Show Notes
Transcript
[00:00] Rob: In this episode of “Startups For The Rest of Us” Mike and I will be talking about what feature to build next. This is “Startups For The Rest of Us” episode 212.
[00:08] Music
[00:15] Rob: Welcome to “Startups For The Rest of Us”, the podcast that helps developers, designers and entrepreneurs be awesome at launching software products. Whether you’ve built you’re first product, or you’re just thinking about it. I’m Rob.
[00:24] Mike: And I’m Mike
[00:25] Rob: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, Mike?
[00:30] Mike: Well, we got a really cool “thank you” email from a Mayo De Leon. He says, “Hi guys. I wanted to thank you for the great audio content. I tune your podcast in while on the treadmill. I’ve lost 16 pounds in four weeks just listening to the podcast and getting tons of incredible information. Thanks. And he’s the founder of Proposalware. I listen to a lot of podcasts, but I don’t think I’ve lost 16 pounds in four weeks.
[00:50] Rob: Yeah, I know. Very nice. We also got several new iTunes reviews. We’re up to 376 worldwide, most of them five-star. The first review is from Eric Stark from Sweden. He says, “With under 200 episodes under their belt, I’m impressed by the consistent high quality. Always some good nuggets of wisdom each week. We have one from R. Wilmer of the UK. He says, “Perfect timing for me, since this is something I need. So good I listen to it twice”. Then we have Chris Kodem from the Czech Republic saying, “There’s no other podcast I know of that so consistently delivers such great value week after week. Where plenty of other podcasts end up turning into a collection of tips and tricks, Mike and Rob manage to combine their own ongoing experiences as entrepreneurs, with detailed tactical advice, into a tight package that respects my time by keeping the fluff and banter to a manageable level. I highly recommend it.” So many thanks to everyone who has given us an iTunes review. If you have not, I really encourage you to give us five stars. You don’t need to write a review. And even if you are on something Sketcher or Downcast, if you review us in there it actually helps us as well. So we really appreciate it.
[01:54] Mike: Well, I spent a ton of time this past week working on the Micropreneur Academy Forums, and basically migrating everything to a new platform. Because the Micropreneur Academy was built on WordPress back in … When did we start it? 2009 or something like that? We went with Simplepress forums for the long time. Over the years its gotten kind of old, and it just doesn’t handle things very well. And then WP Engine shut off some of the full text search capabilities, which completely hosed the ability to search inside of the forums. So about a year ago we started looking around and saying “Okay. Well we really need to do something with the Micropreneur Academy itself, migrate to a new platform of some kind, or just do a major update of some kind. What we ended up doing was we ended up going out, finding a new platform. We looked at, I think, three different platforms that were on our short list, and only one of them really met a lot of our needs. So we spent probably the past eight or ten months working to try and get all of the content in such a way that can be moved over onto the new platform.
[02:50]We tested it out for MicroConf Europe and for MicroConf Vegas. This past week we, kind of, pulled the trigger and disabled all the forums on the Micropreneur Academy, moved all the content over, and then I’ve just basically been working through support issues for the past five or six days, trying to make sure everything is working and that everybody can get in. I think it’s gone reasonably well. I think there’s a lot of good comments in there, and the discussion have actually really moved forward.
[03:17] Rob: Yeah. That’s been a thing I’ve noticed. Obviously there are going to be hiccups when you gave a migration like this, with thousands of forum posts being moved to a new platform. But the fact that the number of conversations that are going on instantly increased from the time we moved over I think really says something about the platform and how much of a difference it makes in being able to allowing for conversation, allowing for good discussion. So, I’m happy with it. Micropreneur.com is still active. People can log into it. We have all of the content there, but the forum discussions themselves have now been moved into Founder Cafe, and I’m happy to call that the new home of the Micropreneur discussions.
[03:55] Mike: Yeah. So it’ll be interesting to get some of the bugs worked out. And once we can that done then we can start adding in a lot of the other things we’ve looked at, like adding a wiki, and integrating that in so that everybody can use it and collaborate on what sorts of tools are out there that they’re using, or reviews and analysis of the things that are working and not working for them. I think that will really help – just in general – the community, because it’s obviously stuff that people are going are going to suffer through on their own, but if people have already gone through that process of evaluating different pieces of software, or different services, it helps to be able to share that information. Before you could do it in the forums, but I don’t think that it was nearly as well organized as something like a wiki would be, and that’s going to be completely integrated into the New Founder Cafe.
[04:37] Rob : Right. So if you’re interested, if you have checked out the academy in the past, but left because maybe the discussions weren’t up to your liking, you might want to check it out. Micropreneur.com, if you enter your email there, we’ll let you know the next time we take a class.
[04:51]So, Gabe from “Just Add Content” sent us an email, and he wanted to give us a heads-up about the start-up class from “Y Combinator”. It’s at startupclass.samaltman.com. It’s actually a course at Stanford, and there are videos of the lectures that are only up for a certain amount of time, from what I can tell. There are notes and there’s all types of stuff. Now I actually found it in the Downcast Podcast Repo today, so I’m sure it’s in iTunes as well, if you search for “start-up class” and then look for a very simple logo that’s just, kind of, text on a black background. You can pick and choose which lectures you might want to listen to. It’s discussions from people like Paul Graham and Sam Altman, and a bunch of other influential and knowledgeable start-up folks. So I have not started listening to it yet, but I am very much looking forward to digging into this, because this is essentially something that they’re doing for their own founders, so it’s definitely going to have some good insights and tips I think will be useful to you if you are interested in this show.
[05:48] Mike : Very cool.
[05:49] Rob : Today we’re going to be talking about deciding what feature to build next, and the criteria that we use to figure out how to decide whether to build a feature if it’s requested, and then how to somehow prioritize those features. I think I should start by saying that this really is, as usual, a discussion about B2B apps. So, if you’re going to business-to-consumer you kind of need some good luck. You kind of need an amazing sense of product if you’re going to pull it off, and you don’t necessarily go based on user requests, because consumers don’t necessarily know what they want before you show it to them. I think this is really evident if you hear every person who is building a B2B app, what do they say when you talk about what features to build next? They say, “Talk to your customers.” Right? That’s the next thing you should do to guide the direction of your product. And you can’t just listen directly to what they say. You have to filter that, and you have to decide the direction you want it to take. But with B2C folks that’s where you hear the quotes like Steve Jobs saying, “It’s really hard to design products by focus group.” A lot of times people don’t know what they want until you show it to them. And I find it hilarious when people take that so out of context, and they day, “Yeah.
[06:58]That’s how you build a start-up. People don’t know what they want, and you just have to make the decision as the founder.” And it’s like, number one, you’re not Steve Jobs. You just don’t have the product sense that he does. You don’t have the experience. You don’t have the leverage and the resources and all of that stuff. Number two, unless you are doing a B2C company, whether that’s hardware or software or any of that other stuff, that advice is not helpful. I don’t know of very many, if any, B2B companies that are using that as their product direction. There’s actually this other quote that everybody attributes to Henry Ford. The quote is, “If I had asked people what they wanted they would have said, ‘Faster horses.'” Again, implying that your customers don’t know what they want, and that you should make the decision for them. My take is that that is not correct. Yes, if you want to build a billion dollar business, then maybe you need to innovate to the point that you are ahead of the curve and people don’t know what they want.
[07:54]So you should not be listening to this podcast. You should be going and building a slide deck and trying to pitch investors to raise your series-A of five million dollars, and then go try and build some B2C company. And that’s fine, but that’s really a different path. If you want to build a business that other businesses need – where you save them money, make them money, save them time – and you want to build a sustainable product in a repeatable process, then that’s what we’re talking about today is how to take incoming feature requests. Whether it’s early stage, or whether your product is far more mature and you’re still getting feature requests, that’s really what we’re going to be talking about today. It’s how to decide what features to build and then, hopefully, how to prioritize them.
[08:30] Mike : This is really about maximizing your chances of success.
[08:33] Rob : The first thing I want to tap into is trying to figure out the priority of when to build a feature. So the four questions that I think about when we’re talking about whether to build a feature, and this is in order of priority. Number one is a prospect asking for it. It’s someone who is not currently paying you, asking for you to build this feature. Priority number two is a customer asking for it. Priority number three is someone on your team – such as a developer, support, or salesperson asking for it. And priority number four is, “Do you think it will shift your product into a new market?” So, in other words, are you asking for it, but it is a little riskier. So let’s look at each of those individually now. The first one is, “Is a prospect asking for it?” So the reason that a prospect’s feature request tends to be the most important is because a prospect hasn’t paid you money yet, and their time frame is very limited. So if someone comes and says, “Hey, does your product do X?” and you tell them, “No it doesn’t, but we can build it.” you typically have a very limited time frame to get that done before they will move on to another product and decide on something else. So that’s why I’ve prioritized it high here, even above customers. And there is debate of whether you should listen to your customers to support them, or your prospects first. But in this order, I’ve put the prospect’s feature requests as number one.
[09:53] Mike: I think a lot of this is dependent on the price point and what stage you are in the company. Because the start-up that I worked at, what the sales reps would do is they would talk to people, and because the deal price points were extremely high, they would talk to people and essentially talk them into buying the software saying, “We will build this feature for you.” And they were basically promising features that had not yet been developed, or were kind of in the pipeline. And it was interesting to see them work that side of the sales angle, because they’re basically making promises that they can’t necessarily keep themselves, or depending on the back-end developers and engineers to do it for them. It was just interesting that they used that as a strategy for selling the products. It was like, “Oh, we don’t do that now, but we can. Give us a little bit to work that out for you.” But they were also dealing with time frames that were several months. So the price point there, because a higher price point product has a much longer sales cycle in it, it gives you that flexibility to do that, especially on more difficult problems that you are trying to solve, or more difficult features that you are trying to implement. If it’s a really hard problem to solve, it’s a lot harder to turn that around in a much shorter time frame, and as Rob said before, if the price point is low and your attention span from the customer is not very long, it’s going to be difficult to turn around some of those things.
[11:14] Rob: Right, and it may not be worth it, frankly. If you only have a $10 a month product, unless you really, really early on – let’s say first 20 or 30 customers – it’s typically not worth dealing in super fine detail with someone who’s requesting features. You know? You can take it and say, “Yeah, we’ll put it in our queue.” but then even to take the time to get back to them and say, “Hey, we implemented this. Are you ready to sign up?…blah…blah…blah.” on a $10 a month product, it just doesn’t justify. Like the LTV typically will not. You need just a higher lifetime value in order to be able to justify it. I think the other thing is, in my experience of doing this with my software products is, it’s worked out really well – with the higher end stuff, where it’s actually is worth working one-on-one with someone – is that when a prospect who hasn’t paid you any money starts asking you for things, try to define the finite list. The question that I use is I’ll say, “Is this the last thing that is keeping you from paying us money?” Because nothing is worse than building a feature and then having somebody come back and then saying, “Oh yeah, and then I need this other feature.” So now you’re on this constant thing trying to keep up with someone’s feature ideas in order for them to actually become a customer.
[12:23]Prospects like that – I don’t think they do it intentionally – but prospects like that are not necessarily going to be good for you. You really want to find people who are one step away from signing up, and they just need you to build one feature or maybe two, and you want to work on those people first, especially in the early days when you’re trying to get to revenue. Then you can come back and work on people who maybe take a little longer. I have someone in the queue right now who’s been thinking about it now for maybe six months, and we’ve been emailing here and there. And I know him, so it’s cool. He’s not a hard customer to deal with, but he has just been in constant thought about whether or not to move over, and it’s little by little he’s gained confidence in Drip. And the fact that I’ve kept him in my boomerang, kept him in Pipedrive and stuff, and touched base with him every month or two has eventually meant that he has come over. But it wasn’t one single feature that it took. It’s, kind of, a series that we’ve built.
[13:15] Rob: So the second priority that I have mentioned is whether a customer is asking for a feature. So the first was a prospect. The second is someone who is actively paying you money. Now the interesting things is if you have one-time software sales, then this actually becomes a lot less relevant, or it becomes a lower priority for you. Because if someone has paid you a large chunk up front, and maybe they’re paying you a small annual maintenance fee, they’re just not as valuable to you as a new prospect who could potentially land you a very large sale. With SaaS it doesn’t matter, because that money of an existing customer … In fact, with SaaS it’s actually a much more even trade, because a prospect and a customer, who are potentially paying you the same amount of money, are potentially worth the same to you – although a customer who is already paying you money could potentially be worth more. So, that’s where I was saying this priority could be shifted to where customer requests could be higher priority, but what I’ve typically found is, since switching cost are not zero with SaaS apps, that customers are not likely, if they have trust in you, they are not very likely to jump ship very easily. So as long as you are listening to customer requests and building them in a reasonable amount of time, you don’t need that tight turn-around like you do with prospects. Because a customer is not likely to say, “Well, I need this in the next week, or else I’m going to cancel.”
[14:33] Mike: Yeah. I think you bring up an interesting point there where, in some cases, it’s a difference between what type of product you have for this particular prioritization. With a SaaS customer, they’re coming back to you every month, but if it’s a customer where you sold them a perpetual license for either downloadable software, then you’ve gotten all of your money up front, and the return for you is your 20% maintenance cost at the end of the year. It depends on where your money is coming from at that point. It does make a difference when you’re trying to prioritize multiple feature requests.
[15:05] Rob: Right, and another thing to think about when a customer is asking for a feature is, “Is that customer a power user, or are they just a normal, everyday user? How much are they paying you every month?” and, “Are they maybe one of your more painful customers? Someone who may cause you trouble most of the time, and that you really wish would, kind of, go away?” There’s varying levels of the quality of customers, of how much you want to work with them, and how much they’re paying you. All that factors into where you want to prioritize features that they request.
[15:35]Then the third priority is, “Is someone on your team asking for it?” So, a developer, a person in support, or a person in sales. Typically, this will be influenced by their interaction with a customer. To be honest, I’m not quite sure why customers wouldn’t request something and people on your team would request it, but this happens to me. My support guy will email and say, “Hey, have you thought about building this?” Then I’ll say, “Why?” And he’ll say, “Well, I see customers are having trouble with this.” But maybe they didn’t know what to request, or didn’t know how to request it or something. So these should definitely be in the priority, but since it’s not something that you’re maybe going to email several customers when you’re done, and notify them, and potentially get new customers out of directly, it’s something that I prioritize as third out of fourth.
[16:17] Mike: I think these fall into a couple of different buckets. One is if customers aren’t asking for it, that’s a slightly different scenario. But when your support team comes back and says, “Hey, I think we should build this.” it could very well be that they have this cross-sectional view of all the different customers who are coming in with requests, and they can see something where one customer thinks, “Oh, I just didn’t understand the interface.” or, “This is confusing to me.” But your support rep sees that there were 50 different people who had a very similar problem in going through the sign-up process, or using a particular page, or something like that. So they get to see that, and the customer on their own isn’t going to ask for you to implement a new feature. But the support reps are going to look at that and say, “Hey, we’ve gotten a lot of calls about this particular thing, because people don’t understand how to use it, or it’s not clear. We should make some changes here to make the product better.” And that will ultimately cut down on your support costs. It’s not something anyone has asked for, but at the same time they do need that little bit of extra help.
[17:13]The other place where I can see people internally asking for stuff is to make their lives easier. So, for example, things like administrative interfaces, or the ability to log in as any given customer so that you can see exactly what it is that they’re seeing. Stuff like that is stuff that no customer is ever going to ask for, because you wouldn’t give it to them anyway. But your support team and your developers need that kind of stuff, and need to be able to do those kinds of things because it helps them do their jobs, and it helps them serve the customers. It’s interesting that you can look at this and say, “Oh, well anything that comes internally should be a third on the list of priorities – should be under customer requests.” But I think that that is not always the case. There’s definitely some flexibility here in terms of these prioritizations. It depends on exactly what it is.
[17:59] Rob: I agree, and that’s where this priority stuff really does come down to there always a big judgment call, and a gut instinct based on what the actual feature is. What I’ve typically found is that something might come internally. So, under this list it would be priority three, but then I’ve just been hearing rumblings over it from customers and from prospects, and there’s an underpinning of the request already being there. So I do think there’s a lot of judgment that has to go into this as well. [18:24]And the fourth priority is, “Do you think it will shift your product into a new market?” So this is essentially you coming up with feature ideas. And the reason that I couched it like, “Do you think it will shift you into a new market?’ and not just saying, “Does it come from you the founder?” is because spit-balling features and just coming up with new features is almost never a good idea. The only time that you should be considering generating your own features, and not just building stuff that prospects and customers are asking for, are if you think that it can push you into a new market and either widen your reach or actually get you into a new vertical. And so to give you an example of that, seven, eight months ago Drip was, essentially, a very small email marketing app. It could capture emails, and it could do auto-responders, and it could do some split testing. And then we were getting a lot of customer requests to do marketing automation. To be able to move people in and out of lists, to be able to tag them, do behavioral email and that kind of stuff. Now, I thought that those features would push us into a new market. So while those features did not come directly from me, that was a really big impetus to raise the priority of those, and to build them out. That’s what’s resulted in the spark of growth in Drip that wouldn’t have happened otherwise.
[19:39] Mike: I think for something like that you have to consider the ramifications of that – of shifting into a new market – because it has the potential to take you out of the one you’re currently in. So I think that there’s definitely some additional considerations you need to take into account when you’re deciding on something that could shift you into a new market, because you don’t want to necessarily be seen as no longer doing a particular thing. Your current customers aren’t going to necessarily care, because you’re solving their problem and they know that you’re solving their problem. But at the same time you have to be conscious of what adding some of those new features is going to say to prospects who have never heard of you before, or don’t know the history behind where you app has come from.
[20:18] Rob: So with those in mind, I have four questions that you should ask yourself when you’re thinking about building a new feature. Hopefully it will help deciding whether you should do it, and then how to prioritize it as well. So the first question is, “How many of your existing customers do you think will use it?”
[20:35]It’s always an estimate, and my estimates typically come in the form of like 5%, 20%, 50% or more, because it’s not relevant to get down to 7.5% or any type of detail like that. And this will come up in discussions pretty regularly, when we’re trying to decide to build a feature. Then, if only 5% of people will use it, the next question – the second of these questions – is, “Will a good chunk of your customers who use it be power-users?”. Because power-users are more loyal. They’ll end up paying you more money over their lifetime. So even if only a small chunk of people use it, are they going to be your power-users?
[21:13] Mike: Another question to ask yourself is, “Does the feature request fit in with your vision of the product?” This is something of a balance you need to strike. If you’re too narrow-minded and you’re not open to listening to customers and having them show you the way that they do things, then it can cut you off from implementing things that would attract a lot more customers. And I think that this is probably a problem that a lot of people struggle with, because you have this vision or this idea of what the product should look like in your head, and you say to yourself, “I know how to implement this. I know how it should be done.” Then you talk to customers, and suddenly maps that you’ve, kind of, laid out in your head get blown apart, and you have to go in a different direction. And it’s not to say that it’s going to be in a completely different direction – and sometimes that does happen – but there’s these minor alterations in course that you almost have to take in order to serve your customers better. Sometimes that can be difficult to make that transition from saying, “I know exactly what I’m going to do, and I know how to solve this particular problem.” to transitioning over to saying, “Okay, maybe I don’t understand this as well as my customers do. Let me have them show me what should be done.”
[22:17] Rob: And then the fourth question is, “Will this feature be over-extending your team’s capabilities?” What I mean by that is, we get a lot of feature requests that ask for things that are far outside of our core competency, and they don’t relate at all to marketing automation or email marketing. They are peripherally related. So it’s things like landing pages or shopping carts and payment processing and that kind of stuff. And we’ve seen some of our competitors that go out and build these things based on customer requests. So they are a conglomeration of really five or six different apps, because they added landing pages and shopping cart and all of that stuff in. But what they did is they over-extended their team’s capabilities. They basically built lower grade software. The software is not Best of Breed. So it’s not a collection of Best of Breed tools. It’s actually a big collection of so-so software tools. [23:11]So what’s happened is if you go to a Best of Breed landing page provider, and a Best of Breed shopping cart and payment provider, and Best of Breed marketing automation, and you combine those together using integrations, you can actually get a much better tool out of it. So, what these competitors have done is over-extended their teams. They’re not able to properly support the software. They’re not able to properly build enough features in it to keep up with everyone. That’s where they’re finding themselves. As the product matures, they still have a large customer base, but they’re finding themselves being, kind of, beaten on the lower end from new competitors who can come out and just build one piece of it. So, keep it in mind, if you try to extend out too far to areas which are not related to your core product – especially if you’re a really small team – that’s something to look out for.
[24:00] Mike: I feel like this supplies a lot more to established products that are trying to do new things with their products. If you were to take Mail Chimp, for example, and have them start doing landing page design so where they’re not only sending out emails, but they’re also designing the landing pages that the emails that are being sent are driving people to. It seems like that might be a natural extension of what it is that they do, but at the same time they may just not do it very well. It does shift the core focus of the developers and of the management team to a slightly different vertical, because now you’re saying, “Okay. Well, we’ve got this group of people who are sending out emails. Then we’ve got this other group of people who maybe just want landing pages, but we’re really focused on trying to get some collaboration between those two, and overlap as much as possible between the two so we can leverage one market to get into another. And that doesn’t always work out. Sometimes it’s better to just simply spin off a new product under, kind of, a new team. I do feel like, in some ways, this is a problem that applies to larger companies than much smaller companies.
[25:01] Rob: But I’ve seen it happen with the smaller guys too, because it’s pretty easy – especially early on – to get a lot of questions and requests and not know which ones to build or not. And a lot of them are going to come out of left field, especially if you have competitors who are large and already cover four or five different product spaces, like email marketing and landing pages and shopping cart. I mean, those really should be three “Best of Breed” products that are linked together. But if you have competitors that have already built all of that, then the first thing you’re going to get as soon as you start building is, “Oh! Can you do a shopping cart too?” And that alone is six to twelve months of development to build it well, and then you need an ongoing team just to keep adding new features to try to keep up with a Shopify, or a Magenta, or another cart that’s going to be really well-built. I’ve seen it happen in the smaller space. We certainly get these requests – that’s why I’m bringing it up – and we’re obviously not a big, massive company. And if we decided to go into those spaces, I personally think it would be a mistake.
We could have built a landing page provider by now. We could have built it in a month or two, but it wouldn’t be anywhere near as good as a Leadpages or an Unbounce, and the same goes with shopping carts.
[26:10]So I think the last thing to think about when you’re trying to prioritize and think about whether or not to build features is, if you do decide to build a feature, every time you should be asking yourself, “How can you hide it well enough in the user interface, so your app doesn’t become a hideous collection of check boxes and settings?” This is more basic UX stuff, but you use a lot apps – I think we all do – especially it tends to happen more in open-source, unfortunately, because I don’t know that there is someone maintaining the UX and managing that. But you see them, they’re just a bunch of settings, and you really can’t find you way around very well. That comes from just implementing everything and not really asking yourself these hard questions, of how many people will use it. And then thinking about the fact that things that most people will not use should not very visible in the UI. They should actually be hard to find. So whether you do that through having lighter text, having them being hidden until someone clicks something, having an advanced view that only shows all of the check boxes if you’re an advanced user. I mean, we have entire features that are completely hidden for all of our users until we uncheck a box in our admin area, and that’s purely to keep the product really useable for that 80 to 90% group that wants to do some basic stuff, and maybe exercise their muscles with email marketing. But the really advanced stuff, we hide it quite a bit in the UI. And I feel like that’s helped keep the core product from basically just bloating out.
[27:37] Mike: And that’s really just about establishing what the 80% of the market needs for your particular product, and as long as you can figure that out you’re addressing most of their needs. The rest of it’s a matter of figuring out, “What is not used by people very often, but some people still need it?” You know, those “power users” that need those advanced options. And I’ve used a lot of products where they have the special advanced menus for doing things, or they’ll have an interface where there’s all the basic options there, and then you can click on this link that expands this other area that will show you all of the advances options. But most people don’t need that, so they just use the basic menu.
[28:12] Rob: Yeah, and I’ve been quite surprised at the low level of usage of several of the features that we’ve built. Some pretty key features that several people requested are used by a handful of users. Now the users who use them love them, and they don’t want us to remove them from the product for sure. It’s the 80/20 rule, but it’s not even that – it’s like the 95/5 rule. It’s like just a couple percent of our people use them, but they really, really use them everyday. So that’s your challenge, right? You can’t build fifty different products for the 2 to 3% of people who use all the different features, because it would become bloatware. So you really have to spend time thinking about not only should you build the features, but then if you decide to build them, how can you keep that UI as simple and as elegant as possible, especially for new users getting started, because that’s where you don’t want to overwhelm people, during the on-boarding process.
[29:06] Mike: If you have a question for us you can call it into our voicemail number at : 1-888-801-9690, or you can email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “Out Of Control” by Moot, used under creative commons. Subscribe to us on iTunes by searching for “startups”, and visit www.startupsfortherestofus.com for a full transcript of each episode. Thanks for listening, and we’ll see you next time.
Episode 211 | When to Consider Outside Investment for Your Startup
Show Notes
Transcript
[00:00] Mike: In this episode for Start Ups for the Rest of Us, Rob and I are going to talk about when to look for investment money for your startup. This is Start Ups for The Rest of Us, Episode 211.
[00:06]Music
[00:14]Welcome to Starts Ups for The Rest of Us, the podcast that helps developers, designers, entrepreneurs be awesome at launching software products, whether you built your first product or you’re just thinking about it. I’m Mike.
[00:22] Rob: And I’m Rob.
[00:23] Mike: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the good word this week, Rob?
[00:27] Rob: I am putting the real finishing touches on an audio documentary about the 9-month process of kind of getting Drip off the ground. So I mentioned this in a previous episode, but then I left because I had, you know, 11-hour flights between each of them. I spent a lot of time editing, and I took 9 hours of audio down to about 2, and I added music. Then we added – we just added an epilogue this week, kind of a summary discussion recorded a year after the final recording for that. The audio documentary itself will go live on my blog. How about you? What’s going on?
[01:01] Mike: Audit Shark Version 2.2 is officially released. And I got a few comments on Twitter. Somebody said, “If you’re not embarrassed by it, you know, then obviously you launched too late.” And my reply was, “I’ve been extremely embarrassed till now. My level of embarrassment at this point has dropped from 8 to about a 6.” I’m really excited about it. It’s, you know, there’s a lot of new enhancements. Not even really new features, just, like, stability enhancements, and adding an installer, like a lot of the cleanup stuff that just never got done earlier. And then there was some, you know, some things that people have been asking for that just haven’t been there, like reporting, and the scheduler. People were kind of pointing to is objections before, and they’re just like, “You can’t do this. You can’t do that.” But I’ve got most of those major things addressed. So at this point that becomes a much easier conversation to have because I could say, “Oh, well, it’s right here. And maybe it’s not exactly what you want, but, you know, it is there.”
[01:52] Rob: Yeah, it’s tough trying to sell your product when you’re having a conversation about it and everything they ask, you’re like, “Yeah, we’re going to build that soon. Yeah, we’re going to build that next.” It’s not mature enough to support the customers you’re talking to.
[02:05] Mike: Yeah, and that’s kind of what was happening in several cases. It’s a nice feeling to be at that point now.
[02:10] Rob: Yeah, and what we’ve noticed with Drip is that we hit that point, maybe, it was somewhere in the last six months, where I stopped saying, “Yes, we’re about to build that,” and I started saying, “Oh yeah, you can do that,” and then it was like, “Oh, you can do that in two different ways depending on your preference.” And now what we’ve noticed is that – Derek was just telling me this the other day, that we get these big groups of feature requests that are kind of all very similar. And so, people come in to the app and start using it, and then everybody realizes, wow, you know, this is working. But you need reporting. Like your reports aren’t there. And so we probably within a week, we got 4-5 people requesting the same thing, and so then the next week we built reports. And then after that, it was something else. But it’s crazy how the same people kind of progress through the app and as we launch the new feature, then they all realize that this next thing is not there yet, and we have to build it. So I definitely feel like Drip has matured to a place where it has fit with a certain market, but there’s always kind of that next thing.
[03:11] Mike: Well, I think it’s good that, you know, you get that group of people that are all asking for the same thing. And then when you implement it, they ask for, they all ask for like the next thing, which is kind of identical. I mean, maybe they ask in different ways, but it means that you’ve got that, you know, that product market fit, where you’re attracting the right people of a specific type, and they all have a similar problem. So when they come in, they use it, they all need that similar feature set, which makes those future conversations with people from that particular market much, much easier to have.
[03:40] Rob: And the other part that’s nice is you start to learn who your good customers are, your helpful customers are, who request the good features and request them well, meaning they give you an idea of what they need and they ask for it respectively, and they’re willing to wait for you to build it right. They don’t need everything today, you know. And they’re not threatening to quit, or they’re not kind of being jerks about it. Like the vast minority do that. Right, every once in a while, you get a customer like that. And it is nice because when you have this group of customers who’s requesting it, it makes it a little easier to figure out what you should build next. Right, because you have a pipeline and you have basically a weighting of how important each feature is, and it does, but it makes it easier to figure what to build next, rather than when you have no customers, as we know, it’s a big challenge to figure out what feature to focus on.
[04:31] Mike: So what else is going on for you?
[04:32] Rob: Well, I listened to the book “Zero to One” by Peter Thiel. I’ve now listened to it twice and the reason I did that is because it just contains a lot of pretty deep and insightful conversations and essays. And Peter Thiel, if you don’t know, he’s one of the PayPal mafia. He’s one of the founders of PayPal and then he went on to start – so that was a business that sold for $1.5 billion to eBay. Then he went on to found another business that is also worth more than a billion dollars. But Peter Thiel is so amazingly smart that I find that I just re-listen to these chapters that he wrote and he makes comments about, you know, where the world is headed, where he thinks technology is going, how to start a company that revolutionizes stuff. And I find that even though he’s not speaking to me because I am not starting a billion dollar company. I’m not starting a groundbreaking, you know, paradigm shifting, just completely world rocking company, and I never will. I have no plans to do that.
[05:30]Even though I’m not, I still find that a lot of the stuff he says has some application to me and my business and the way that I like to think about things. The book Zero to One is about building these massive ideas and trying to revolutionize. You know, it’s like trying to fix a massive technology problem of say, not having water, not having enough food, or something like PayPal, where they’re trying to replace a currency. It didn’t actually succeed, but that was their goal. It’s having a big view and being able to live up to it. Even though that’s the focus, I still think there’s some good nuggets.
[06:04] Mike: Very cool. I think last thing for me is LinkedIn has been irritating the living hell out of me because every time I get a new connection, it asks me to go through this ridiculous process of confirming all the possible ways that I might have an email account, like Gmail and Outlook.com and Yahoo, and asking if it’s okay to like for me to log into those things so that it can reach in and suck out as much data as it possibly can. I made the mistake of letting them do it with my Gmail account. They’re like, “Oh, we don’t do anything,” and it’s just like, ugh, it’s awful.
[06:32] Rob: Well it’s weird because it’s not doing that to me, so I wonder why it’s – why it would be doing that to you.
[06:38] Mike: I don’t know. I have a paid subscription, so I don’t know if that’s it.
[06:42] Rob: Ah, yeah, I do not.
[06:43] Mike: But yeah, maybe I should cancel it. Maybe it’ll stop.
[06:46] Rob: Exactly.
[06:48] Mike: So real quick before we get started, we got a email from Niles from MicroConf Europe, and he said, “Hey Rob and Mike, thanks again for all the information and inspiration at MicroConf. It was amazing and I really enjoyed and learned from the crowd. Also, you might enjoy knowing this: the money I spent on the conference is already back in my pocket with an ROI of greater than 100% because one of my customers heard about me attending MicroConf and is paying me for a workshop to summarize everything I learned. Thanks again, and keep up the great work.”
[07:13] Rob: That’s awesome. I love to hear stuff like that.
[07:16] Mike: Well thanks, Niles. Glad to hear that that’s working out for you.
[07:19]Today we’re going to be talking about kind of a topic that came up at an ask me anything session that Rob and I tried out at MicroConf Europe. One of the questions that was asked of us was essentially along the lines of, “Have you ever thought of going after angel or VC funding, and would you ever do it?” And I thought it was an interesting question, not just because Rob and I kind of have very similar views on it, but also because I think people do have kind of a mistaken impression that, you know, Rob and I are completely against angel or VC funding in any way, shape, or form, because there are definitely cases where it makes a lot of sense to do, but, you know, obviously that’s not really our platform. It’s not what we do. It’s not our background or anything. But I wanted to do was talk a little bit about the times where we think it would be warranted to go after funding and what sorts of things that we would look for.
[08:03] Rob: Yeah, you know, and the first couple paragraphs of my book, and I said, I don’t want you to think that I’m anti-funding, I’m just anti-everyone thinking that the only way to start a successful software company is to raise a bunch of funding and to get big. And that’s really the approach we’ve tried to take, right, is that you don’t have to go that route, that it’s one possible path. And it doesn’t even need to be the path up front. Like, some people have the connections to do it from day one, to raise a big chunk of funding, and other people bootstrap until they have traction, product market fit, and they start growing, and then they raise some funding. There’s a lot of different ways to go about it. And I guess to give one disclaimer: Mike and I have never raised funding, so there’s a lot of ins and outs to it that we’re not going to dive into. There’s actually a good book by Brad Feld called “Venture Deals: Be Smarter Than Your Lawyer and Venture Capitalist.” And if you really want to know the ins and outs of venture funding, then that’s the book you’re going to want to read about nuts and bolts. What we’re going to talk about today are kind of the considerations, the things you need to think through if you’re considering not raising, raising at a later stage, or, you know, maybe raising just an angel round or a VC round.
[09:11] Mike: So I’d like to start off with, what we’re going to do is we’re going to talk about some of the situations where we think that going after funding of some kind is warranted. And when we talk about going after funding, there’s a couple of different primary levels of funding. You’ve got angels, that are kind of at the lower end, and then you’ve got VCs at the higher end. And I’ll say that the estimates range. It’s hard to give it an exact number of what exactly constitutes of somebody doing an angel investment versus what dollar amount is qualified for VCs. You know, the ranges are anywhere between like half a million dollars up to, some people say 2 million, some people say 5 million for angels, you know, and some people will say, well VCs will go down to 2 million or down to a million. It kind of depends on who it is that you’re talking to. You know, you essentially do a progression from angels at the lower end to VCs at the higher end. And then you can also have people like family members or friends do lower end investments as well. There’s different rules for those kinds of things, so we’re not really going to talk about any of the specific rules because, you know, we don’t necessarily know what those are.
[10:09] Rob: And specifically we don’t know what those are for every country in the world. And since our listenership is worldwide it would just be too hard to even try to address them even if we could comment on the ones here in the states. I think of like friends and family as kind of being the lowest round because typically if someone has no funding and they want to raise something from friends and family, it’s typically a very small amount. It might be 50 grand or 100 grand. And then angels, I consider like a professional angel someone who is investing their own money. It’s not institutional funds, but it is someone who has had a large exit or who has just a lot of cash in the bank, and they are then divvying out their angel funds, their own funds, in typically in amounts of between 10 and 50 thousand dollars per investment. And you get a group of angels all to invest at once. And these investors tend to be what you might call smart money, right. You try to seek them out in an area of expertise where you’re entering so they can actually give you advice, whereas friends and family, if you’re going to do that, frankly, it’s not something I’ve ever done, nor would I recommend doing it, but you’re not going to get much good advice from your family. And then venture capitalists of course are folks who are investing institutional money. They’ve raised money from a bunch of limited partners, they’re called, and they’re trying to put a lot of money to work at one time. And so, you know, like you said, some VCs will come down into the million dollar, you know, two million dollar range. They typically have so much money in their fund, that that isn’t even worth doing for them. And that they want to do a series A, in the let’s say, 2 to 5 million dollar range, and a series B in the 10 to 20, and then, you know. When I’m saying A and B, these are the rounds, right. Series A is your first round of funding. Series B would be your second round after angel.
[11:51] Mike: So let’s talk about some of the different situations where we think it’s warranted for people to go after funding. And I think the first one that came to mind for me was essentially a land grab of some kind is necessary. So, you know, companies like PayPal or AirBnB come to mind just because if you’re their first, then it makes it a lot of easier to stifle all sorts of competition, you know, in that particular space. It’d be very difficult to compete with the likes of PayPal or Amazon or AirBnB at this point, just because they’ve dumped so much money and investment into that that they essentially crowd out all other contenders and are able to shove them out of the market, or just outright acquire them. And it’s not to say that being acquired by them is necessarily a bad thing, but you’re not going to have this massive, out-of-the-park success that you might’ve been shooting for initially. The reason you would go after funding in the case of a land grab is because you want to grab as much of the market as you possibly can before anybody else gets there.
[12:48] Rob: Right, and these land grab businesses are the ones that are super, super risky, and maybe 1 in 1,000 works, or 1 in several thousand works, so it’s not super repeatable. It’s not reliable. There’s not a high rate of success. But if you do succeed, then obviously you can be worth 100 million dollars or several hundred million. So not particularly the approach that I espouse, and it feels to me, I’ve always thought this was much more of a lottery ticket. And frankly, if you go and try to do a land grab business and you’re going to raise funding, you need some type of team that is really good. No one’s going to fund just some Joe Schmo nobody’s ever heard of to go and do a land grab business anymore. Like, the late 90s maybe, but these days you need to have either some kind of tractions, or some kind of team or both if you’re going to go after this kind of market, and then you’re going to have to commit to moving to wherever the venture capitalist is, and that’s maybe one of maybe 5 cities in the world, where you’re going to find somebody to give you this much money. And you’re going to have to work incredible hours. You’re going to have to grow a big team. You know, you’re not going to do it with 10 employees. This is the kind of business that goes to 100 employees in a year or two, if it succeeds, and then it goes to several hundred after that. So this is the one I agree this is where you need to raise it if you’re going to do it. But if you’re going to do that, then this is not the podcast that you’re looking for.
[14:09] Mike: The next time we think it’s warranted to go after funding is that you have problem solution fit and product market fit. I think the best thing to do here is to kind of step back a little bit and describe what both of these things are for all the listeners. So why don’t you talk a little bit about problem solution fit?
[14:24] Rob: As concepts, they are very powerful. And there’s something that I use in everyday conversation as I’m talking to other founders, as well as in my own business to try to gauge where I am.
[14:35] Mike: Because in my mind, the problem solution fit is like you’ve found something that people are experiencing as a problem that needs to be solved and they’re willing to pay for it, which is slightly different than the product market fit, which is you found an audience that is willing to pay for it. Because there’s a difference between finding a couple of people who want the solution, versus a lot of people, I think.
[14:56] Rob: Right. Right. And finding a lot of people, that group of people, and being able to reach them inexpensively enough that you can actually make a profit at, is part of profit market fit.
[15:05] Mike: Yes. Yeah. Because the first part is really about the customer discovery phase. And the next piece, which is the product market fit, which is more about like validation and somewhat scaling, I think, but, you know, making sure that you got the price points and everything else.
[15:18] Rob: Right, and I think the key part with that, that you just pointed out, is problem solution fit comes before product market fit, but first you have to solve a problem, and then you have to turn it into a product, and then you have to find the market for that.
[15:31] Mike: Next, I think, if you’re going after funding, you need to know all the important metrics that people who are going to invest are going to be interested in. And you need to know them cold for your business. So you’re going to need to know like your cost of acquisition. And you’re going to need to know the lifetime value of your customers. You need to know what your turn rate is. You’re going to need to know what your profit margins are. And you can use those calculations to figure out whether or not you’re going to be able to expand the business. I mean, has it become a machine where you can put a dollar into it and you get two dollars out, because that’s what the investors are looking for. They’re looking for a way to accelerate the value of their money, and your business is the mechanism for doing that. And they want to know if they throw money into it, are they going to get more money out on the other side. And I think that that’s probably the best position to be in. I don’t necessarily know that you need to be in that position always in order to get funding. But I think that if you are in that position, you can solidly demonstrate those metrics and those numbers to them, then you’re in much better negotiating position to be able to get the most value for, you know, the equity that you’re essentially giving them in exchange for the money.
[16:32] Rob: Yeah, that’s the key part of what you said there is that you don’t always need that. You don’t always need the traction, but that’s where you’re going to be able to give away the least amount of your company for the funding that you’re raising. You know, I don’t know of any venture capitalist that’s going to write a multi-million dollar check to someone who doesn’t have product market fit. I think it’s going to be a very rare instance. It’s going to be a repeat founder who’s already had a success. It’s going to be someone with an exquisite pedigree and a great team, or it’s going to be someone who has a real in, in a market or a patent or something like that. But if you’re just coming on the scene and you’re trying to solve a problem for a group of people, you’re going to need traction if you want to be taken seriously. If you don’t want to do 50 pitch meetings in order to find your one investor. You know, if you actually want to use your time well, you’re going to need to know these numbers cold and you’re going to need, basically, to be ready to scale.
[17:20]So you know, when I was getting started, like around ’99, 2000, I thought the only way to launch software products and startups was to raise funding, and I went down that road for years. And I’ve talked about that in the past. And around 2007 is when I really kind of switched and realized that I could do it with smaller products. And at that point, I really became kind of anti-funding, and I just thought it was all a big game. And then some time in 2008-2009, I was at Businesses Software and I was talking to Dharmesh Shah, who previously before HubSpot, I’m pretty sure he had bootstrapped his first company. And so, he was talking about raising funding. Or he’d either just raised it or was talking about it, and I asked him, “Why did you do that?” And it felt like kind of a betrayal of his bootstrapper ethic. And he said, “You know, we hit a point where we saw that you can put 1 dollar in and you can get 4 or 5 out, and it was a repeatable, scalable process, and so at that point, you want to put in as much money as you can in order to get 4 or 5 times that much, much larger amount on the other end.” And for the first time, it really clicked with me, that there, especially within our B2B space, once you’ve solved the problem and you’re able to scale, there is a really good time to raise funding. It doesn’t mean you have to, and doesn’t mean you always should, but if you are going to, that is the optimal time, once you’ve hit that place where you know how to scale a business up and all you need are the funds to put it in basically just grow faster than your competition because especially with SaaS businesses, if you can climb that long, slow SaaS ramp of death, and you can build up that large customer base by having a big influx of cash, it will just throw off cash for years and years after that. And whether you raise investment or not, whoever owns part of that company is going to be doing well.
[19:04] Mike: And I think that’s a very different story from a lot of the people who are kind of coming out of college, or going through Y Combinator, where, you know, people are investing in the people and an idea, but they have absolutely no product. They don’t even have a product yet, let alone product market fit or product solution fit.
[19:20] Rob: That’s a really good point. Like, we are talking about – we’re not talking about B to C stuff, like I don’t even think that’s on our radar, right. I’m not talking about the guy who’s going to start the next Uber or the gal who wants to start the next Twitter. That’s just a totally different ballgame. We’re really talking about repeatable businesses that solve problems for other businesses, and therefore are much easier to build and more predictable.
[19:41] Mike: Right. So I think if you’re trying to find that engine that’s turning that dollar into more than a dollar, then, you know, going after funding is probably not wise at that point.
[19:49] Rob: One other thing I wanted to add here is that typically if you take angel investing, you are implying that you are going to take a Series A, round of Series A from venture capitalists, then a Series B, and enough funding needed to get to a hundred million dollar or more valuation. That’s typically implied. It’s not always. But if you plan on raising angel funding, and you do not want to grow to that size company, that is something that you would need to be very specific about with your investors up front. And some investors will want no part of that. They only want to go after the big homeruns. And others are okay to invest in companies that may get to a 7 figure or a low 8 figure valuation. And, in fact, it’s becoming more common, to be honest. I heard the term fund strapping, and I really liked it. It was from Collin at Customer.I0, and they essentially raised, I think it was around, $250,000 of angel funding with the intention of making it to profitability and not raising a Series A, B, and C. And they did it. They succeeded. Raise some money in order to get your company to the point of profitability. And so that’s not everyone’s path, but I do think that’s a viable path. And I’ve talked to a couple entrepreneurs in the past six months, actually several people who are trying to do that, and they don’t want to go down the old rabbit hole of trying to grow into a bazillion dollar company. But they just want to, they’ve found that growth engine, they’ve hit the point of product market fit, and they just need some almost growth capital to get to that next level. So keep that in mind if you are at that point because I think it’s becoming a more viable option.
[21:21] Mike: So now that we’ve talked about the times that we think it’s warranted to go after funding, what are some of the things that we would look for when we were going after funding?
[21:29] Rob: There’s kind of two terms for investors, right. There’s smart money and dumb money. And typically, smart money is from an investor who is going to bring a lot of value to you, and a lot of advice and some guidance, and maybe some connections and some introductions. And then, the pejorative term is dumb money, and that’s typically when you go to the local doctor or dentist and they have some money in the bank, and they give it to you, and they’re not actually going to help your business at all. It’s just money that you’re going to use to grow. So my hope would be, you typically want to take smart money because that’s the one where their specific experience or network of connections are going to be able to be leveraged by you and hopefully, you know, there could potentially be introductions to acquires down the line. There’s just a lot more that they can bring to the table to help your business grow faster, rather than just writing that check.
[22:13] Mike: I think there’s also some rather obvious things you should be looking for as well, such as honesty and integrity, you know, kind of a history of not screwing over people that they’ve invested in. Those are things that, you know, I think in some cases may be difficult to find. But, you know, you should be able to find a list of the different companies that somebody has invested in and be able to ask the people who they’ve invested in, you know, what was it like to work with this person? How did they help you out? Are there any places where you ran into problems or disagreements and how were those handled? Because I think you want to know that you can work with the other person. Are they going to just railroad you into decisions that are not good for you or for the business? Because at the end of the day, yes, these investors tend to invest in multiple businesses with the attempt to get money out of at least one of them that’s going to make up for all their investments, but at the same time, you don’t want to get the short end of the stick here. I mean, yes, you’re taking money from them, but at the same time, you don’t want to be in a position where they’re trying to pull money back because they need it for something else that they see is going to be much more profitable for them in the long run.
[23:15] Rob: Yes, some advice that I was given once, was not to take money from a first time angel investor, to look at someone who has some kind of track record, because first time angel investors are going to be really gun shy, and if they only have one company, they’re going to be kind of be all up in your business, right? I mean, you really do – you want advice and you want help. You don’t want someone’s who’s emailing you once a week, asking you about the status, or really trying to offer advice, or going to your website and giving you feedback on the headline or anything. Not unless you ask for it, and you consider them an expert in that area. Typically, if someone is doing a lot of angel investing, then they know the boundaries and they know what’s good for the founder and the company, and they’ll give you the leeway to kind of go out and do it on your own, realizing that you’ll come to them when you need the advice and the help.
[23:56] Mike: The next thing I think you’d look for is somebody who’s got a shared vision for the product, the company itself, and your working arrangements, because if you’re listening to this podcast, chances are really good you’re probably bootstrapping your business. And you’re going to have a certain way that you operate the company, that you work with the employees who are working with you, so maybe you have a distributed team, maybe you guys talk once a week, or once a month, or something like that. Maybe you take long, afternoon breaks, and you work in the evenings or something like that. But, at the end of the day, you want to be able to continue working in whatever way has made you successful. You don’t want to have to conform to, I’ll say, arbitrary rules about how the business should operate just because they think that, you know, you should be doing things differently. But there’s a difference between having them make suggestions to you versus mandating that.
[24:44] Rob: The folks who I’ve seen raise funding well, especially that initial angel round, they basically were very deliberate about who they invited in, and they tried to stack their team with someone who knew a lot about, you know, maybe online marketing. And someone who knew a lot about growing a sales team, and someone who knew a lot about acquisitions and selling, and someone who knew a lot about some other piece. So they actually kind of built this team, a dream team of investors, who not only gave them money, and therefore have some type of, essentially an investment in your company, but they have an expertise that they can lend. And it wasn’t a bunch of overlap. It was complementary skills. And all of these skills are something you’re going to need at one point or another if you do actually make it to profitability and hope to, you know, one day get acquired. So, Mike, you know, the original question at MicroConf Europe was about funding and it was also for us specifically, and the question was, would you ever consider raising angel or VC funding, and I’m curious what your thoughts are on that?
[25:45] Mike: I’m not opposed to it. But I think, for me, I would have to get to that point where I do have, you know, the problem solution fit and the product market fit, and making sure that, you know, as I said, I’ve got all those numbers in place and dialed in, so that I know how much it’s going to cost me to acquire a customer. And not to say that I’m at the very beginning of a growth curve or something like that because I think it’s foolish to get to the very beginning of a growth curve where you know that you’re putting money into it, you’re going to get a lot of money out of it, and maybe trying to get that. You’re not sure whether, how long that growth curve is going to last for that particular channel that you’re trying to leverage. I don’t know what the hard numbers are for me for saying, “Hey, I’m going to go get money.” I’d have to be in that situation to kind of put the parameters around it. I’m not opposed to it. I don’t agree with the stance of going out and raising money to build a company because I think that you can get a lot more leverage out of it if you have something that you’ve built and are pushing forward and you’re being successful already, versus going out and saying, “Hey, I have an idea for this, or I have some small product that I’ve built. You know, can you give me money for it.” I think those are two entirely different scenarios. But I’m not opposed to it. I just haven’t been at the point where I think that it’s warranted it yet.
[27:00] Rob: I’ve definitely entertained the idea. I think ever since 2009, when I talked to Dharmesh about it, I realized that there’s a smart point at which it is perhaps a good choice to raise some funding. I don’t like saying never, but I don’t ever think that I would raise a venture round because I just don’t want to turn my life upside down. It’s not worth giving up the lifestyle that I’ve built over the past 15 years in order to try and go for some big homerun and go for 100 million dollar exit. Because what I have already is probably what I would do if I had a 100 million dollar exit. I mean, don’t get me wrong, my life would change, but it wouldn’t be so dramatic. You know, I wouldn’t go out and buy a yacht or anything. I’m already pretty happy with the choices that I’ve made, and kind of the life that I live. With that said, in recent years especially, you know, as I’ve built apps with larger and larger markets, and especially with Drip now that I feel that it’s hit product market fit or it’s very near that, and it’s starting to scale up,
[28:04]the question became for me, not should I raise funding, but under what circumstances and terms would I raise funding? And as I started talking to some folks I trust, who have gone down this road, they said, “Why wouldn’t you do it right now?” And I said, “Because it would really impact my lifestyle.” And they said, “Well what if you could raise from people who don’t care about that?” And that, you don’t need to move. And they don’t care that you take a month of vacation. You know, there is no board, right, so you don’t lose control of your company. And you don’t give away more than 15% of your company and it allows you to grow faster, and da da da. And suddenly, it was like how interesting that it’s not an either/or question, it’s under what circumstances would you or would you not raise funding, and that’s the question that I’ve mulled over. You know, that’s kind of – it’s been on my mind for, you know, definitely the last several years. Would that be an option? So I don’t know if I ever will. I think that funding allows you to get somewhere faster. So if you want to get to that 7 figure or low 8 figure revenue mark, funding is definitely going to get you there faster,
[29:04]but it’s all a matter of how patient are you, and do you think you could get to that even without the funding. Or are the competitors in your space too far ahead and perhaps better funded, and that’s, I’m asking these theoretically, but I mean, these are the things I’m thinking through with Drip, right, because I’m in market automation now. And there are some big players, and there’s some well funded players, and there are people who are definitely ahead of us. And so I’m trying to figure out, you know, am I able to build a really solid small business without funding and will I succeed in the long term? Or do I need a little bit of help getting to a point where I’m just a bigger player in this space? So I don’t have any decisions, but, for sure, I’m not anti-funding. So it’s an interesting question.
[29:44] Mike: I mean, even at MicroConf Europe, you gave a really great answer to the question, and I was just like, “What he said.” Because I didn’t have anything to add. I mean, it was just- it was dead on.
[29:53] Rob: Right. I would say though for most people that I know, like most founders that we deal with and talk with, I don’t think it’s the right decision. I just don’t think it’s helpful. I think building a bootstrap software company and self-funding it, and all the learning that goes along with that, even if takes a while to do so, I think that’s the right choice. It really is an epic time that we live in, that we are able to do that, because even 20 years ago, it was barely possible to do that. And these days, we know a lot of people who are doing very well just building self-funded little software companies. I think that’s really amazing.
[30:29]If you have a question for us, call our voicemail number at 888-801-9690, or email us at questions@startupsfortherestofus.com. Our theme music is an excerpt from Out of Control by Moot, used under Creative Commons. Subscribe to use on iTunes by searching for startups, and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening. We’ll see you next time.
Episode 210 | Key Takeaways from MicroConf Europe 2014 & DCBKK
Show Notes
Transcript
[00:00] Rob: In this episode of Startups for the Rest of Us, Mike and I discuss MicroConf Europe 2014 and Dan and Ian’s DCBKK. This is Startups for the Rest of Us, episode 210.
[00:09] Music
[00:16]Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at launching software products, whether you‚’ve built your first product or you’re just thinking about it. I‚’m Rob.
[00:25]Mike: And I’m Mike.
[00:26]Rob: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. So weird this week, Mike, I haven’t seen you in a while.
[00:31]Mike: Welcome back, you know. I feel like there should be fireworks and balloons and kazoos and stuff like that to welcome me back on the show.
[00:37]Rob: What it’s been four or five episodes at least since I’ve been on, and you and I hung out last week at MicroConf Europe but what else has gone on that folks might want to hear about?
[00:45]Mike: There were some interests shown on Twitter about this, but I mentioned that I had let go a couple of developers. It was Friday at the airport, it was like 9 o’ clock at night, I was at the end of my rope and I’d just had it. I was just like, all right. That’s it. Both of these guys are done. And I let go two developers. Somebody had commented a while back and it just kind of rings in my brain that said, nobody ever got fired too soon from a job. Nobody says, oh, you fired them too soon. It’s always, hey, why didn’t you do that sooner?
[01:15]Rob: That’s tough, man.
[01:16]Mike: One of them had been having ongoing issues just keeping his hours up, and I just kind of finally drew a line in the sand. And then the other one had only been brought on about six weeks before but he was brought on to finish off version 2.2 and basically I gave him a three-week time frame. Three weeks stretched into six, and after six I just said, okay. That’s it, we’re done.
[01:38]Rob: So what are you going to do? Are you going to hire more or are you going to step back into engineering?
[01:41]Mike: Well, a little bit of both. I’m probably not going to hire because my other developer was actually out on his honeymoon. I’m really happy with his progress on all the stuff that’s been going on with AuditShark. Had he been there, I wouldn’t have been in such a rush to get rid of these guys, but I was just like, well I’m going to be at MicroConf for another week. These guys are not going to make any meaningful progress over the next week or so, so I may as well just draw the line in the sand and be done with it.
[02:04]This other guy was on his honeymoon for two or three weeks and I couldn’t hand things off to him. So things just kind of sat there for a little bit. He just got back today so hopefully I’ll be able to send things his way and then I’ll be free to do other things. I’m working on some stuff now just because I didn’t know when he was getting back. But once I’ve got a couple other things done, I’ll be handing stuff over to him and hopefully he’ll be tabled to take it from there.
[02:27]Rob: Nice. I’ve spent the last five weeks on the road. I took the family, my two kids and the wife went to Thailand for almost a month. Then I spoke at the end of that at Dan and Ian Tropical NBA, their DCBKK event which was awesome. Then I flew to Prague, wife and family flew home to California. All told, in Thailand I was only involved in one high-speed motorcycle chase with the police, ending with them searching me for drugs, which they found none. And we only had one trip to the hospital for stitches in the four year old’s finger. But other than that just your standard run of the mill vacation.
[03:05]Mike: The high-speed chase that you’ve alluded to, you downplay that very well.
[03:10]Rob: Being on the road makes you appreciate high-speed internet and having access to a washer and dryer. Especially when there’s four of us and we have three changes of clothes each, so we all fit in a single backpack. But that was really the only things that I missed.
[03:24]The real kicker was this high-speed internet and not being able to predict how fast it would be at the next place. You have no idea how much you rely on this, like we rely on it for our TV, for our movies, for my podcasts. I had a tough time keeping up with the podcast because sometimes I’d go to download and it would take hours to download all the episodes. It’s good to be back in a place where that’s more reliable and definitely if I was going to stay somewhere longer, like once I got to Prague I was in an Airbnb for several days, and the internet there was fast. So it’s not a matter of being in the US or not, it’s a matter of being in hotels or not. The high-speed internet is critical.
[04:00]So the good news for me is Drip had its best single month of growth ever while I was gone, which is encouraging me to take more vacations internationally. Obviously the seeds of that growth were sown in the months prior to the travel, not actually while I was away. I can see the trial funnel and how it all plays out, so I know it was basically the 30 to 60 days prior to leaving. But it does make a nice punch line. People in Prague were asking how Drip was doing and I was able to say, it’s actually been doing really well while I’m on the road. It’s nice to be able to say that, it makes vacation a lot more enjoyable for me because if things are tanking and they’re going sideways and I’m on vacation, I stress about it the whole time. I keep thinking about how can I turn this around and what do I need to do? But if they’re doing well, I can be freed up mentally like, ah. I just want to do more of the same.
[04:46]When I get back I’m really amped up to work and continue to drive trials which is essentially what I did when my family left and went back to California. I had four days in Thailand at the end and I basically went to co-working space in Bangkok, just worked long hours, probably 12 to 14 hour days and it was really worth it. I got a ton done; I was super fired up because I had been off for so long. You get reinvigorated when you step away from work that long. You get new ideas; you just kind of want to get back to it after a certain point. That’s how I felt.
[05:20]Mike: I felt the same way just coming back from MicroConf because I had put in all this time on AuditShark before I left and then for several days I didn’t get any work done at all on it. Of course I come back and suddenly I’m ready to get a lot of work done and I’ve been very, very productive over the last several days. I think part of that is also being able to catch up on my sleep.
[05:39]Rob: Yeah, it’s always tough. And you’re hanging out till 1 or 2 in the morning with everybody.
[05:44]Mike: Yep.
[05:45]Rob: Yeah. What’s up with you on AuditShark?
[05:47]Mike: I’m looking at different ways I can scale up the sales side of AuditShark and decrease the length of the sales cycle. Those are two things that I’m kind of fighting with right now. One is the length of the sales cycle and the other one is just generating enough leads that I can talk to on a regular basis. I feel like Pipedrive is filling up with a bunch of different leads that are in there but keeping track of them and keeping on top of everything and also trying to fill the funnel with people as other ones are falling out – I guess I’ll say the broader picture is that if I’m putting 100 people a day into the sales funnel to try and follow up on – whether I’m actually contacting them or not is kind of a different story. But if I’m hitting them on day one, and I go to a second batch of people on day two, day three, day four, etc.
[06:34]By the end of the week I’ve got 500 people kind of in queue. Some of them are just going to not be a fit, so they fall out very quickly. But there are other ones where you’ve tried to reach them and they stay in your funnel because you haven’t gotten a no yet. So they stay there and you have to come back to them later on. That’s actually pretty challenging to make sure that you’re staying on top of all of them. I don’t feel like I have a great system for that. Somebody suggested just using a spreadsheet.
[07:00]Rob: Sometimes that‚’s the best solution. The 100 a day sounds like a pretty high volume though, that would be tough to manage in software. That’s a lot of leads or suspects or whatever you want to call them coming through.
[07:11]Mike: Suspects‚ I like that word.
[07:12]Rob: Yeah, I read that in a sales book.
[07:14]Mike: Victims, maybe.
[07:15]Rob: Similarly, I’m also wrapping stuff up. I’m basically formulating two game plans for Drip for the next seventy days. That basically takes me through mid-January. Because the next two months, there’s more holiday time, things are starting to wind down. I know I can still drive trials and grow a little bit but it’s not going to be at the levels that it has been. So I know these next two months are going to need a nice roadmap and it’s going to be doing some stuff internally, I think. I’m working on a product roadmap and marketing calendar. The product roadmap is basically what features are we going to build? What are the next steps, after coming back from MicroConf Europe?
[07:52]I have some ideas after talking to a bunch of people about what they’re looking for. I’ve got a good sense of where I want to take Drip next. Then in terms of a marketing calendar, I just want to know what’s going on every week. I’m really going to be buckling down on marketing because things are ready to – things have already started to scale up with Drip and I’m ready to hit it even harder.
[08:13]Mike: Cool. This week we’re going to be talking about what happened at MicroConf Europe. We kicked off the conference with Rachel Andrew, why don’t you talk about that a little bit.
[08:20]Rob: Yeah, we’re just going to touch on a couple of the talks that we got the biggest takeaways from. Really we only have time to go through a couple of the speakers and Rachel Andrew, she really set the tone for the conference. That was the goal, right? Typically your kick off speaker, you’re hoping that they’re doing something that’s interesting enough that people are going to be really engaged. That kind of sets the tone.
[08:40]If you’re interested in more details about the speaker talks, as usual we have a recap site, it’s called MicroConfEuropeRecap.com, and we’ll look it up in the show notes. Christoph Engelhardt was so kind as to take very detailed notes and he‚’s aggregated slides and all types of stuff. We don’t have videos of the talks, but that’s the next best thing.
[08:59]One thing I like about Rachel Andrew is she runs CMS, it’s called Perch, and she runs it with her husband. They don’t have any employees. It’s downloadable self-hosted web based CMS. So it’s really the traditional Micro ISV, micropreneur approach with no employees and it’s even downloadable software. So she has some really good experience, she’s an experienced speaker and she has a lot of takeaways that she lent to the crowd. One of my favorites is her quote, “The missing features at launch don‚’t matter to anyone but you.”
[09:33]While I don’t fully agree with that, because when I’ve launched specifically Drip, we had missing features, and it mattered to everybody. But I think that depending on your product and depending on your competition, what features they have, this can go one way or the other. But I do like the sentiment of this because it reminds you that you are always going to be bothered by the stuff your product lacks. But that you need to ship it before you get to that comfort zone or else you’ll never ship it.
[10:02]Mike: I think that when she was referring to that, she really meant that the things you feel are important, your customers don’t necessarily value as much. As long as you’re meeting the core requirements of whatever it is that they need, that’s the important piece. That’s why they’re buying it. It’s not as though you need to go out of your way to include everything in, the kitchen sink. The set-up core requirements that your customers have, that’s what they‚’re paying for. All the other things you think are necessary, they think are nice to haves but are not critical for them to buy it. I think that was a very fresh approach to that sort of thing. In some ways it’s kind of a minimum viable product sort of thing, but it was a nice breath of fresh air to hear it put that way.
[10:42]Rob: Another thing she said was that the happy majority of your customers will be silent. This is something that I have definitely noticed with products that I own, but I hadn’t thought about it in those terms before. She basically said that a lot of features that you’ll hear requested over and over are really just being requested by three or four people who are kind of your loud minority. A lot of your happy customers, you’ll never hear from them. This is definitely helpful for folks who are just launching a product to give them some perspective on what to expect as you’re starting to deal with customers.
[11:20]Mike: The phrase I’ve always heard is “the squeaky wheels”. The people who complain a lot, there are going to be a few of them, and they’re going to complain a lot about certain things but unless you hear a lot of people complaining about the same things, you have to pay them a little less attention. You can certainly go down the road of implementing things that, one, people don’t use or don’t need or, two, are actually going to hurt your product rather than help it and make people a little confused about what your product does.
[11:46]Rob: Yeah, and you use the word complain. I don’t know that I would use the word complain as much as give feedback. Sometimes, the more irritating customers, they are complaining and they’re kind of a pain in the ass but a lot of the customers who are in the un-silent minority are the people who I think genuinely want the product to be better. I think the majority of those folks, while they may email you feature requests three times a week, I wouldn’t consider that a bad thing. I know it’s hard to deal with the onslaught of oncoming feature requests – of all people right now, I know this. I think I’ve received literally multiple feature requests per day for Drip. So it’s trying to get back to everybody and handle it well is a challenge but I think I’m pretty thankful in general for even the people who send us one or two per week. If they’re cool with realizing that we’re not going to build all of them, I think that’s where you’d end at the sticking point, right? Because if someone requests something and they’re nice about it and you can‚’t build it, sometimes that has to get done. Certain people are willing to accept that, certain people will get really indignant about it and they’ll say things like, well, you would get so many more customers if you had this. That’s pretty few and far between though.
[12:54]Mike: One of the things that she had mentioned in her talk was that the things you’re customers tell you that they’d love should be in your headlines. I thought that was not just an interesting take on it but a fascinating way to resonate with your audience. Because your audience is clearly going to think about your product differently than you are. In some ways it reminded me of other techniques I’ve heard from people going to Amazon.com reviews and pulling snippets of what people are saying about other products or about similar products and using that to help do SEO or to identify keywords that people are using to describe that type of product. It was just a very interesting way of taking your customers’ words and using them to your advantage on your website and in your SEO to help resonate with the rest of the user base that has already obviously bought into whatever you’re selling.
[13:40]Rob: Right. I love this one. I’m such a proponent of learning the way that your customers and potential customers are talking and thinking about your product, entering the conversation that’s already going on in they’re head. Most of the time when I sit down to write marketing or sales copy I will try to go and actually read emails or testimonials or somehow read something from my customers to start getting me in the mindset of how I should be talking about it. I think this is a really good tip.
[14:08]Another thing Rachel said was that you can learn a lot from the misuse of your features. So basically, you’ll launch a feature and you think everyone’s going to use it a certain way and then she gave an example of how some of her customers misused it. But what that really means is that they have another need, I’ve definitely seen this. At first, you think, ah, people are screwing things up! Right, they’re not using this correctly. But if you look at it from this other perspective it can actually lead to making your product better.
[14:34]Mike: I think a nice reminder that she threw out there for everyone was that your product is never done. Even if you’ve implemented a ton of things that were in line with your vision, there are always new requests that are going to come up, there’s always new ways to use your product. If your customers are coming up with new ways of using your product in their environment for new processes or new procedures as part of their daily workflows, you have to look at those and say, okay. Can I rework the product? Or can I reposition it in terms of the marketing to make it appeal to those types of people in a slightly different ways? The work’s never done. There’s never going to come a time where you can just sit back and say, oh, the work on this is completely done.
[15:14]Rob: Another popular speaker, who actually went last, was Lars Lofgren. He‚s in charge of Growth for KISSmetrics. He does a lot of work with their content marketing team; he runs a lot of split tests for them. He did an excellent session of teardowns at MicroConf Europe. His talk was titled “Unlocking the Four Gateways of Growth”. I really enjoyed this talk. My guess is it will be one of the top-rated talks.
[15:39]He had a great overview of depending on the phase that your product is in, what metrics to look at, how to build a better product, how to ask if it can grow, how to build a simple business model – he kind of went through the four phases, really good stuff. One of the first things he talked about was when choosing metrics – he said you have to have metrics that you’re measuring to figure out where you are and where you need to go, what you need to improve. He said when choosing metrics, always ask what is the biggest constraint right now.
[16:06]I feel like this is a really succinct way of basically saying, when you are early on in your product you just need data. Right? You either need one-on-one customer interviews when doing customer development, or if you want to split test market and copy you need traffic. You need some data to say which one’s going to perform better. Then when you get further on, maybe you’re starting to scale up, you don’t necessarily need as much data any more now. You need a lot of people coming and you need to optimize your funnel. I guess in a way, you do need data, but you just need that data further and further down the line of your funnel as it gets better. I really like this whole concept of thinking about what is the biggest constraint right now for your product growing? Figuring out how to measure that and then focusing on that for kind of a three month sprint.
[16:51]Mike: I think one of the things that does for you is that if you’re trying to fix all these different things all at once, it can be hard to fix any of them effectively. If you focus on the one biggest problem you have, and say you’re having problems getting people to click through and actually sign up for a trial. That’s your biggest problem at this point. Then by focusing on that and alleviating that headache as much as you possibly can, then you’ve essentially freed up people to move through the rest of the funnel.
[17:19]Then you get to see what’s going on. You don’t necessarily know whether or not there are other problems that are right after that or are six, seven, eight steps down the road. By focusing on that one biggest problem, you’re always focused on getting those people through the sales cycle. It trickles down.
[17:36]Rob: I also like that this makes you think about, depending on your stage, you need to look at different metrics. Because we’ve gotten questions in the past where someone says, well, I only get 100 unique visitors per month to my website, how can I run split tests? The answer is, you can’t. Because that’s not your biggest constraint right now, right? You need to choose a metric that is actually helpful. It’s more than likely that you need to actually go talk individually to customers and decide on what you need to build.
[18:01]But maybe your biggest constraint, if you only have 100 uniques per month is traffic. Then you can start trying to increase uniques and improve that. I’d recommend definitely checking Lars’ slides out up there on Christoph’s hub.
[18:15]Another thing I liked that Lars talked about is he had this section called Can You Grow? The takeaway I took from that is he said, pick one growth channel, one marketing channel, and focus on it for a three month sprint. Put everything you have into it and try to make it work. This is something that I have done many, many times. I’ve never systematized it like he was talking about, basically making it a sprint and making it official and documenting stuff.
[18:40]Mike: One thing I like that Lars talked about was whether or not you had a stable business model. I think that’s one of the things kind of neglected by most people because they’re so focused on trying to figure out, what should I charge? Not saying that what you should charge doesn’t factor into it, but they’re focused on all the details of trying to get people to pay for it and not necessarily focused on the big picture.
[19:02]He talked about a couple of different pricing models. One of them was for SaaS, and he basically said that for SaaS, you want a lifetime value of the customer to be essentially at least three times your cost of acquisition. You want to be able to recover that acquisition cost within twelve months. If you’re able to do that, you can establish a solid growth engine for that product and if your churn is above 2% then that’s something else you need to work on is to help drive that churn down below 2%. Obviously you get that by talking to customers, but I think that figuring out what your cost of acquisition is and measuring it against your lifetime value is really important. The one difficult thing is trying to figure out what your lifetime value is when you don’t have enough data to figure that out.
[19:46]I was talking to Jana, who runs HappyBootsTrapper.com, but she has a product called FirstOfficer.io and we were talking about how do you measure lifetime value of customers. Especially when you have people who are paying you on a monthly basis, versus others who are paying you on a yearly basis, and of course the question comes up – those people who are paying you on an annual basis, they only have one real opportunity to cancel. They’re given that opportunity to renew every year but that’s when they think about whether they want to renew this. Versus the people who are getting a bill every single month, where they look at it and say, well, do I want to keep paying this or do I want to cancel?
[20:19]There’s obviously difference between your lifetime value for the people who are paying you on an annual basis versus those paying you on a monthly basis. You can’t just arbitrarily aggregate them together, that’s not sound mathematics. We had a pretty extensive conversation about that. It’s just interesting how different people look at that particular problem.
[20:39]Rob: Right. I think it’s like trying to find the standard. The standard I’ve seen is that if someone does not have the option to cancel that month, then they should not be included in the churn calculation. You can break up into annual and monthly churn, or you can say on the month that they’re able to cancel, did they churn?
[20:53]To be honest, man, it’s really hard to get below a churn of 2%. It’s pretty rare that happens, but that’s what the really big companies when they really start to scale up, that’s what they have to hit. So I like that Lars brought that up and brought some real numbers. These are numbers that I have either found myself or have researched and always keep in my notebook; they’re my rules of thumb for things. It was nice to see them up there on the screen for everybody to see and kind of benchmark their own apps from that.
[21:25]So as I said, we had nine speakers at MicroConf Europe, we can’t talk about all their stuff. But I’d recommend you check out MicroConfEuropeRecap.com if you want to see some of the other talks about hiring a designer as a founder, how to build an app that you can sell, optimizing SaaS apps. There’s a lot of really good info there.
[21:24]I really wanted to talk, just for a few minutes, about Dan and Ian’s DCBKK event. DC is their membership website, their membership community called Dynamite Circle. BKK is the airport code for Bangkok, so it’s an annual conference that they host for digital nomads. I really consider the Tropical NBA as kind of a sister podcast of ours. To be honest, they have a lot of overlap, their audience and the folks who attended may have the most overlap with MicroConf attendees in terms of their interests and the conference in terms of its audience, size, and format. It was really cool to get an inside look at how another conference for similar audience and a similar size was run.
[22:25]The fun part was that a lot of the attendees listen to our podcast and it was really fun to touch base with them since we typically wouldn’t cross paths with them. They’re digital nomads, they’re traveling in Southeast Asia and other parts of the world. It was fun when I first got up to speak and they did a show of hands of who listens to our show. It kind of felt like it was a hometown crowd.
[22:44]Mike: Really? What was the rough percentage?
[22:46]Rob: I think it was maybe 40%, 50%? It was a good chunk. That’s my memory. Someone can correct me in the comments if I’m wrong. I just remember thinking, wow, a lot of people have heard of what I’ve been up to or heard of the podcast. It was nice and I kicked off the conference and it was fun to do that.
[23:04]One thing I did in my talk was, I’ve talked about this stair step approach a bunch of times on the podcast but I’ve never really fleshed that out. I really fleshed it out and dove into what I think the specifics are on how to stair step your way up to recurring revenue. Meaning, starting with a smaller product that’s typically a one-time sale and has a single marketing channel and then stepping up to multiple of those until you can buy out your own time. You own all of your time, then stepping up to recurring revenue. That really resonated with the DCBKK crowd, it was cool. I overheard several conversations later referencing it and saying, yeah, my app is a step one business right now, I’m hoping to get to step two. That’s a really good feeling for a speaker to hear a concept that you’ve outlined be used by attendees so quickly.
[23:50]Mike: That’s awesome.
[23:52]Rob: I also talked about it again at MicroConf Europe about a week later, so that’s again in our recap if you want to hear more details about it.
[24:00]I think the last point I’ll touch on, the event was very well run and I was impressed with it. A lot of conferences I go to, now that we’ve run a conference, when I attend conferences I’m pretty picky about it. I can tell when people are screwing up. If you go to a venue after the conference and the music’s too loud, I’m thinking to myself, real key mistake, man! We‚’re not here to club, we’re here to hang out and talk. We learned that the first year when the music was too loud at one of our venues. I was impressed, you could tell Dan and Ian had run it before.
[24:31]As usual, the hallway track is one of my favorite parts. Breakfasts and dinners were probably my highlights. Actually, in the Tropical NBA episode 268, it’s titled ‚”Getting More Out of Conferences, breakfast is a big deal”. They talk a little bit about this. But one thing I did this year at both of these conferences, DCBKK and MicroConf Europe, was I was really intentional about seeking out certain people I wanted to connect with. I made sure that we had some one-on-one time. Typically I will see people, like Derek Sivers was at DCBBK, or Nathan Barry was at MicroConf Europe, and I would see them in passing and I might catch up with them at a group event. But I’ve realized that the time is not – it’s tough to have an in depth conversation at a group event like that because you just wind up, especially as the organizer and speaker, you get mobbed.
[25:20]There are a lot of people who want to talk to you, and that’s okay. But I realize that you kind of have to have one-on-one time to do it. So I think that if you are attending conferences, that perhaps my number one recommendation, aside from being prepared to ask interesting questions and not just make small talk, my other recommendation is to look out for people who you really want to connect with. Make sure that you are able to find some one-on-one time with them, hopefully over a meal where you can really catch up and deepen those relationships. Because in my opinion, that’s really what attending these events is about.
[25:53]Mike: Yeah, that comes down to scoping out who else is going to be there. Then schedule in that time, either before you get there or while you’re there. If you haven’t had a chance to connect with them before the event, definitely make sure that you get on their radar and say, hey, I’d really like to sit down and talk to you for a while. This is what I want to talk about. Maybe you don’t have a set agenda that you tell them about, but just get on their radar so they know you’re trying to make time for them so hopefully they’ll reciprocate and make time for you as well.
[26:20]Rob: So thanks for Dan and Ian for inviting me to speak and congratulations to them for running a top notch event. So Mike, we’ve run six conferences now, four in Vegas and two in Europe. You feel like we’re getting a little better at it?
[26:32]Mike: A little bit. You know, it’s interesting going back and forth between Europe and Vegas. There’s certain things that I think we took for granted the first couple years at MicroConf and Vegas because we went over to Europe, the crowd over there is different. Then we changed some things over there that I don’t think we initially realized in the beginning helped to make us successful here in the US. The biggest one for example that I saw in the US, we chose to do it on Monday and Tuesday primarily for cost reasons and we never changed that. We never experimented with it, and first thing we did when we went to Europe is had it on a weekend. It’s interesting that actually might have torpedoed things for us if we had done that in the US.
[27:16]Rob: Yeah, the quality of the attendee overall tends to be less on average because it’s more people who don’t have to take off work and they’re able to come. You’ll wind up with a lot more beginners, I guess is what I’m trying to say. A lot more people who are just thinking about doing things, but if you do it during the week, you tend to have more people really serious about it. If they not only have to pay for a ticket and pay to fly, but they have to take time off work, then they’re probably pretty committed to this idea.
[27:44]Mike: Yeah, so that was one of the things I noticed up front. It’s interesting to see different perspectives from around the world about what sorts of things people have to deal with and obviously there’s this core set of problems everyone has. But it’s interesting to see that people in different countries deal with them in different ways, there’s certain laws that affect some people and don’t with other people. It’s a very mixed bag with the periphery problems that people have to deal with.
[28:11]Rob: Right.
[28:12]Mike: If you have a question for us, you can call into our voicemail number at 1(888)801-9690 or you can email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from We‚’re Out of Control by Moot , used under Creative Commons. Subscribe to us on iTunes by searching for Startups, and visit StartupsForTheRestOfUs.com for a full transcript of each episode. Thanks for listening, and we’ll see you next time.
Episode 209 | How to Run A Successful Webinar (With Brennan Dunn)
Show Notes
- DoubleYourFreelancing.com
- PlanScope.io
- BuildAConsultancy.com
- A summary of the key points from this episode was generously donated by Sweet Fish Media: 5 Steps to Hosting the Perfect Webinar
Transcript
[00:00] Mike: In this episode of Startups For the Rest of Us, I’m going to be talking to Brennan Dunn about how to run successful webinars. This is Startups For the Rest of Us Episode 209.
[00:07] Music
[00:13] Welcome to Startups For the Rest of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at launching software products. Whether you’ve built your first product or you’re just thinking about it. I’m Mike –
[00:21] Brennan: – and I’m Brennan –
[00:21] Mike: – and we’re here to share our experiences to help you avoid the same mistakes we’ve made. How you doing this week Brennan?
[00:25] Brennan: I’m good. I’m good. I’ve broke ground finally on my new course, so things are good.
[00:31] Mike: Excellent. If you’re not familiar with who Brennan is, I want to give you a quick introduction. He is the founder of Planscope, he’s written several books and courses on consulting, which you can find at doubleyourfreelancing.com, and he is also a former speaker at Microconf and will also be speaking at the upcoming Microconf Europe in Prague. Thanks, and welcome to the show Brennan.
[00:49] Brennan: Thanks Mike.
[00:50] Mike: So today we’re going to be talking a little bit about how to run successful webinars. Brennan, you’ve run quite a few webinars. I think one of the first things we should start out with is – when you’re first starting to look to put together a webinar and considering doing it, what are some of the first things you should think about? Are their target audiences you should have in mind? What’s the first thing they should start doing?
[01:10] Brennan: First, I think you need to realize what the goal of the webinar is, both for you and the audience. For you, it’s probably to promote or sell a product, in your case. With Auditshark, you’ll probably be wanting to teach somebody something about security, so that ultimately they can understand why it’s important to have a secure infrastructure, which will then ultimately lead them to Auditshark, right? I think you need to figure out both what the role of the webinar is, and on top of that, what the takeaways are for the attendees.
[01:40] The target audience, I think – It’s probably not that hard to determine if you already have a product in mind that the webinar’s for. If you have a info product, or a software product, or whatever it might be. Hopefully you already know who the ideal user is, right? That’s probably the easier part if you have a product in mind. But, a really good webinar is meant to – It’s kind of like an interactive blog post in that you’re teaching something and it’s interactive. People can ask you to clarify something, or have live Q&A, and do a lot of really fun things that you really can’t do traditionally through a newsletter or through blogging or through whatever else.
[02:17] Mike: Yeah. When I was putting together my first webinar for Auditshark, one of the things that jumped into my mind was – Obviously there’s a reason I’m doing the webinars because I want to help bring awareness for Auditshark and help drive sales, and things like that. But, the key thing that came to my mind first was, “What’s in it for the person who’s coming to the webinar, and why should they even care? Why should they spend the 45 minutes to an hour even bothering to come to the webinar, and what can I offer them that is going to” – especially to entice them to come and attend? It’s sort of “Marketing 101”, but “What’s in it for me?” is really the underlying question.
[02:48] Brennan: It should be. I think you really do need to be respectful of the person’s time and really understand that even if you are trying to sell something, I think the webinar itself should be valuable in its own right, even if you’re not selling anything. I think you really need to think: even if nobody buys, will they still walk away from this event thinking, “You know what? It was worthwhile for me to attend”. And that’s why I’m a big fan of a training webinar, or something like that, versus – Because some of the more seedier parts of the internet might have webinars that are more like pitching people on timeshares. I’m very big on having a very dense, educational webinar that coincides and aligns with whatever product I’m trying to up-sell.
[03:27] Mike: It’s almost the difference between doing an educational webinar, versus an education on how to use my product webinar.
[03:34] Brennan: No one cares about your product; they care about what it can do for them. I’m very big on the idea of: let the webinar demonstrate the “why”, and let the product come in as the natural “how”. Why is security important? Why does it matter? What are the implications of an insecure infrastructure, case studies, right? Then the “how” is obviously – the “how” is: if this is all resonating with you, and this makes sense, and you don’t want to have exploits or whatever else happen on your systems, then look at Auditshark. That’s the goal, right?
[04:04] Mike: Yes. There’s a couple other things on the educational side of things that help, because even if somebody comes to the webinar and they look at the product and they say, “Well that’s not really for me”, if you didn’t give them anything of value, they will probably never come to a future webinar. So, even if they’re not at a point right now or not ready to buy just yet, they may be down the road. I think if you turn it into too much of a sales pitch right away, they’re going to get turned off. They’re not going to come back to a future one. You’ve lost them as a future customer.
[04:31] Brennan: I think this is true of webinars, newsletters, really any form of marketing.
[04:37] Mike: So we talked a little bit about the fact that the target audience should come away and have learned something. But, one of the things you have to also ask is: why should you use a webinar? When are appropriate times to use webinars?
[04:49] Brennan: I think there are a lot of different ways a webinar can be used successfully. One of the ways that I think it underused is a way to learn about your audience and what they need. Let’s say before I wrote my course on pricing for freelancers, I could have hosted a webinar to my list; to my audience, talking about what I might even put in the course, right? Just a feeler to find out if this is something that resonates with people. Do people care about this product that I’m thinking about putting together? A webinar is a great way to do real-time validation, because you can talk to people about what it is you’re thinking about putting together and get feedback during the Q&A or even in real-time. I think it’s a really good way to scope out a product before you do the legwork needed to actually build the product.
[05:31] The second thing, which I think is the more used case, is using it to promote an existing product. If you have a software product out there, a webinar is a fantastic way of promoting it. I think the two real distinctions between a webinar and traditional forms of marketing like a newsletter or a blog post are: it’s interactive, meaning people can say, “Hey Brennan, can you clarify what you said about x, y, and z, and can you tell me more about that?”, and on top of that – another big thing – is that you can’t skip forward. The attendee cannot skip ahead. Let’s say you launch your product and you put together a really good sales page. A lot of people are just going to skip to the bottom and the pricing, and go there before they actually know what the products about, what the benefits are, and so on.
[06:14] The way that webinars are structured, because they’re live, is you can’t skip ahead, which I think when done right can really make them valuable. I’ve had webinars where 40% of the people who attended bought for me, because if they make it to the end, it’s very self-segmenting. Is this for them, or isn’t it? They know what it is and why they need it at that point.
[06:34] Mike: I really like the credibility aspect, because when you go to a sales page, it feels like you have to work a heck of a lot harder on the back-end to make sure that you’re putting the right information upfront to not only get the people who are going to read everything, but also to get the people who are just going to skim the content to figure out if it’s for them. But with the webinar, as you said, you get a lot more engagement and they’re hearing a live person on the other end of it, versus a website where it’s a little less personal. A webinar is very personal because you’re actually sitting there listening to the person who’s talking to you.
[07:06] Brennan: Right, you hear a human’s voice. A lot of them will have some sort of real-time chat where you can talk to other people who are attending. When I do a webinar I break the ice with asking everyone where they’re from. It’s really personal compared, like you said, to a static sales page.
[07:21] Mike: What are some of the disadvantages of hosting a webinar? What are some of the things that would actually turn you away from using a webinar?
[07:27] Brennan: First, you need to show up to make it happen. With a really great sales website, the idea is you can let it run on its own and if it’s effective it generates and drives sales to you. With a webinar, it still requires you to attend, like it’s a live event every time you do it. So, it requires time. On top of that, it’s one thing for me to blog weekly, and send it out to my audience, but they can read it and consume it on their own time. Whereas, typically with a webinar, you’re making people schedule, and asking, “Am I free on Tuesday at 2 pm EST?”, and especially if you have a lot of people from all over the planet, it’s logistically harder sometimes, and people really need to think, “Can I attend? Can I actually blank out my schedule for an hour on this day at this time?”. So that, I think, is one impediment – mainly for the audience, not as much for you.
[08:13] Mike: I think it is a little bit of an impediment for you because you have to think of where people are going to be attending from and what segment of your audience you’re basically going to ignore. We have this problem with the Micropreneur Academy where we’ll hosts an academy conference call. We’ll post a number and people can call in from all over the world, and we typically aim for an evening of Wednesday or Thursday. So it’s evening for the US, we have people calling in from India and it’s 2am or 3am there. It’s like, “Wow! You’re a trooper”, but when you have a worldwide community like that, it’s very hard to do those types of schedules without shunning some part of the world.
[08:52] Brennan: I’ve seen people who offer maybe two or three different versions of the same event. They might have one be at 7am EST and another one might be 2pm EST, and then you can choose which one is best for you. That’s one way to work around that.
[09:09] Mike: Let’s talk about some of the technical logistics. How do you go about hosting a webinar? What sorts of tools or technology should you be using? What should you at least give some consideration to?
[09:19] Brennan: There’s a lot of different options out there. My favorite – and it’s also the most economic – is using Hangouts on Air. A Hangout on Air is basically a Google Hangout, but it doesn’t have any limit to the number of attendees who can attend, and it auto-records everything that you do. What I do now is, I put together a very simple static page that has two iframe embeds basically. It has an iframe embed for a Google Hangout, and it also has an iframe embed for a service I use called Chatroll, which is a real-time chat widget.
[09:48] So I just put these two up and that is the entire – at least the hosting – that the viewing part of the webinar. There’s also GoToWebinar which is also an option, but I think that’s $100/month. It’s desktop software, but I just like how mine requires to just go to a webpage and as long as you can watch YouTube videos you can watch my webinar.
[10:05] Those are really the two main options. I think there’s Livestream also, I’ve never really used that. I would recommend for most people Hangouts on Air is by-far the easiest and most economic way to get started.
[10:17] Mike: I signed up for a GoToWebinar and I did my first webinar through there. My 30-day trial recently ended with them and they sent me this email saying, “Hey, your trial just ended. We’ll give you $10 off if you sign up now”, and it ended up being $39/month instead of $49/month, but that’s for their lower-end plan for only up to 100 attendees. The downside I saw with those was that the conversion rates were actually really low because they don’t give you any customization for the registration page. You can select which fields you want to get. Basically, just the user experience for signing up and registering for the webinar – it’s completely in their hands.
[10:55] Brennan: The registration flow is horrible; you can’t control it. Like you said, I don’t even think you can control the emails they send out. I think they send out a reminder email the day before, and then maybe one an hour before.
[11:06] Mike: You have some flexibility there you can set-up a bunch of different reminders. You can pre set-up polls and stuff like that for inside the webinar, and you can also customize the emails that get sent out afterwards. Once they get all of the registrations in, you can download them into Excel. From there you can do a MailChimp import. You can do your own things if you really want to. That initial registration page – it does not convert well.
[11:29] Brennan: The webinars I’ve been doing – the registration page gets about an 85% average conversion rate. In the show notes, I’d be happy to link to one of those as an example. I like having control over the entire registration confirmation flow, along with the emails that go out beforehand. I like being the one to send it. So I actually use my marketing software to do registration for me. I use Infusionsoft, but this can be done in Drip or MailChimp, AWeber, or whatever. But really, all you really need to do is create a list for that webinar, design a custom page, advertising the webinar, and then have an opt-in form, which is literally name and email.
[12:09] They get on that list, and you have an auto-responder that is scheduled to go out. I’ll send out a few emails before the actual event, and then I’ll be the one promoting, “Hey, the event is about to start”. Then after the event, I send out the replay mail, and any additional emails that relate to the pitch that I had. I think you can do a lot with a free MailChimp account with Hangouts on Air, and Chatroll does cost about $50/month minimum. Those three things plus some knowledge about how to glue it all together can basically give you what you need.
[12:40] Mike: Even if you’re paying $50/month for Chatroll, that’s only marginally more expensive than something like GoToWebinar – there you’re limited to just 100 people. Plus, people have to download their stuff, and I found this out the hard way. Their recordings don’t always work. I recorded my first webinar, and somebody emailed me, “Hey, I missed the webinar. Can you send me a recording of it?”. I said “sure” and thought this would be a good time to check and see how well the recording is.
[13:05] The recording was awful. It skipped all over the place, the transitions were terrible, and it just did not work. I had no choice to say, “Look, this recording didn’t come out well”, but I was kind of able to turn it around and say, “Hey, this didn’t work out well with the recording but if you would like a personalized demo or personalized webinar I can certainly do that”.
[13:23] Brennan: That’s what I love about Hangouts is that they come out as YouTube videos automatically – no matter what. You don’t need to worry about recording. It does it for you.
[13:30] Mike: So – Hangouts on Air from Google, a combination of Chatroll and a custom landing page for the people who you’re driving it to, and then in terms of getting people registered for it – very simple integration with like AWeber or Infusionsoft or MailChimp, or what have you.
[13:46] Brennan: Exactly. That’s it.
[13:47] Mike: That’s basically all you need to handle of all the technical side of stuff. Let’s dig a little bit into driving people to that landing page for the webinar. How do you drive people specifically to that page and get them to sign up?
[13:59] Brennan: If you’re promoting to your own lists it’s a lot easier. They’re used to hearing from you already – they know who you are. What I’ve done in the past is I will typically send out two or three emails spaced out where I talk about what they’re going to get out of it. I don’t actually say, “Join my webinar, here’s the link, cheers, Brennan”, I don’t do it like that. I’ll talk about an example of something that happened to me back before I learned how to price – this is what my life was like these are the kind of clients I was working with. Then I segwayed from that into: I’m going to be talking about all of this, what I learned over the years in building up my consultancy; if you’d like to join, there’s limited availability, but click this link – I’d also include the date and time.
[14:41] I did this one launch on doubling your freelancing rate last May, and I got quite a big turnout from my own list. I think it was really effective too because – It’s a way if you’re constantly talking to your list, it’s like a one-to-many. It’s you up at the top, and your broadcasting hundreds to thousands of emails to all of these people. There’s no two-way relationship.
[15:00] Mike: You’re not getting that interaction.
[15:02] Brennan: Yeah. But, it’s one thing if you can invite your list to a live event. They can talk to each other in the Chatroll, and they can also ask you questions and you can answer them live. You can say, “Yes Bob, great question, let me address this”. It’s just a great way to get to know who your audience is and help them get to know you better on a more personal level. That’s what I would do with my own email list. I would think: well, is this a launch or is this a meet and greet event, or am I really doing a formal promotion for a product of mine. It’s always going to be better for that. I get a very good conversion rate for my own list. I get upwards of 90% typically when promoting my own list. But if you’re going to look into paid acquisition or the typical social stuff, you’re definitely going to get lower returns, right? You’re going to get lower conversions. But, people like John Lee Dumas have done extremely well with paid ads when it comes to promoting webinars. I don’t know, Mike, if you’ve ever seen any of John’s ads in your Facebook feed –
[16:00] Mike: Yep.
[16:00] Brennan: – but he makes a killing. If you look at his income reports, he does most of his sales through webinars. I think it’s useful because traditionally, when most of us think of doing a paid advertising campaign, it’s usually: let’s drive people to the marketing site and let’s get them to hopefully buy. But when people are on Facebook and just browsing the web, usually not in a “pull out my credit card and buy something” mood. They’re just casually looking around. If you can find lower ways to convert people from a paid campaign through a webinar opt-in or an email course opt-in or something, I generally think that’s a lot more effective than just driving people to a product webpage.
[16:42] Mike: Part of the way you need to think about it is putting them at the first step of what your sales funnel looks like. Ultimately you want them to buy something way down the road, but there’s a series of other steps you want them to go through first, or at least start them on that path. Even if you get one touch with them, which is an advertisement of some kind, they’re probably not going to buy right away.
[17:03] But, you need to get them on that path somehow, and using a webinar says, “Hey, just give me your email address and I’ll send you a link to this webinar and you’ll get a bunch of free educational stuff that’s going to help you out. If it doesn’t help them out, they’re probably not coming back. But if they do find a value in it, then they’ve started on that path and they may start looking at you more. Eventually, they’ll say that they’re finding value in this, and paying money to get the product they’re offering is ultimately going to benefit them far more than just listening to free webinars.
[17:35] Brennan: I think it’s harder for you to promote to somebody who doesn’t already know who you are to ask them to blank out their calendar and attend a webinar. I’ve seen them offer something immediately too, like a worksheet or PDF report – something they get immediately upon opting in. That way – it’s not like when you see a Facebook ad, you click it, you opt-in and wait a week before you get anything – you get something immediately. But, you’re also hoping they can attend the real event, which is the webinar.
[18:05] Mike: Yeah. You’re kind of satisfying that need for instant gratification that we’re all used to on the Internet.
[18:09] Brennan: Right. A lot of people will say, “Fill out this worksheet before you attend”, because a lot of it will be in line with what they’re going to be presenting on. Say I was doing a webinar on pricing. I might give people a worksheet, “Now fill out these questions about your experience pricing, what fears you have around pricing”, just so they can get that emotional buy-in into what the webinar will be covering. So if you give them something of value immediately, that thing of value needs to coincide nicely with the webinar itself.
[18:37] Mike: What I’ve seen, I think LeadPages did this, when I registered for one of their webinars I went into it and looked at what they sent over, and it was actually a worksheet that went along with the webinar. Their webinar was going to walk through a bunch of things, and it was almost like a mad-libs thing. That is what the worksheet was. You had to fill it in, and it didn’t make much sense unless you actually attended the webinar to be able to connect some of those dots. So, it was kind of interesting, but at the same time I looked at it and said, “This is going do make me do some work”.
[19:08] Brennan: You could just offer a free report or a free eBook download or something too. That isn’t as intensive. Like you said, you have to rack your brain and think through stuff.
[19:19] Mike: You can tap your own email list, you can leverage some paid advertising or use social networks like Twitter, LinkedIn, Facebook, and various ads and stuff within those. Are there any other ways you can think of that people can use to drive people to a webinar?
[19:32] Brennan: I’ve had a lot of luck over the past few months with something called a joint-venture webinar. And what that is, is I will approach somebody in the complimentary audience, someone who has done the groundwork of getting an audience of consultants, and I will say to them, “I have a product that I think could be really valuable to your audience, but on top of that, I want to train your audience for free on a gist for my product”. There will be a soft up-sell at the end for the people who get a lot of my training and want to take it to that next step. But it’s not a overrated right, it’s not a hard sell. On top of that, I want to offer you, the audience owner – let’s do a rev-share of any sales that come as a result of that.
[20:10] So, I think there’s huge benefits for this. First off, if you go to an audience that has maybe tens of thousands of people, if they promote your event to their list, not only do you have a lot of potential sales that can come from that, but you’re also going to grab a whole lot of email addresses. You’re going to get a lot of new opt-ins, which is awesome. It’s hard, because unless you have a track record of your product and yourself being capable of delivering a large amount of value – if you have something untested. If you have a new product and nobody knows who you are, and you go to somebody with a list of 100,000 people and say, “Will you promote this?”, you’re probably not going to get very far.
[20:46] But, I would look out for people that are either in your immediate network that you know through conferences, or whatever else, and try to come up with something where you can say, “I want to provide value to your audience and make your look better to your audience by giving them something”, and then basically having a self-segmenting offer to them which is: if you want to take this product to the next level, I have a product that will help you do that. But if all your webinar is doing is trying to sell the product and nobody gets any value from it, no one will come back. And on top of that whoever promoted you is not going to be very happy with you.
[21:20] Mike: So this is more about credibility with these people you’re trying to tap into for a joint venture. You might be able to go to them – If you pre-record something that might help. But I think you’re right. You almost need to be making that pitch to someone who is at your level or even a little bit above. You probably don’t want to go down. If you have a list of 1,000 people you don’t want to approach someone who has 10,000 or 20,000 because the return for them is probably not nearly as big as it would be for you. So, baby steps up, but you’re not going to be able to make those huge leaps that you might have read are possible on TechCrunch.
[21:53] Brennan: Yeah, they’re going to want to see proof. If you’ve done this to your own list, and you can point them to recording, that’s much better than having nothing else before that. You should definitely do this first with your own audience and start there and maybe eventually doing a joint-venture.
[22:07] Mike: One of the things you touched on earlier was when you’re driving people to the lists and being able to give away different things so that whether it’s a white paper, various ways to entice people to sign up. What is typical for the registration rates? I think you said some of them for your own lists you’ve seen upwards of 85-90% for opt-in rates. What would be the typical range of other options? So if it’s paid advertising, what sorts of things can people look at to say “I’m doing well” or “These are areas where I obviously need to improve” because maybe somebody’s getting 20% and they’re thinking that’s great, but realistically they should probably be getting 40-50%.
[22:46] Brennan: I think you should definitely be getting upwards of about 50%. Everyone I know who has registration opt-in pages for webinars seem to be getting above that. The thing you don’t want to be doing is to have too much stuff that it’s keeping someone from opting in. It’s the typical squeeze-page set up where you don’t have much. You have a headline, a very basic sentence or two on why they should attend, the date and time it’s at, a type in your email, “click join”, then maybe under that, a bit about who you are and maybe four or five bullet points on what they’ll get from it.
[23:21] I think the more you add, the less likely someone is to opt in. At this point, you want to have as many people as possible opting in, because after they opt in is when you want to try to get them to actually attend. I think a lot of us will look at, “Oh yay, I got 1,000 people” to opt in or register, but then 100 people show up. Show up rates are very, very minimal. There are some things we should talk about how you can get more people to attend.
[23:48] But, one of the things I love about the joint-venture approach is that even if you get 1000 registrations but only 200 people show up, you still have 1000 new people on your list. This same thing applies for paid acquisition, doing social marketing, any sort of thing like that. You should definitely be aiming for above 50%. I think a really good squeeze-paged with not much you can do except put your email address in and click a button. You should be getting closer to 90%.
[24:14] Mike: I think those are great numbers for people to have at their fingertips. Now what about follow-up referrals and things like that? I’ve seen some landing pages where after you put in your email address and said yes you will claim your spot and confirm to attend this event. I’ve also seen pages where they’ll ask you to help promote it by sending out a tweet, or emailing friends. Do you see that those types of things work well? Or no?
[24:39] Brennan: I have actually. What I will typically do is on the confirmation page is I’ll have a to have a “Share on Facebook, Tweet this” link and say “thank you”, and I also have a widget that will let them add it to their calendar. Basically the confirmation page is: stick it on your calendar and why don’t you tell somebody about it. But in the email that I send out. So, immediately upon opting in I send a welcome email. And this welcome email it’s very simple. It’s basically, “Hey! I’m really excited. I can’t wait to see you at the live event. Can you do something for me?”. I have a form that will help me learn a bit more about who you are and what you need to get out of this event.
[25:14] If you’re going to give me an hour of your time, I want to make sure I cover what you need to hear. So click this link fill out this form, it will take you about a minute. And just tell me a bit about what you need to hear from me on whatever date the webinar is. That’s just a link to a Woofu form, or it can be a Google form. But it’s literally, “What made you want to opt in?” “What drew you to this?” and also “What are you hoping to get out of this event?” And what I found is when people filled that out, and I found about half of the people who have ever registered for my webinars end up filling out that form, I get a lot of raw data.
[25:46] But on top of that they’re much more likely to actually attend. Because now they’re vested. They’re engaged with the event before it’s even happening. If they’ve taken the time to say, “I’m hoping you cover x, y, z”, the likelihood they’ll attend is much higher. But on top of that after I link to that form, at the end of that form I say can you do one more thing for me “I want to do my best to make sure I address whatever it is you just put in that form. But can you try to get one or two new people from your network to attend that you think would get a lot of value out of this?”. I’ll usually have about three tweets that they can copy and paste.
[26:22] And I’ve gotten a lot of people. Like whenever I do these events I’ll have a lot of people on Twitter sharing the url which gets even more people into it. So, that’s typically what I’ll do for that first welcoming email that I send out immediately on opt in.
[26:37] Mike: So, this sounds like taking the corporate face or feel of the company that’s behind the webinar and putting a person’s face on it to say, “Although you’re getting a webinar with such-and-such company, you’re actually talking to me Brennan Dunn”.
[26:51] Brennan: That’s right.
[26:52] Mike: It’s just got that personal feel to it, so you’re creating this one-on-one relationship with somebody. Not necessarily, “I have a webinar with BidSketch or whatever the company is”.
[27:01] Brennan: Nobody wants to go to a webinar to talk to BidSketch the company. They want to talk to a person, so I think it’s important that whoever’s going to be presenting for the company is the one that needs to be behind these emails.
[27:13] Mike: Some of those emails obviously are aimed at increasing the likelihood that people are going to attend. What are some of the other ways? I think an email sequence and timing that email sequence leading up to the event is also a good way.
[27:26] Brennan: You need to get people excited. You really want to make sure to get people to attend. Mine would change depending on how far out the event is. I’ve done events where I’ve opened that registration a few weeks in advance, but typically those don’t perform as well. I’ve found that just sending an email starting to promote the event less than a week before it happens those tends to be the most effective in terms of turn-out and how valuable that event was.
[27:51] I’ll typically send a welcome email, and usually another email on a weekend – the Sunday before. Usually I’ll run events Tuesday or Wednesday. I’ll send this on a Sunday, and I’ll basically say “Are you ready?” in the subject. Inside, I’ll reiterate why I’m excited to have them to attend, but then I’ll copy and paste a few of the responses I got from people and almost use it like testimonials. Like, “I’ve struggled with pricing myself at $20/hour for years, I don’t know how to get out of that. I can’t wait to figure that out. – Laura” or something like that. I’ll do this for maybe four or five of the responses that I got.
[28:29] It’s really just a way to really not only have another way to promote that hey if you haven’t filled out the form. Fill it out so I know. But also as a way to showcase that first off there are other real people attending and secondly people are like dying for this info and I plan on sharing how to fix these different problems that I’ve just listed out. So it’s just a way to kind of again remind people “Hey! You got an event coming up”and on top that really just build that excited for them to attend. I usually send it the Sunday before the event and then again if my event’s on say Tuesday, and let’s say it’s at 7am my time, I’ll send out a reminder saying, “By the way, the event is coming out later today” and I’ll also give people the live-link for the first time. I’ll tell them to set an alarm on their phone, make sure it is on their calendar, they won’t want to miss it, and that even though there will be a replay, you can’t ask questions to a video. If you attend live, you’ll have an avenue to ask questions about what I’m presenting. So it’s really important that they show up live.
[29:29] Mike: Now these are all things you can schedule well in advance because people sign up for it. This is specifically for the mailing list that you’ve set up for this particular webinar. Do you go back to your primary email list and continue trying to get people signed up for the webinar? How do you manage the back-and-forth between those two lists? I don’t think you want to beat your existing subscribers over the head with your webinars, because if you’re doing that, it’s almost like you’re abusing the privilege of having their email address.
[30:00] Brennan: I agree. I will typically only send two or three emails max about a webinar. It’s easy for me to do this with Infusionsoft – I can filter out people who have already registered from getting those follow-up emails. So if you’ve already opted into the webinar, you’re not going to get that reminder email to the general list about the webinar. I do that.
[30:19] Mike: So when you are giving the webinar. Let’s talk about the different things people can do to keep people engaged when you’re giving the webinar, and the types of logistical things you need to deal with during the webinar. So I think the first one is Should you record it? In some ways this is a no-brainer. You’re using the Hangouts which automatically records it so you don’t necessarily have to worry about that, but the question is: now that you have the recording, should you do anything with it? Should you repurpose that recording? Should you send it to people afterwards? I think there’s some pros and cons there that you might want to talk a little bit about.
[30:52] Brennan: I’ve done experimenting on record, not record – obviously you always record it, but do you share the recording or don’t you? What I found works best. The beautiful thing about Hangouts on Air is that live page you send people to to watch the webinar. If they were to refresh that page or go to that page after the event, it will automatically start playing the recording. That’s just how Hangouts works.
[31:21]So what I’ll typically do after the event, and this is part of that auto-responder for the pre-event and post-event, about two hours after the event I’ll send out a replay email where I’ll say, “Hey you guys are awesome, thank you so much. For those of you who couldn’t make it, here’s the video. But there is time-sensitive stuff that I mention in the video, so I will need to take it down on this date at this time”, which is typically the end of your sales window.
[31:37] This way people who are geographically all over the planet can watch it on their own time. Usually it’s a day or two window period I’ll set up. But the benefit of this it’s not an open-ended, yeah you can watch it from a year from now if you want. There is still some urgency behind it. You want people to watch the video especially if you have a timed promotion. No one will act on that promotion probably until they’ve seen the webinar probably. So, you want as many people as possible to watch the webinar. So I’ll usually do a replay, but take it down after a certain amount of time.
[32:07] Mike: Yeah, I think that’s really really great advice. When you’re running the webinar, why don’t you talk about some of the objections some people have, and how you address those directly within the webinar.
[32:17] Brennan: We’ve been talking a lot about the webinar but we haven’t talked about what’s in the webinar – format-wise and everything. The formula that I use for putting these together – I’ll start with ice breakers where I ask people where they’re from, what they do, and livechat is great for this because they’ll just type it out and I’ll respond to people in real time.
[32:38] Then I’ll jump into the training. Within the training there are two schools of thought. The first is you can either gloss over your entire product. Let’s say you have a course. You could sum up the entire course in the event, but still make it so even if somebody doesn’t buy the course they can still learn something, or alternatively you can drive into one specific part of the product. So with my product, Planscope, I could talk solely about client communication and how important it is to keep your clients addressed on what you’re working on, progress, budget usage, and everything. The selling point could be that Planscope does this.
[33:13] It also does a lot more. I would have focused on one core feature. That would allow me to do future webinars that allow me to hop around the future benefits that the product provides. You’ll typically do this training, and I usually spend about 30 minutes doing that. You need to have a bridge. Let’s go back to Auditshark. Let’s say you presented on the importance of security and how vital it is to have a secure system. The bridge that ties the training in with the product is something like this.
[33:45] On one hand, you could do what I did with Auditshark. I manually went in to all of my machines to make sure all of these settings were set. It took a lot of time. I was manually addressing and diagnosing and running diagnostics all the time on my machines. It took a lot of time. Or you could do what I’m doing now, which is, why I built Auditshark which is, you pay for Auditshark and we’ll do the majority of this for you. Do you want to go the shortcut or the long road?
[34:13] The training should set people up so they are equipped to take the long road. You can teach them about how to do what Auditshark does automatically. You could train them on how to do it manually. Basically, the pitch is really: if this is stuff that matters to your business, and your time is valuable enough where you don’t want to do all of this manually, here’s the product for you. I’ve built the product that automates much of this.
[34:36] Mike: That’s exactly what I did with my webinar. I basically talked about how to implement a security plan, which was geared more toward: these are the things that you should be doing. Then walk them through that process on how to do that stuff, where to start, where to finish, and what are the different gotcha’s and what sources of authority you should be looking at. Then walk into the process of how to verify those things inside of your environment.
[35:00] Then it was like – by the way, if you want to not have to go to every one of these machines individually and check all of this stuff, this product will do it automatically for you. It will pull back on everything and you can report on it and you can slice the data however you like.
[35:14] Brennan: If somebody doesn’t value their time all that much, they can take what you train them on and do it themselves manually, right? But, The goal with Auditshark in this case is to remove that need. Remove that time spent. It’s like when I sell Double Your Freelancing Rate, the way I sell it is: this is stuff I literally spent years of trial and errors on writing proposals and qualifying new clients. How do I do all of this kind of stuff?
[35:38] I packaged that into a start-to-finish framework that is this product. it’s really like, yes. You can take what I just covered and practice and tweak things and everything else, or I have a product that will help you get to that finish line and goal, which is the reason your hear, which is a lot faster than how you would get there otherwise.
[35:57] Mike: That’s a great tactic in general because you’re talking about what they’re doing, what are the different ways they’re going to accomplish whatever the ultimate solution would be, and walk them through the pains they’re having. It’s actually reinforcing the problems that they have to go through to do this. Maybe they know some of the different things they’ve learned over the years to get from point A to point B a little bit faster, but the tool is really what drives the value. That tool automates a lot of it. You’re trying to walk them through to this point where they recognize where they are today, and they realize what the potential solution is for all of their problems with the service or product that you’re offering. At that point, it becomes a much easier sell to say: Hey if you give us your credit card, we can solve most of these problems for you very quickly. You don’t have to worry about them ever again.
[36:48] Brennan: After you do the training with that kind of pitch, I definitely think there needs to be some sort of urgency factor – whether that’s a discount, or some added benefit, or something like that. I’ve found that having a day or two to get it at that discount or with that extra benefit is typically ideal. I’ve found that 40% of people who end up buying do so within an hour or so afterward. The other 60% actually come with the emails I send after the live webinar.
[37:22] I already mentioned the first email which is the replay, which also includes a worksheet I put together that is actually in the course that I give away for free. It’s a worksheet that coincides with a lot of what I covered in the live event. So I give that away also for free along with the replay in that first email. The next day I’ll send out another email where I overcome objections. Somebody attended or they watched the replay, and they’re thinking, “Well this is all great, but is it really for me? Am I at the point of my life where I really need something like this?”.
[37:52] So I really just help people self qualify. I tell them “If this is where you are then yes you should do this.” But if this describes you then maybe you should do this first. So it’s just a way to really help qualify people into does this really make sense for them to adopt product which is being pitch and it’s also a great way to really further described on paper this time in writing with a bit about include sales copy on the value and benefits of the product.
[38:18] And that will typically be the second email I send. Then I’ll send a final email, which is usually a few hours before the sales wrap up. I say, “if you haven’t watched the replay yet, do it, because I need to take it off because in that replay I give out this coupon or this offer code that is going to go away. It won’t work anymore so I’m going to be taking down the video. So please watch it soon.” I’ll also include a link to the slide-deck that I used. I’ll also include a closing testimonial that really is meant to drive people to it.
[38:50] Mike: So, we’ve got the follow-up email sequence, the link to the replay, any additional documents or materials, a link to the slide-deck. There’s a very specific sequence that you go through that essentially winds down the webinar. You have the intro emails leading up to the webinar, the webinar itself, and then it winds down to whatever the end of that sale or promotion is for that webinar. Is that right? –
[39:12] Brennan: That’s right.
[39:13] Mike: I think that’s a very regimented sales process you’ve probably tested quite a bit. Correct?
[39:17] Brennan: Yeah. Like I said, I’ve done this 13 times to other peoples’ lists and about four or five times to my own list, and I’ve definitely iterated on all of this. The way I have just outlined, for what I’ve been doing it, is most ideal. I’ve seen people who don’t do replays, people like Ramit Sethi do not offer replays, so you either see it live or you don’t see it. I think that there’s a lot of pros to that, but you could also be missing out on some.
[39:42] There are a lot other interesting things you can do. Another thing Ramit does. Is he will do things like he will ask questions live. Usually not questions, more like things he wants people to agree with. Like, “Have you ever feared X?” “Have you ever feared that a hacker could get into your server?” or something. And then, “If you have, let me know in the chat”. Then he’ll get a flood of, “yes yes yes” and it’s kind of like a psychological mass-confirmation thing. So I’ve seen that work.
[40:07] There are so many different techniques and strategies. I think ultimately, you need to have a way to excite people to attend. You need to have an event that is informative, educational, and more importantly ties really nicely in with the product you’re trying to sell. Finally, you just need to close the deal afterward.
[40:26] Mike: I think that’s all really great, sound advice. One thing that might be in the back of people’s minds at this point is that they may have a fear of running webinars. What are some of the fears that people might come across in trying to set up their own webinars. One that comes to mind I’ve seen other people mention before, is “What if I host this webinar, and nobody shows up”, especially if you have a live chat there where people can see how many people are in the webinar. I think with your implementation of Chatroll then, if everyone can see what everyone else is chatting, then that might be a very valid concern. What are your thoughts about that?
[41:00] Brennan: I would use some discretion in that. If only ten people register, I would probably not put Chatroll up, just because that means probably one or two people would attend. I think that would be a little of awkward. I think there’s room to tell people to tweet questions instead of having a chat box. That’s another thing I have seen people do, especially when they don’t have a chat element.
[41:23] Chat elements are good, but if you don’t have one, no one really knows. You could have one person watching live, or 1000 people. To the attendees can’t discern how many are attending, right? You can’t really fail. One person attending is not failure. It’s not the goal you were hoping to hit, but it still gives you practice and helps you build confidence so you can do it better next time.
[41:44] Even if nobody attends, you can just try it again. Figure out why people didn’t attend, you can reach out to people. Email everyone. One thing I like doing if you have a small list – I used to do seminars for my agency where we would basically do this, but offline at our office using seminars and networking. One of the things that worked really well when you have a smaller audience is to email everyone individually who registers and say basically that first email I mentioned – do that, but don’t do it as an auto-responder.
[42:12] Do it as a, “Hey Mike. Googled you and found your website. Awesome! It looks like you’re doing this really cool! Can’t wait to have you here. Can I ask you a few questions? I’m still wrapping up on the material I’ll be presenting on, but I want to ask you specifically, Mike Taber, some questions. I want to know what you’re looking to get out of this so that I can really tailor this event just to you.
[42:31] If you have a smaller list and you’re thinking the reception won’t be as big as you want it to be maybe- I’ve had 900 people attend live, so I couldn’t do that with them – but if you’re talking about a list of maybe a few 100 people, it might be better for you to be a little more personable and to actually turn off some of the auto-responders and write people manually.
[42:51] Mike: And the other thing you can do which I actually did was I went through the list of people who signed up for my webinar and I picked out different people to see what companies they were in – essentially using their registration email address from. Even people who registered with Gmail accounts I was able to backtrack through Reportive and identify people through LinkedIn and there were people who signed up from 25,000 employee companies, like Senior IT Auditor at a public company. It’s like, that’s a really good lead. I want to touch base with that person. Those are the types of things you can also do.
[43:22] Brennan: Right. I think it’s very valuable, both for learning – You’ll get to learn who your audiences. It’s just a lot more than just knowing you have 500 people on a list. It’s so much better when you know actually who is on that list.
[43:36] Mike: That leads me to the very last question. After people have signed up for the webinar, whether they attended or not, what do you do with those email addresses afterwards? Do you essentially add them to your main list? Or what?
[43:47] Brennan: That’s what I do. I’ve seen it work really nicely by having a P.S. segway in your last email saying, “By the way next week I’m going to be writing to you on (whatever your theme is)” and I want to maybe say “if you’re not interested in getting my weekly emails on consulting, just click the unsubscribe link at the bottom of this email”, and then by default opt-in anyone who doesn’t do that.
[44:07] Mike: Very cool. Well thank you for coming on the show Brennan. It was very educational and I think a lot of people are going to get a lot out of this. Where can people find you if they want to hear more from you?
[44:15] Brennan: Awesome. So thanks Mike first off for having me. I finally have a new centralized website. It’s doubleyourfreelancing.com. It has three plus years of weekly blog posts on consulting, along with all of my courses and everything else. It also has if you want to send me an email. The about page there’s a link to email me.
[44:33] Mike: Excellent, we’ll link that in with the show notes. If you have a question for us you can call it into our voicemail number at 1-888-801-9690. Or you can email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Out of Control” by Moot, used under creative commons. Subscribe to us on iTunes by searching for “start ups” and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening.