Basecamp. They were the first web-based project management tool that I remember. I’m not sure if they were the number one, but they certainly were the first early entrant.

So as we’re going to walk through these four unfair advantages, I kind of want, instead of everyone just listening, I want you to think to yourself, “Where do I stand on a scale of one to ten?” But I was trying to think what does that mean? What does one to ten mean? And so, I think maybe one to Basecamp. Or one to Baremetrics. Where do you think your app, or the app idea that you have, stands on this rating scale? And this may not be super relevant to you. We have three other advantages, and maybe they’ll be more relevant. But if you are thinking of launching something, it’s good to know. If you think about DRIP, it was probably a one or a two. It wasn’t early. We have hundreds of competitors so that wasn’t necessarily our unfair advantage. So it’s okay if you don’t have some of these.

Mike [10:38]: I think there’s some challenge in trying to figure out where you are in that spectrum, because you look at something like Basecamp now and they have 30 or 60 employees or something like that. And they have millions of dollars that are coming in, and hundreds of thousands, or millions, of subscribers. And knowing whether or not your market – or the thing that you’re going after – and whether or not it’s going to ever get to that point, it makes it difficult to try and relate yourself to where they are. One to Basecamp, I think there may be a better way to put that. I’m not sure.

Rob [11:05]: There probably is. Maybe when we do this next time you can write the outline. No, I was only kidding – BOOM! I only do that when it’s live. I don’t –

Mike [11:13]: I’ll write your talk next time.

Rob [11:13]: All right. Unfair advantage number two is who you know. This is your network. These are the people, not just who you know, but who would be willing to endorse you, who would be willing to promote you to their audience, who would be willing to advise you, or make intros. It’s deeper than just, “Oh yeah, I know that guy who sat next to me at MicroConf.” It’s like, is this person willing; do they know you, like and trust you enough that they’re willing to put a little bit of their reputation on the line in front of their audience, or in front of someone else who has an audience that they’ll make an intro to?

Mike [11:47]: Yeah. You’re basically asking them to spend their social capital on your behalf. So you have to have at least some level of trust, or knowledge, there. And it’s not really just about the type of product that you have, or how good it is, because if you’re just launching a product it’s probably not very good, and you have to have that relationship with them that they know that you’re going to be able to come through, or you’re willing to do what it takes and put forth the effort. As opposed to, “Hey, I’d like an introduction to [Beth Flynn?].” Or somebody else like that. And there’s a lot of social capital there, and if that product tanks, or that relationship goes south for whatever reason, then it’s really their reputation on the line. It’s not yours. So that makes it challenging.

Rob [12:25]: Another caveat, or note about this, is that who you know, you kind of need to know people that your competitors can’t access as well, because there’s potentially a loss of value there. I think if someone was an affiliate for you and a competitor, it could work, but it certainly has a lot less value if your networks overlap heavily. It would be really nice if your network was very different, and the two circles didn’t overlap much. So what do you think, Mike, who you know? Copied, bought?

Mike [12:51]: Definitely not. Well, it depends on your friends, and who you know, and whether they can be bought or not [laughter]. I think that there’s definitely difficulty in copying, or buying, either one of those things. With certain types of markets you can kind of buy your way into relationships. For example, a reseller market, you can spend money taking people out to dinner and convincing them to promote your products, especially if you have the type of margins that are there in order to, essentially, compensate them for that time, or that’s their business. It could very well be that they’re getting paid to promote products and they don’t necessarily care. But I think that, in general, you probably don’t want those types of people to help you promote your product anyway.

Rob [13:27]: And some examples of businesses that were grown based on the person’s network, based on who they knew, AppSumo is one. Most people don’t remember but Noah Kagan was pretty much an unknown in our circles in 2012, 2011, whenever AppSumo launched. And, in fact –

Mike [13:45]: He spoke at the first MicroConf.

Rob [13:47]: That’s right.

Mike [13:47]: He was not known until after MicroConf. We can make that claim.

Rob [13:50]: Yes, I guess so.

Mike [13:51]: I don’t think so.

Rob [13:51]: The two aren’t correlated, but they happen to line up. So, when he launched AppSumo it was a “deal a day” site, where he would get these big bundles of software and he’d discount them, and the first deal they every did 20 or 25% of the deal sales went to Micropreneur Academy members. Somebody posted it in our forums, and it was just the perfect lineup because we all consumed software and stuff, and it was kind of a founder bundle, or startup bundle. And he just picked up the phone and started calling me. And I’m like, “Who is this guy?” A) I don’t like talking on the phone and b) who are you. I get a lot of phone calls. And we talked and I had no idea. And he’s like, “I was employee number seven at Facebook.” And I’m like, “This is crazy.” But he built a lot of that business based on relationships. And he either built them – like he did when he picked up the phone and called me – because later on we did a deal together. He put HitTail on AppSumo. He was able to build these bundles because of his extensive network of people. Then he was able to get affiliates and just do all types of crazy stuff. And it was based on his network.

Clarity.FM from Dan Martell. Dan Martell is also a MicroConf speaker. That dude just knows everyone, and if he doesn’t know you, he will soon. He just utilized that network really well. Clarity.FM is advice for founders and entrepreneurs. It’s actually a network of successful founders who you can call on the phone and just book like ten minutes of their time for X dollars, and it was a marketplace, right? Few of us in this room, if any, could start a marketplace like that, because you need so many high-end founders. And he just picked up the phone, wrote emails, and was able to populate this business. And he later sold it. He sold it a couple of years ago to Startups.co.

WP Engine is another one. Jason Cohen talked early on about how his network didn’t allow him to grow WP Engine, but it allowed him to hire really good people because of his blog, and it allowed him to raise funding like that because he was well known. So those two things contributed heavily towards his growth. And then a shout-out to [Carthoop?]. It’s an honorable mention, because he’s still working on it and growing it. But Jordan, as I view it, he knows a lot of people, especially in his space. So he’s in the e-commerce space. He just has a way of — I see it, and I remember Dan Martell meeting everybody, and suddenly Dan Martell knows way more people than I do in my own circle. And Jordan’s the kind of guy who’s doing that. So these are some good examples.

Mike [15:59]: I kind of joked about it earlier, but every single person behind those companies has been a MicroConf speaker at one point.

Rob [16:05]: I didn’t do that intentionally –

Mike [16:07]: I know.

Rob [16:07]: – but it is – when I’m going to write this and outline it it’s kind of like I’m going through and I went to all these startup lists and all these – I did go through all the MicroConf speakers and I just put this huge list of SaaS apps and startups together. And I was thinking which one do we know grew fast? Which ones didn’t we? And then breaking down the criteria. So there is definitely some bias here. It did come out of me.

Mike [16:26]: Yeah. There’s definitely bias there, but I also think that there’s a correlation with those types of people, because they travel in the same circles. And when you tend to get into a particular – and social network is kind of a nuance term, I think at this point – but when you get into a social network of people – and I would say that MicroConf people are a social network of people. There are various other ones out there. There’s startup groups in different cities. They’re all their own social network. So you have those social – maybe social circles is a better way to phrase it – but when you get into a social circle, you can very quickly and easily be introduced to other people, and over time those relationships develop. And, as you are kind of alluding, over time those relationships develop into something where you are able to just tap into those relationships and talk to people and just get-to-know-you basis, and you’re able to use those people to grow your business. And “used” is probably a strong term, but leverage that relationship.

Rob [17:18]: So, on our one to ten scale, where do you stand between one and maybe a Jason Cohen, in terms of your network?

Mike [17:25]: Jason Cohen knows everybody.

Rob [17:27]: He does. It’s crazy. All right. Unfair advantage number three is, who knows you. So this is your audience. This could be an existing customer base, where there’s people who may have perhaps bought an info product from you. Maybe it’s folks who have subscribed to your one-time sale WordPress plug-in and then you’re going to launch a SaaS app. It’s people who know, like and trust you.

Mike [17:46]: And it could just be people you’ve worked with before. Most people discount, or undervalue, LinkedIn to some extent, because a lot of people will use it as a mechanism for just kind of increasing their network connections in efforts to be able to leverage that into success, or download the list of emails, and they’ll just start introducing themselves to other people. But when you connect with somebody, a lot of times people will start with the people that they’ve worked with in the past, people they actually shared a job experience. Then, from there, you start finding, “Oh, there’s these small groups of people that I worked with maybe at a startup ten or 15 years ago that went on to do other things, and I didn’t realize that these two people now work at the same company, and I worked with them – one at this company and one at this other company – and now they work together. You can also leverage those relationships to ask them about other people; your second or third connections in LinkedIn. And I’m not saying that LinkedIn is the panacea for all of your networking issues, because it’s certainly not. But you can use that to gain some visibility, and it works in the reverse as well. Those people will see you on the other end. So you see it from your perspective, but you are on the other end of that as well.

Rob [18:51]: All right. What do you think, Mike, who knows you, your audience? Can that be copied, can it be bought?

Mike [18:54]: It goes back a little bit to who you know, and whether or not those relationships are reciprocal. Because just because you know somebody doesn’t mean that they know you as well. There’s that element of trust that you can leverage, and whether or not you have a voice that they’re paying attention to in any way, shape or form. So, it definitely can’t be copied or bought. It can be re-implemented, but it’s going to be at a slower growth rate. You’re probably much better off being in a position where other people know you than you know of them on a peripheral basis. For example, I know Jason Cohen, but it’s not like I’m on his inner circle or anything. And he knows who I am, but the relationship is not, I would say, directly equivalent in both ways.

Rob [19:35]: All right. So, examples of businesses that have been built on the who knows you, but built on an existing audience. SumoMe. So going back to Noah Kagan, he had already had AppSumo, he had a very large email list. 750,000. I think they’ve kind of made it public. And then when they went to build SumoMe, they basically had the big email list that they could get started really quick, and they got to six figures in the installs – hundreds of thousands, or over a hundred thousand pretty quickly based on that list. They took their existing audience and they very intelligently turned it into a software success.

Edgar, meetedgar.com. This is Laura Roeder. She had an audience of folks who had bought training and information products from her on social media and Twitter marketing. It may have been Facebook, too, but definitely Twitter marketing. Then she started a SaaS app for essentially doing just that. It had a system to it, and was able to pretty quickly get to – I think she got to $100,000 a month of MRR within, was it six months or ten months? It was very fast. Anomalous growth.

KISSmetrics. Hiten Shah, Neil Patel. They started Crazy Egg. They had an audience of marketers who said, “These guys build good products.” When they came out with KISSmetrics, they already had that list of customers, and they had a small marketing audience, but they really had a lot of customers who trusted them.

LeadFuze. Justin McGill started this as a productized service. It was doing cold email outreach. He actually had what they call BDR’s – business development reps – he had a staff of them who were doing email outreach. They were actually doing some for DRIP. They would go get customers. Then he built LeadFuze, the software product, behind it using that revenue. Then he sunsetted that productized service, and now LeadFuze is a SaaS app – and he’s public about this so I can say it – but they hit 30,000, 31,000 in MRR in a short time. Again, it’s like six months or something. So it’s pretty good growth.

Then DRIP. I would say that one of the big reasons that I got early traction, and that Drip was able to grow the way it did, was a little bit because of my network. But I think a bigger part of that is because of who knows me. It’s because when I said, “I’m launching something and I think it’s good.”, people would listen. They would at least give me the time of day. Whether they were going to switch that day from MailChimp, I at least got the benefit of the doubt.

Mike [21:41]: I think there’s an important distinction to make here when you use the phrase “Who knows you?” It is not necessarily who is in your audience that knows you. At least not the number of people because, for example, ‘Startups for the Rest of Us’ has 11,000 listeners or weekly downloads or something like that. All it takes is one person in that audience who they may know 200,000 people, or 300,000 people, and they may have a channel that you can leverage. So, even though your particular audience, the people listening directly to you, may be lower than you’d like, it doesn’t necessarily mean go out build an audience. You could very well have just five friends, and one of those people, all it takes is their relationships. And if they know who you are and they know what you’re building, “Oh, let me introduce you to so and so. They can help you.” That’s where that social capital comes in. That’s where those social circles are really helpful. So, it is not necessarily equal in both ways. But that’s an important distinction about “Who knows you?” is not just about the number of people that know you. That number gives you a bigger surface area, but it also gives you those people that may have their own relationships that can work in reverse for you.

Rob [22:45]: The influencers. So, in terms of “who knows you,” where do you stand from one to ten with ten maybe being someone like Noah Kagan, who has, obviously, a very large audience. And our fourth and final unfair advantages for self-funded SaaS founders is growth expertise. This one’s a little tricky. Growth expertise is knowing the tactics, knowing the strategy, and having experience doing these things. It’s not just reading about them, but it’s having this in-depth knowledge of it. And it’s people who we think of as the best growth people. That’s what I mean by expertise. I don’t mean someone who has toyed around with stuff, or someone who has done some marketing. And there are people, who without an audience – this was the tricky one where I said, “I have apps here that have grown with no audience and very little network as far as I can tell. And they weren’t early so how did that happen?” And every one of them there was a founder, or there was a marketer there, who just knew his stuff, his or her stuff. They just nailed it. And that’s what I’ve encapsulated with this one.

And copied or bought is a tough one on this. Copying, very hard. It could take years to get that expertise. Bought, could be bought perhaps with equity, but the best growth people we know they don’t just work. You can’t just pay someone $200,000, $300,000. These growth people, they’re not going to do it. So bought, very, very hard. You would need to give away a chunk of equity.

Mike [23:55]: I think that’s the key piece there. You can pay for expertise, but there becomes a certain level of expertise that is, I’ll say, early enough in a particular technique of some kind that is really difficult to buy them. You can go out and you can find people that are doing consulting for $20,000, $30,000, $50,000 a week for certain things, and you can’t buy them. There’s stories from unnamed individuals who’ve probably been a little bit public about – without naming names – and they’ve said, “I was offered $1 million dollars for annual salary and I turned it down.” And it wasn’t to say that they couldn’t be bought, because they were obviously doing the consulting work, but they didn’t want to be tied to that, and there was no equity involved. So when you get into those situations, to find somebody that is that good that early, without offering them equity, I think it would be really challenging to be able to buy them.

Rob [24:42]: Some examples of these companies are companies like Sean Ellis’ Qualaroo, who’s here in the house.

Mike [24:48]: Actually, it’s not Sean Ellis –

Rob [24:49]: Sean Ellis. Yes, I know he sold it, but he grew it and then sold it. But Qualaroo’s a sponsor of MicroConf this year. That’s not why this is here. I put this here back in April. We have Buffer from Joel and Leo. They were a little bit early into that market, but they weren’t the first. There were plenty doing what Buffer was doing. But is it Leo? Leo’s the growth guy, is that right? I forget if Joel’s the – Anyway, one of them is the programmer and one of them is more the growth guy. And that dude just hustled, and they didn’t know anybody. He cold emailed me, and he knew Hiten, and then he cold emailed me and said, “I’d love to do a guest post or two on your blog.” And I was like, “Well, you know…” And he showed me examples of his writing. I get a lot – if you have a successful blog then you get tons of offers for this. I typically turn them down but I said, “Well, give me a sample.” And his writing was really good. Over the course of a couple weeks, he did two guest posts. I found out later he was doing one guest post a day on all the big blogs. If you go back and you look at that time when Buffer was getting started, you look at everybody, like Jason Cohen, my blog, on Startups, [?] blog – just pretty much every blog you can imagine that has any type of influence, any type of link-back authority, and Buffer has a guest post on that. He was just hustling. He had growth expertise and he had hustle.

Crazy Egg is another one where they didn’t have an audience at that point but Hiten and Neil, let’s just say, they’re at the top of their game, and some of the best in the world at this.

Mike [26:04]: Going back to your Buffer example. When you do that type of thing and you’ve reached out to Hiten Shah or Rob Walling and you get at least some visibility. You said yourself, “I had no idea who this guy was.” And you asked for a sample of his writing, and then started looking back and seeing where else it was that he was being published, you can leverage those relationships, because really what you’re doing in a way is – back to your stair step approach – you’re leveling up the people that you’re talking to. You’re talking to people who have fairly large social circles, and you leverage that relationship into a larger relationship that they may have with somebody else who is bigger. Then you go bigger, and you keep going bigger. And you go, “By the way, I did a blog post over here for Neil Patel. And I did one for Rob Walling. And I did one for Hiten Shah.” And then it’s like how do you turn something like that down? You can leverage those types of relationships, but you can’t just go for the big fish. You’ve got to work your way up to it.

Rob [26:51]: In terms of growth expertise, I’d ask you to think about, “Where do you stand on a scale from one to ten, where ten maybe someone like a Sean Ellis or a Neil Patel?” Whoever you think in your mind is maybe the best of the best. So, a couple other things that I’d say are not unfair advantages, and that a lot of these are just table stakes for competitive spaces. If you’re going to go into a space with 100 competitors all of these are table stakes. If you go into a niche that’s maybe smaller and doesn’t have a tone of competitors, these will get you an advantage, but it’s not an unfair high growth advantage having just these things. I have five or six things here. One is great design and UX. I love great design and UX, most people in here probably do. But this alone isn’t going to cut it. This is table stakes if you’re going to be in a competitive space.

Mike [27:32]: And the reason is because that can be copied. You can very easily copy that.

Rob [27:36]: Copy or buy it.

Mike [27:37]: And that goes back to Jason’s quote, “You can copy it or buy it.” You can go buy the same theme that they did. Or you can buy the same designer that they used. There’s way to copy a design. It’s not a big deal.

Rob [27:46]: Technical or design skills. While, again, I think these are super valuable, most of us in here do. These are things that can be bought for a couple hundred thousand dollars. You could hire a really good technical or design person, or a great design or UX person, unlike that growth thing. Money. Money’s not an unfair advantage. Maybe unless you’re the only one in an entire space that has money, but money is cheap these days. It may not be forever, but it’s pretty easy to get a round of funding. As we’ve heard a lot of people just having some success, and then people are throwing hundreds of thousands of dollars at you. This is the climate we currently live in. Five years ago it wasn’t that way, right after 2008, 2009 – which I guess is not seven years ago – and in five years it may not be that way. But right now money is pretty easy to get.

An uncopiable idea. When I was researching unfair advantages, this came up in a few of kind of the big MBA like Stanford Business Review, Harvard Journal of such and such MBA stuff, and an uncopiable idea is something like a Google where you have that killer algorithm and it’s completely uncopiable. And the reason that I don’t think this applies to us is because this is for self-funded SaaS, and I could not think or find a single self-funded SaaS app that ever had an uncopiable idea. So that’s why it’s on this list. Domain expertise. Let’s say you’re selling to lawyers. I think that’s a good thing, that if you were a lawyer, your brother’s a lawyer, your co-founders a lawyer, that is really good. Not uncopiable though. And then passion, interest, time, focus. Again, these are table stakes. These are things that I used to think, “If I have that, I have an advantage over people.” These days I don’t think you do.

Mike [29:13]: I think everything that you just listed there, all of its stuff that you could either copy or buy. And they are helpful, but they’re not the only things that are going to get you to a higher level.

Rob [29:21]: So if you look at the four unfair advantages we’ve listed – we’ve listed be early, who you know, who knows you, and growth expertise. The latter three – who you know, who knows you, and growth expertise – those come with you. Those are skills, or assets, that you can bring with you from product to product, year over year. Being early – I’m not trying to downplay that – I wish I could be early actually. I think that’s the thing is I’ve never been early to anything in my life. I’m not the creative type. And I think that there are certain people who are just going to be thinking that way and are going to be at the right place, at the right time. But for me, I like to develop repeatable models that can be used over and over. That’s what we do at MicroConf is try to teach things that, not just say, “Well, go be early.” because that’s not helpful. Because you don’t know how to do that. We like to teach things that are fairly repeatable, testable, validatable. And so these latter three are things that you can take with you over time.

Mike [30:10]: You’re not even early to the podcast half the time.

Rob [30:12]: I know. I have to keep you waiting. And so, to wrap us up – there’s just a couple of more minutes here – it’s interesting, as I looked at my stair-step approach, where I talk about building one-time apps and then stepping up to one-time sale apps, like WordPress plug-ins and such. Then stepping up to step two which is selling enough of those until you can buy your own time. And then eventually stepping up into recurring revenue. This fits pretty well with this whole unfair advantage thing, because if you do this right – you’re going to launch a WordPress plug-in for e-signature or for lawyers or for something. For sales people. For ecommerce. Then you’re probably going to launch maybe a few more WordPress plug-ins in that space. And by the time you get to step three, and you’re trying to do recurring revenue, which is really hard as we kind of all hear over and over, you may have that. You’re likely to have maybe some growth expertise in that. Maybe you have a network of people in that space, which is who knows you. Maybe you have an audience in that space, which is who you know. So the ideal is that if you travel a path that you would build these skills and build these unfair advantages up over time as you go through your journey.

Mike [31:13]: That was actually an interesting thing that I looked at. Even on your stair step approach, early on you look at the things that you did. It was the WordPress plug-in, all the single products, the one-time sales, things like that. And you didn’t even really have any unfair advantages at the time. You were basically in learning mode. You’ve got the learn, build, grow stages for, basically, how DRIP went. But early on it was just you were learning, and you were in learning mode the entire time. And eventually you got to a point where you learned and then people knew who you were. And then after that it was kind of going a step beyond that. So you built up these unfair advantages over time. And I think that that’s an interesting point, is that just because you don’t have them now doesn’t mean that you can’t have them in the future. Being able to build them over time, there’s a trajectory that you can get, and as you build that trajectory – as you build more products or launch more things or do different things in different markets – you learn to toggle the levers in ways that will accelerate the growth in ways that were previously never possible.

Earlier in Steli’s talk, somebody had asked him could he have started with Close.IO and he said, “No, I don’t think that I could have, because there were a lot of things that we needed to go through and we needed to learn.” And I think that that’s very true for most of the paths that many of us are on as self-funded bootstrappers. You really need to go through those missteps and learn those different things along the way. As you get further advanced you learn the techniques and the patterns that come up where you can turn that knob just a little bit tighter and get a growth acceleration that you never thought possible, or that you weren’t comfortable with.

That’s one thing with, for example, building an email list or sending out emails. People are very hesitant in their early days. You’ve got 25 subscribers. “Oh, I’m really not sure about hitting the button on that email that I’m going to send.” It’s 25 people, it doesn’t matter. There’s people, as they proceed past that, you get to 2,500 and 25,000 and you’re just like, “Okay, whatever, I’m just going to hit the button.” And it doesn’t matter at that point because you’re comfortable, you’re confident that you’ve gone through those missteps, and it doesn’t make a difference anymore because you’ve learned what to do and realized that some of the mistakes that you make, they don’t matter nearly as much as you think that they do.

Rob [33:12]: I like that you used the phrase “self-funded bootstrappers.”

Mike [33:15]: Sorry.

Rob [33:16]: So the question we want to leave you with today is, “Which of your advantages do you want to increase?” And now I think we have time for just a couple questions from the audience.

Mike [33:24]: I made up that term, by the way. “Self-funded bootstrappers.”

Rob [33:27]: Self-funded bootstrappers. Hiten would love and hate it, right?

Mike [33:28]: You want to hear another term I –

Speaker 3 [33:30]: He would hate it.

Mike [33:32]: I’ve got another one I made up. Plagiarism.

Rob [33:33]: Plagiarism. Nice.

Andreas [33:35]: I’m Andreas. I’m the founder of [Hunter Recruitment?]. And I was thinking about the unfair advantage, and I was thinking about the problem because we are building a platform with a validation machine. But really maybe our unfair advantage is the people that we know, the tech people that we know. We are [residents?] right now in [Google Campus?] in Madrid, and probably the disadvantage is the people that sit down near to us. We really want the other startups outside the campus know these people could be. I don’t know if you agree with that.

Mike [34:17]: I would say it does map back to that, because it is partly about who you know and who knows you. And I don’t want to directly say it’s because of geography at that point, because you sit close to them. But in a way it is. You are sitting very close to them. How many other people are sitting close to them that are doing what you do? That are trying to connect tech people with businesses that are trying to hire them? So there is that element of geography, but when you translate it to the internet it’s not exactly one to one mapping.

Andreas [34:39]: A relationship.

Mike [34:42]: Right. But that relationship is there because you sit around the corner from them. And you’re probably going to give somebody who sits around the corner in another cubicle the time of day, whereas if somebody just cold calls you over the internet and says, “I’m James Kennedy from Rubberstamp.IO in South Africa. I’d like – “. You’re not going to pay attention, unless you wanted that and you’re basically right there.

Rob [34:59]: Any more questions? May be time for one more.

Speaker 4 [35:04]: What do you think about software patents, because I think there are some companies who use them and abuse them as an unfair advantage?

Rob [35:13]: Software patents?

Mike [35:14]: Software patents, yes. I think both Rob and I have lots of things to say about –

Rob [35:16]: Travesty.

Mike [35:17]: – patents.

Rob [35:17]: Yes, I have a lot of opinions on that. Go listen to the ‘This American Life’ and the ‘Planet Money’ episodes on it. It’s absolutely catastrophic. That’s my opinion. Software patents in the U.S. were not allowed until 1998, and since then it has become an absolute epidemic.

Speaker 5 [35:31]: Okay, thank you. A quick question. How do you recognize when you’re early then when you are wrong?

Rob [35:36]: That’s good. This is our last question. How do you recognize when you’re early or when you’re wrong? Okay, so this advantage is to be early and hit it at the right time rather than – you’re talking about being too early. Being too early to a market is where there’s no one there that needs it yet. And then in a year you see someone launched the exact same thing and it takes off. So like Foursquare had been done like six times. Facebook had been done three or four times, almost exactly the same way, but there was something about the flux of technology and such. You know when you’re right, because you’re right, and the curve looks like this. And you know when you’re wrong – I guess what I’m saying is, you said early versus wrong, and I’m saying too early is equivalent to wrong. But this early advantage is actually when it works. It’s the perfect time. You’re just early ahead of other competitors, but you hit the market at the right time. That’s what I meant by it.

Mike [36:31]: I would say you don’t know until way after the fact. If you are early there’s varying degrees of early. There’s “way too early”, which is – as Rob said – is effectively wrong. But there’s also near the tail end of it, when you’re basically ready to give up, there will be an uptick in growth and that’s going to start giving you hope. And you maybe stick around a little bit. That’s the point where you would recognize, “Hey, I was just early,” versus you were way to early and you get to that point and you just give up. And it’s a matter of how much time do you spend in the “zombie product” land where you’re not really making enough money to be able to support it and be able to grow it the way you need. And I think that boils down to trajectory at that point. How fast are you growing whether it’s users or installs or money? Those are the three things that you can, at least initially, measure a business on.

If you have a question for us, call our voicemail at 1-888-801-9690 or come to MicroConf. You can also email us at questions@startupsfortherestofus.com. Our theme music is an excerpt for ‘We’re Outta Control’ by MoOt, used under creative comments. Subscribe to us on iTunes by searching for startups and visit startupsfortherestofus.com for a full transcript of each episode.

Thanks for listening and we’ll see you next time.

Episode 300 | The 4 Unfair Advantages for Faster SaaS Growth

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