Episode 108 | 11 Software Startup Myths Debunked
[00:00] Mike: This is Startups for the Rest of Us: Episode 108.
[00:11] Mike: 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.
[00:18] Rob: And I’m Rob.
[00:19] Mike: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. How you doing this week, Rob?
[00:23] Rob: I’m doing good. I’m coming back for a week off for Thanksgiving feeling rested. I went to a cabin near Mt. Shasta in Northern California and I did a lot of thinking, a lot of thinking about what 2013 is going to look like, dove deeper in to those topics I mentioned in the last episode about growing HitTail by a certain amount, looking building some – a couple of info products and launching a new app. So, I kind of sort of diving in to those in creating some specific like outlines, plans, dates, that kind of stuff. There’s a lot of fun. I actually – it was so super relaxing to me because I feel like it lays out what, you know, now I know what to expect over the next 12 or 13 months.
[01:00] Mike: Very cool.
[01:01] Rob: How about you? What did you do for Thanksgiving?
[01:02] Mike: I stayed home. My parents came over to visit and had turkey and mashed potatoes and you know, the whole nine yards and I’ve got some more worked done on AuditShark and got all the tasks together to send off to my new contractor for AuditShark so —
[01:15] Rob: He’s a developer and he’s here in the state, is that right?
[01:18] Mike: Yup, so he’s working on the cloud side of Audit Shark which I haven’t put anybody else on that piece yet and I spent probably two or three hours working with him to not only get us some development environment setup but to make basically walk him through everything and I probably would have done that. It’s like a screencast that you just send it over to him because honestly I would want to reuse that in the future but I needed to help him get his environment set up because I hadn’t documented exactly what needed to be done to do that. So, now, I’ve actually got some of that information because I’ve go everything set up on my laptop and my desktop but I haven’t done it for anybody else. It’s been a long time so I’ve had to do it so I couldn’t quite remember exactly what needed to go in to it.
[01:55] Rob: So, he’s working on the cloud side which is like you said it’s more green field development that just kind of plugs in to AuditShark. What does that mean in terms of are you still looking to launch the second week of January to —
[02:04] Mike: Uh huh.
[02:05] Rob: And any updates since last week early access customers using it, have you made any progress on that?
[02:10] Mike: I talked to one early access customer and I had him go through and run a policy. I basically gave him a set of instructions and said, “Hey, why don’t you go through in to this and let me know what your thoughts are?” I made sure to phrase the e-mail on a specific way and not lead him and his response back to me he said, “Wow that was really easy.” “What exactly do you mean by that?” And he explained it a little bit and he’s a like, “You know, usually the stuff is a lot harder.” He’s like, “I expected it to be a lot harder.” So, it was really nice to see that because that’s exactly what I was going for because I worked with a lot of this type of software before in the past and I know how complicated it can be and it was just extremely easy for him to just go in and run an audit and literally, he clicked the button and within two minutes he had his results. It was – it was awesome.
[02:53] Rob: Well, cool.
[02:54] Mike: The real big thing is that now that I have – I’ve had a developer who’s been working on the client side policy builder and now I’ve got a developer who I’m putting on to the cloud side of things. I’m hoping that this works out. We’re going to do a 3-week trial to see how things go and then from there, we’ll make some decisions and talk a little bit more to see where each of us wants to go with it. And what I’m hoping is that I can basically hand off all of the technical stuff to these two guys and you know, I’ve already got all the client side stuff handed off technically and now, I’m looking to get all the cloud side stuff handed off, all that technical stuff handed off so that I can focus, you know, solely on the marketing and customer development and everything else.
[03:29] Rob: All right, well, good luck. So, are you still looking at getting the AuditShark out the door launched in public on January 14th?
[03:35] Mike: Right around that time, yes, so I know that there are certain things that are just not going to be working and you know, in terms of the policy, I know that I’m going to have to go back and forth with my developers over the next six weeks to make sure that everything kind of works from my end and I expected that there’s going to be things that fall a little bit short from where I would like them to be but that’s the goal right now is to have the product out there and launch publicly by the 14th of January.
[04:00] Rob: Oh, let’s move on to some iTunes reviews then, shall we?
[04:03] Mike: Sure.
[04:03] Rob: So, we got several new iTunes reviews, one is from Gerald Dees [Phonetic]. He says, “Excellent advice for any entrepreneur. I’m not a programmer and I don’t have a software or service business but as an author and entrepreneur, I get an incredible value out of the podcast. I love learning from the trials and successes that Rob and Mike share about their business.” Also, we have one from T Nguyen 444 [Phonetic]. He says, “Very informative this podcast and This Week in Startups are my two favorite. This Week in Startups is a high level and Startups for the Rest of Us helps with lower level attention to detail type information.” We got a few more I won’t read but the other one I like is from Eric Foster and he says, “Awesome, awesome, worth listening to every single minute.” Really appreciate your reviews and even if you don’t write a full review, would love a – just a 5-star rating in iTunes. What else is going on with you?
[04:51] Mike: Couple other things. So, next Thursday, I’ll be meeting up with Corey from the Birdy because I’ll be back in Brooklyn and I’m trying to get together a couple of people to meet up for dinner somewhere in Brooklyn. So, that would be fun. Hopefully, we can get some other people. I’ve had a couple of meetings around the country with other people just through the various travels that I’ve done. I had a meeting last night, actually. Some of my consultant work is going to be changed a little bit. And typically, I’m going on site and doing customer work for people but one of the customers that I work with wants me to start doing some of their e-mail marketing campaigns. So, that would be an interesting change of phase I’ll say because I can do it on my own time. I don’t necessarily have to be at a customer site and we’ll see where that lead. I think that there’s a lot of potential there. They definitely have a severely mismanaged e-mail campaign I’ll say. They’re not measuring anything. They have no idea, you know, who’s clicking on what. They’re not even using an e-mail service provider. Everything is going out through their ISP.
[05:42] Rob: Right.
[05:42] Mike: So, I’d suspect that not a lot of it is getting through it —
[05:45] Rob: Getting there, yeah. Well, it’s unfortunately a common mistake.
[05:48] Mike: What I’m concerned about is taking all those e-mails and putting them in to like MailChimp or ConstantContact and then sending out an e-mail and then having most of them actually get through and then flag to spam because previously they – have just never gotten there because a lot of the e-mail vendors, they will just automatically send it to spam if it comes from certain IP addresses and their IP address may have gotten flagged as a spammer so then they’re just going straight to the trash whereas if I move it over to like MailChimp and then send them out, suddenly, they’ll get through because it’s coming from a different IP address and then what’s going to happen. Am I going to get ban from MailChimp?
[06:23] Rob: So, I’ve done this before with a list I inherited and the first in a big paragraph at the top or a big first sentence that just say, “Hey, you’re receiving this because you signed up to receive them or you either a paying customer of X, you signed up on this URL to receive it. If you prefer not to receive any more of this, simply click this link right here to unsubscribe,” and give them the unsubscribe link right at the top because if they are going to click it, then let them do that rather than mark you as spam. I’d also set up a separate account. I wouldn’t use your MailChimp account. I set one up for this – this guy’s business. So, if it does get banned, that you don’t – you don’t also get banned.
[06:58] Mike: Right, I was definitely going to do that. The thing that I remember reading though was that I think that MailChimp also measures the number of unsubscribed and if it’s really high for a list, then they – I forget how they flag it but basically they take note of it.
[07:13] Rob: You’ll get an e-mail. They do but it’s not nearly as bad as spam marks. You definitely want people to unsubscribe rather than spam – rather than mark it as spam. We had a list that did get more unsubscribed than they liked and it was like – it was like if it goes over 1% unsubscribed, then it get upset and that’s fine but they basically e-mail. And I reply back and I said, “Look, here’s what we’re doing. We’re reviving an old list, blah blah blah.” And they were just like, “That’s fine, you know, just don’t – kind of don’t want to happen again. That was just a warning type thing.” So, that’s all they did because people unsubscribing, I mean that really doesn’t hurt anyone, right? It doesn’t knock their IP, you know, whereas when they mark it as spam, it actually like is a ding against their IP address and that’s why they don’t – I can — and that’s why they’ll ban you.
[07:53] So, the only reason they’re looking at people unsubscribing it’s a danger sign that people may start marking it as spam in the future is the thing. So, I wouldn’t worry too much about that. The other thing you could do depending on how big their list is, is you could break it up in to chunks. If it’s 5000 people, you could send like the first 500, the most recent 500 as one list and send it and see what happens and then work your way backwards because by the time you get back five years or [Laughter] you know, however long it’s been, the really early guys probably are going to – there’s going to be a bunch of bounces. They’re probably are going to be a bunch of mark as spam no matter what you do. So but if you kind of work your way that gradually, then you don’t really, you know, pollute the list right from the start.
[08:32] Mike: Got it. They have two different lists. One of them is about a thousand e-mails which is I’ll say much cleaner and they’ve been e-mailing that or at least they’ve e-mailed it at least once that I know of and the other one is around 5000 and I don’t know where it came from and they can’t really tell me. So, I’m really – I don’t know if I’ll even use it to be perfectly honest. I just don’t think it’s worth then.
[08:51] Rob: Well, the good thing is if you set up the MailChimp account, you put the 1000 safe — “safe” e-mails in there and send them a few e-mails over the course of several weeks or a month or whatever, then you can at least get that MailChimp account, get it some credibility, you know, so it doesn’t look like this is your first mailing out of that account. You at least had some successful non-spammy sense. Then if you go to the other list and just do the recent most 500 and see what happens, you at least have some – some credit in their bank of credibility so to speak. So, hey, I received probably the most sophisticated phishing attack via e-mail that I had ever seen. It was an e-mail comes and I’m checking on my iPhone. So, it’s mostly text. It has the exact subject line and all the text from an e-mail that I get from WordPress when I get a comment on my blog at softwarebyrob.com.
[09:42] And so, I’m seeing this comment and I’m seeing the post name and all the URLs and it says to mark it as spam, click this link. To mark it as, you know, approve it, click this link and the comment was junk, right? So, I click on mark it as spam and it opens up Safari on my phone and you know, you know, I just glanced through and haven’t really look at URLs but it sent me to a fake URL and it was all customized for my blog like someone made a specific, very specific attempt. This was not a mass attempt and the only reason I noticed it because they had an image wrong on the thing it was a broken image and I started thinking, “What is going on here?” But I almost like entered my credentials when I —
[10:19] Mike: Wow.
[10:19] Rob: It’s crazy and I went back to the e-mail, it was like list-9.com/rob/ and that’s what all the e-mails where. So, I think it was list-9 or something like that. So, it’s some funky URL and someone really went to – I’m assuming they scraped blogs from some list and then customized it but there was – I was shocked at how close it was to the e-mails that I get. You know, you get every – kind of everyday as you get comments, you need to mark. I mean it was identical because no way I wouldn’t – wouldn’t be fooled like some – by someone like that.
[10:50] Mike: How close for you to actually click in and putting in your credentials?
[10:53] Rob: Well, there were two reasons I didn’t. One was that broken image just made me a little suspicious and that made me look up at the URL because normally if I’m on my computer, my laptop, I’m going to see the URL. That’s like the first thing I look at but on my iPhone I don’t because they hide the address bar pretty quick.
[11:06] Mike: Right.
[11:07] Rob: I didn’t glance up. The other reason is that I don’t really know my credentials by heart and so, it wasn’t in Safari so I was going to have go in and get it out and I was trying to think do I really want to do this right now. So, that gave me pause and enough pause to sit there and work at it. So —
[11:22] Mike: Wow, that’s an – that’s impressive. I think that’s the way that a lot of these types of security attacks are going to go. I mean the password hacks and stuff have kind of fallen by the wayside just because it’s so much easier to get somebody’s credentials through a phishing attempt.
[11:35] Rob: Yeah, it’s that social engineering, right —
[11:38] Mike: Uh huh.
[11:38] Rob: … rather — run a correct password they get you to do that. It’s pretty crazy. So, any listeners, I would just keep your eyes out for stuff like that. I imagine that that has worked with people. It’s a different URL and that should actually raise a flag, right? If typically you’re able to just click and log in, that’s another thing to think about. So —
[11:54] Mike: I don’t know as a lot of people would catch that though because sometimes your browser cashes it and then sometimes it expires so you have to put them in again but if you’re using something like, you know, a password manager then typically you would not have to type it in. It would just cash it there and would allow you just to go right in and then when it didn’t work or didn’t do that, then you’d have to go look up your password and that probably will put you in the same position where that you were in where you said, “Oh, well, why is this not working,” or – then you start to look at it a little bit.
[12:25] Rob: Yup.
[12:29] Mike: Today, we’re going to be talking about eleven software startup myths debunked. So, I thought that we’d take some time and talk about it to people and kind of share what our thoughts were.
[12:37] Rob: Let’s dive in.
[12:38] Mike: So, the first one is if you own a business it mean you can never go on vacation and I think that part of this thought comes from a couple of different areas. One is looking at people who own companies like restaurants or brick and mortar businesses where there’s always customers who were coming in and out and you almost have to be there if you don’t have a manager and this is especially true for any sort of restaurant. You know, restaurants are notorious for like having these mom and pop shops where people don’t go on vacation for years and years at a time because if they do, the entire thing shuts down. And because software businesses are completely different because you can sell software from your website while you’re not actually there, it’s a completely different model. And this whole idea just does not apply.
[13:17] Rob: Yeah, I think with software, it’s so much easier to implement some process to systematize things obviously something we talked a lot of about on the podcast but if you – if you’re able to work on your business instead of in the business and you’re constantly thinking week to week what do I not want to be doing, what’s the most repetitive task here, you know, revisiting that and handing them off to either virtual assistant and just doing all the process stuff that we talked about. It is – I mean I got to be honest, I’ve taken more vacation than [Laughter] ever since owning a business than I did before. It’s a dramatic difference to not have the dollars for hour’s thing. Once you decouple – it actually takes a mindset shift once you decouple the hours you work from the money you make because I still have the mindset of like, “No, no, I need to work 40 hours this week,” but you really don’t and you can start cutting that back either on a week to week basis or you can take a lot of vacation. This is a good myth to bring up.
[14:10] Mike: Well, one of the things that I find is that even when I take a week off or two weeks off to work on my own products while I’m not doing consulting, what I find is that I’m not productive for eight hours even if I’ve got eight or twelve hours on a day to work, I’m not productive for eight or twelve hours. I’m really productive for like four or five but beyond that, I’m not necessarily as productive and it feels like I end up wasting quite a bit of time. So, unless I really buckle down and make a consorted effort to be super productive then I’m not going to be as productive and what that tends to do is it tends to essentially kill my productivity somewhere in the future.
[14:45] Rob: Yeah and the cool part about owning your own business is that you are then able to basically hyper focus on those times when you are productive. So, if you are a morning person, you can make that your work day, you know, you can work three hours a day, five days a week and that can be your whole thing. I mean if you literally get twice as much done in that time, then it’s like working 30 hours a week but you do it in – in half the time. Or if you’re more of a night person, you can do that, you can really structure a time and again, the entrepreneurs I know who – who do this well and who run businesses and are really have a good like work life balance, they understand when they’re – when they’re optimum working hours are, what causes them to be in that optimum working zone and when they find themselves and this something I do, when I find myself on HackerNews or Facebook, I just say, “I’m done,” and I’m going to walk away from my computer because there’s no reason for me to sit here acting and thinking like I’m working when I’m not actually getting anything done, you know, I want to actually rest and rejuvenate during that time.
[15:38] Mike: Cool. So, number two is that mailing list don’t work and are nothing more than spam and this is so false that I just don’t even know where to begin.
[15:46] Rob: Yeah, this is the classic developer mentality, right? It’s like, we, as a developer, we don’t like getting a lot of e-mail or we have this stigma against it but a lot of the biggest online businesses in the world are built purely because e-mail exists and they have massive, massive e-mail list. And so if you look at Groupon or you look at Facebook, even Twitter, the startup Foursquare, on Quora and any of these things, I mean they are constantly when you sign up for them, they are sending you updates via e-mail. It’s what engages people. This is the reason that my conversion rate on many of my apps has gone up substantially like by double digits both during trials as well as retaining customers, even taking visitors and getting them in to trials, all of those things are dramatically increased by getting an e-mail address and engaging customers in a nice way. It’s not about hard selling. It’s not about market, market, market. It’s about educating, providing value and engaging them and setting themselves that they actually want to see and want to open, you know, and even this is one of the reasons I spend more time now creating content for my mailing list, my Software By Rob mailing list than I do for the blog. I actually put more articles out on that in the last six months than I have – I have on the blog because there’s something just more personal and more engaging about e-mail.
[17:00] Mike: This kind of comes back to the conversation I had with the business owner a couple of nights ago where we were talking about this mailing list and I was like your entire marketing strategy behind this is completely mismanaged because people actually do want to get these e-mails and what you’re doing right now is you’re just not measuring anything and that’s got to be turned around in some way, shape or form and I’m like and I can help you do that if it’s something you want help with and he’s like, “Yeah, you know, I’d like you to take a look at it.” So, you know, we’ll see how that goes but that’s definitely I think something that people look at and they say, “Oh, I don’t want to send people e-mails because I don’t want to bother them and you have to bother them because you have to get in front of them but if you are providing them with something that they want, you’re not actually bothering them. They want to see those e-mails and it’s just a mental hurdle that I think a lot of people have to get over.
[17:43] So, moving on the third one is that I’m going to make either billions or nothing and a lot of people think that when they start a business and I think there is a realm of difference between these two and I think you have either one or the other you don’t necessarily have both. You either think you’re going to make absolutely nothing and it’s not worth your time and effort or you think that you’re going to make billions and it’s going to be an over night success and when it’s not, you kind of flip flop over to the other one where you’re like, “Oh, this is just totally not worth it.”
[18:09] Rob: The first time I realized it there was an in between where starting a software company didn’t mean I had to have a hundred million users was just completely shocking to me where I realize, oh, you mean, I can build a business that generates $10,000 a month that’s just software company that I can just be a, you know, solopreneur and kind of do what I want to do and as long as I keep these things in check and build an app that people want, that I can just build a business that – but basically is more of like a small business but as software as the core value of it. My mind was completely blown. This is not the impression that’s in the press, right, of any Fast Company, Inc. Magazine, Entrepreneur Magazine, all these things, they’re not talking about these businesses. These are the small niche B2B stuff that we talk about. I mean there’s a whole movement behind it and actually what’s cool is that there’s so much more to talk about these today, these in between businesses, these niche businesses, niche software businesses than there was even five years ago and there’s just so many more people exploring that and that’s exciting to me and a lot more developers are getting, you know, financial freedom and being able to quit their jobs and because of it, because there’s just so much more education and information available about this.
[19:19] Mike: Yeah, that’s absolutely right and it’s interesting to see those dollars just show up in your account when you’ve got something that you’re selling online because it’s not like you actually put in the time and effort, you know, that leading up to that check being deposited in to your bank. It’s no to say you didn’t put the time in to build the products and put it out there and do everything but it’s not as if there was a direct correlation between the time that you spent doing it and the time that those dollars showed up in your account.
[19:44] Rob: Yeah, it’s that decoupling of hours worked for dollars entering your bank account and it really does blow your mind the first several months of it.
[19:54] Mike: Number four is that “I have to do everything because I’m the one who understands how everything is supposed to work.” And I think this issue can be addressed by setting up various processes and procedures for others to follow. And I think part of this mentality comes from thinking that something that’s either too complicated of it’s going to take too long to explain to somebody else how to do it or you just don’t want to give up the control of it and definitely mental hurdles here to getting over this but I think the key is to find the right people for doing this type of work for you and if they’re not working out, then you need to find somebody else. You can’t afford to act like a full-pledged business that has lots of money to burn. If you’re trying something out and you hand some piece of work off to somebody and it doesn’t work out, cut your losses and move on. But that’s not to say that you should never try that again because it may just be that it didn’t work out with that person. You really have to test the waters a lot in order to figure out what is working and what’s not and if somebody else is making it work, then chances are really good that you can too.
[20:55] Rob: I really enjoy the story that Glen Germaine told us last year when he came to MicroConf. If you recall he had e-mailed in about having really struggling with the idea of hiring a developer. He said he didn’t have the money to hire a fulltime developer and he has a system that I recall it’s like medical – sort of medical billing or medical admin office automation type of stuff. And so it’s a pretty complicated software and he was concern that he would spend more time telling a developer had to do something than – than, you know, actually the time it would take and sure enough, he wrote in and we gave – we designed the whole podcast around it which I think was about – it was about hiring and managing remote developers and then he went and he hired one and it turned out really well. He was very detailed and did an excellent job evaluating but he hired someone through oDesk and since then, he’s just raved about it and he gave us the full story at MicroConf and then we – we talked about it later. But that’s the kind of thing. He did it right. He spent the time and found a right person from the start. The thing to remember is if you do pick the wrong person, it’s a learning process.
[21:54] And so, like you said Mike, if it doesn’t ring up the first time, it doesn’t mean it doesn’t work. It doesn’t mean that it won’t work, it just means that you have to give it another shot and you have to learn from your mistakes and get better the next time because this is the only way that you will actually be able to take that vacation we talked about earlier and that you will be able to grow your business is if you let go of these simpler tasks or the lower end tasks I guess I’ll say and I don’t – I’m not to say that development is a lower end task but it is something that’s easier to outsource than the visioning and you know, kind of the entrepreneur mentality of really directing the business. That’s the thing you can’t outsource. For everything else, I think slowly overtime, if you own a business 3, 5, 10 years you are going to want to slowly outsource more and more pieces of it. It’s a learning process like anything else learning how to do that effectively.
[22:43] Mike: And the one piece that you touched on there that I think is really important is that you can’t outsource the vision of what the product is suppose to become. You can outsource all the things leading up to it but you can’t outsource the vision itself because nobody else is going to have that insight and that’s why it’s so difficult to copy somebody’s idea because if there are actually visionary about it and they have in their head exactly what needs to be done, you can’t just look at somebody else’s business and copy it and expect to get the same results because there’s little subtle nuances that you’re going to miss.
[23:13] Rob: I think the one other thing I’ll add is early on in your business, at least this is the way I did it, I didn’t have a lot of money to pay great people. And so, I started off with cheap virtual assistants, cheap developers. They were inexpensive but that’s what it took to get the business off the ground. They were okay. I dealt with some headaches. I dealt people who were, you know, not ideal but it’s what it took to give me — I bought myself enough time that I was able to leverage these businesses and grow them up but what you can do is overtime you then – you can trade up so to speak. So, I had a VA who is – I always knew she was average but she was good enough and then I found someone who’s almost three times the cost that she is but this person is almost three times better. So, now, I have everything going to him and I’m just funneling all types of stuff. Now, it’s more expensive but I have the leeway to be able to do that and I’ve done the same thing with developers and designers and everything. It’s like you trade up overtime as you have the luxury of being able to do that and it then buys you even more time because you get better people who not only provide better results but they are just more reliable, they’re more consistent that answers many questions and that kind of stuff.
[24:21] Mike: So number five is saying, “I don’t know where to start,” or “I don’t have any good ideas about anything that’s never been done before.” And part of that is finding something that’s never been done before. If you’re looking for something that’s never been done before that is just an outright mistake because if something has never been done before, then how do you know that anybody is willing to actually pay for it and that’s one of those things that you really need to find out early on when you first start building something is to make sure that there is going to be people who are willing to pay for it. In addition to not having the ideas, it’s a matter of just asking people and you don’t want to ask them in a way that says, “Well, do you have this problem,” or “If I gave you X, would you be willing to pay for it?” What you really need to do is start focusing on what people feel are their own problems because when you talk to somebody and you say, “Would you be interested in a product that does X, you know, and solve such and such problem for you?” Well, of course, they’re going to be because you have phrase the question in such a way that is very leading.
[25:15] If instead you ask them, “You know, what sorts of problems are you having with your business or with your environment or with this or that just to describe some pinpoints. You start looking at the individual things that they’re saying and the subtle nuances of things that they might talk about. So, they may say, “Oh, well, I’m having a problem with my billing. I’m doing everything and sell and it’s kind of a pain.” And you may think oh well, this person needs a, you know, some sort of software that will do their billing for them but that may not actually be the pain. You have to drill in a little bit deeper and you may very well find out that it’s not that their billing system is a pain. It’s just that the person doing it is difficult to work with. So, unless you’re asking those in depth questions, you might start making assumptions about what the problem is and going down the wrong path.
[26:01] Rob: Yeah, I think there’s a progression of questions you have to ask because early on, you’re right. You want to ask – you want to find a customer group. You want to find out a common problem they all have, right? So if there’s 20 of them that you talk to, 10 of them or whatever, then you try to group that together and say what’s this common pain they have, then though I think you get in to the customer development side where you start saying, “All right, my hypothesis is they need an app that does this and in order for this to work, I need to charge 50 bucks a month for it.” So then you come back to that group and then you find others and you say, “Would you pay 50 bucks a month for an app that does this,” and if they say, yes or no then you say why. You know, you try to figure out what the salient points are, the feature it needs, you know, maybe something it’s lacking with the prices and all that kind of stuff. We definitely agree with you there’s that early space where you really need to just throw it out, throw up in here and say, and don’t lead them yet because you’re just trying to – you’re almost trying to do a brainstorming session where you don’t want to – you don’t want to introduce, you know, impurities in to the conversation.
[26:35] Mike: And that kind of leads us in to number six which is to build something that people want. Why don’t you talk a little bit about that?
[27:01] Rob: Yeah, so you know, I won’t say this is as much of a myth as it is only half of the equation. It’s a myth that this is all you need to do. This is to build a better mouse trap theory and we know that just building a product that’s better, it isn’t enough. You also have to be able to acquire customers for less money than they give you over their lifetime and I think that’s a key part that’s really missed in the discussion of building something people want. I love the quote because Paul Graham wrote an essay and it may – it was out there titled Build Something People Want and that was the salient point from it and now that’s thrown around all the time on Hacker News and in other startup circles. And I think it’s important but it’s half of the equation. There’s the entire marketing side that people ignore when they say this phrase.
[27:42] Mike: Number seven on our list is that passion is a competitive advantage and this is just not true at all either and the reason is because everyone has passion for the products that they’re working on especially when it comes to their first product but the fact is that passion for your product is just not enough. You have to be able to get over your fears. Be able and willing to go talk to people that you’re not necessarily comfortable talking to and that’s something I think a lot of people miss.
[28:06] Rob: Yeah, I mean there are a lot of ways to have a competitive advantage. I like to think that each person has a competitive advantage that – that really is something that they should leverage, just kind of their number one skill and so some people are awesome networkers. And if you have just a fantastic network and that’s what you’re really good at, then that’s your competitive advantage and that’s what you should totally leverage to build your app. If you have a real like an engineering mind and you enjoy marketing, you should combine those two and become, you know, an engineer-driven marketer and that’s more of like Patrick McKenzie is, that’s kind of stuff that I do, a lot of testing, conversion, improvements and I think you died head first in to that. And the other – other people just have a gift for product, right, design UX, that kind of stuff and that’s kind of their whole thing. They don’t really know a lot about the metrics and the analytics and they don’t care because they can build such a gorgeous product and they have at least some way to market it. And so, I think you really need to think about more practical things like that in terms of competitive advantages rather than something that is as ephemeral at passion because like you said everyone who’s building an app is passionate about it. So, it’s just not enough to propel your app in the success.
[29:15] Mike: Number eight is that you have to raise funding to launch a startup. And I think that the word startup has been seriously abused over the years. I read something recent from Paul Graham where basically he said, “The definition of a startup is this…” So, I think that there’s a lot of fighting about exactly what it means to launch a startup but at the same time, I mean the stuff that we’re doing on and working on I mean we consider them to be startups whether you want to agree with the definition or not. I mean you’re working on a software startup because it’s a — it’s an – basically a new software company. So, but raising funding is not necessary to launch a startup. You don’t need any money or whatsoever. Didn’t Patrick McKenzie say that he launched the Bingo Card Creator with $60?
[29:56] Rob: I think it was, yeah.
[29:57] Mike: There are definitely ways to launch a product and a company with very, very little money. You definitely don’t need to go raised funding and the fact is that raising funding is not necessarily going to be answer to all your problems anyway. In fact, it may very well create more problems.
[30:13] Rob: Right and I mean I want to be clear, we are no anti-funding, right. We’re not anti-venture capital. I’m anti everyone thinking that you need to raise angel fund and venture capital in order to do a startup, in order to start a software company, in order to launch B2B website. Now, I do know that there are cases where the only way you’re going to grow that and the only way you’re going to be scale it quick enough is with funding. What I’ve seen is that the more money you have at your disposal, the faster you can grow, period because you’re not waiting for your revenue to come in to then reinvest in a business. Once you have a flywheel in place, a marketing flywheel and you know that you’d just need to dump a bunch of money in to it and more will come out at the other end, then you really do want as much money as possible. And so if you’re waiting for one in $2,000 a month to come in to stuff it in to there, you would grow a lot faster if you had 10 or $20,000 a month to put in to that engine. So, once you are ready to scale, I absolutely think funding is an option for people but it’s not necessarily and if you don’t want to go that route and you want to maintain control, this is such, you know, something we espoused so much on this podcast is you don’t need it to get off the ground and certainly not to build a business that will support you and your family and your lifestyle in the way that you want.
[31:23] Mike: Yeah, and I totally agree with everything you said. I mean the one thing that you brought up was that we’re not anti-funding, it’s just that you don’t necessarily need funding and that leads in to number nine which is you need a co-founder. And I have the Single Founder blog but at the same time, I’m not anti-cofounder. I’m just anti the idea that you need a co-founder in order to succeed. So, I know a lot of people out there who are building these one-person companies that they’re the single founder of that company and they’re doing quite well and some of them will bring employee, some of them don’t. It really depends on what their goals are but you don’t need a co-founder to succeed. And in fact a co-funder, I mean I think that Paul Graham wrote an essay where he basically said that that’s actually one of the risks in having a co-founder that somebody you can fight with. He’s like one of the number causes of a startup failing is fighting between the co-founders. I just think that it’s very important to differentiate between having a co-founder is in some way is nice and some way it is not versus that you absolutely need one in order to succeed.
[32:25] Rob: There are obvious benefits to having co-founder, right? It gives you that ongoing mastermind group, it’s the ongoing support from someone you keep each other’s morale of and as long as you’re on the same page and you share the vision of the startup, then it tends to be a good thing. Now, it does mean you have to grow that thing twice as large to get the same type of pay out. So, if you’re going after a hundred million dollar evaluation raising funding, it’s kind of here nor there, right, because it doesn’t actually matter if you take home 50 million at the end of the day or a hundred million because you’re not going to be able to spend that in your life but if you are building smaller niche apps and you’re bootstrapping, it becomes a lot harder to be because you have to then pick a market that’s twice as big. You have to build your app to twice as much before you’re going to be able to quit your job. Well, it add some complications at the lower end, frankly of in common app size, you know, startup size. So, there are definitely positives and I can understand why people want to take on co-founders but in general when people ask “Should I,” I tend to say, “You know, if you’re asking that question and you don’t have someone already in mind, then I would basically stop this through this point if you can get it done on your own, then do that.”
[33:32] Mike: Number ten is that you just need one big break and your business will be huge. And this is another one of those fallacies that people think, “Oh, just if I get listed in TechCrunch or if I do this or if I do that, if I get on that podcast, then I’m going to get a lot of press and that would be the end of it and that will kind of push me over the edge.” And it’s really not about that. I mean what you’re really looking for is this incremental wins that build upon each other. I mean there’s a reason there’s a hockey stick growth curve and it’s there because there’s all these other previous wins that have to happen in order for you to start making up that growth and as you make those incremental wins, they build upon each other. There’s no one single thing that you can do that is going to just make your business huge.
[34:17] Mike: And number eleven is to scratch your own itch. And this really means building an app that you need and by definition, other people are also going to need that. And again, this is another one of those things that is not necessarily true and there’s a lot of people who’ll say, “Well, don’t sell to developers because they don’t pay for stuff,” “Don’t sell to designers because they don’t pay for stuff.” And that’s – those things aren’t true either. I mean if you’re selling something that solves a problem, people are going to buy it. That said, just because you have a problem does not necessarily mean that every one else has that problem as well. And it may be true but it’s not necessarily true. So, you really have to start looking at those types of problems that you’re having and ask other people if they have those problems as well. And if they do, then you may very well have viable products but and this also works in the reverse as well. Just because you don’t have a problem, it doesn’t mean that other people don’t see it as a problem.
[35:06] Rob: Yeah, this one the “scratching your own itch” I’m pretty sure it’s popularized by 37signals because they just built software internally and then started releasing it and other people needed it as well. That worked great for them. Obviously, they have a great niche business, people estimate brings in 20, 30 million a year, that’s awesome. The thing is though as overtime, you know, over the past 7 years since they launched Basecamp, everyone has taken that mentality. And so, you know, every business process that I can imagine for designers and freelancers and developers and small software shops and small, you know, small design shops, whatever has been built internally and released it with Fog Creek, right with FogBugz, with was the SourceGear did with their plug in to Visual SourceSafe back in the day. So again, you’re right. It’s not to say this does or does not work, it’s just it has been espoused as something that that’s what you need to do and that’s the only way you should build software.
[36:00] And if you’re not scratching your own itch and you’re not customer number one, then you’re doing the wrong thing. It’s just – it’s incorrect. I do believe that if you are customer number one, you do have an advantage because you do know your customers and you do know what the product should do. It gives you some insight but it’s absolutely possible and I’ve seen many people do it successfully to build an app that doesn’t serve you, yourself, you know, as you stand today. So, it’s like you said, you need to take this with a grain of salt and look in to it more. Then if you do have a need, that’s great but you need to then do more research to figure out who else has that need, how expensive are they to market to, what can you charge for this, is this then a viable product option just because you have a need in solving your pain, doesn’t mean it’s actually a viable product.
[36:44] Mike: And I think what you said there is – also important because if you are customer number one and you have already validated that other people need this product as well, being customer number one definitely helps you. I mean that’s – that’s a definitive advantage over a product where you’re not necessarily going to use it. That doesn’t necessarily mean it’s not a viable product. I mean you can certainly market and sell a product that you don’t use internally. It’s just that it’s probably not going to be as good as if it was designed by somebody who does use it internally in our regular basis. So to recap to eleven software startup myths, number one is owning a business means you can never go on vacation. Number two is that mailing list don’t work and are nothing more than spam. Number three is “I’m going to make billions or I’m going to make nothing”. Number four is “I have to do everything because I’m the one who understands how everything is supposed to work”. Number five is “I don’t know where to start or I don’t any good ideas about anything that’s never been done before”. Number six is to build something that people want. Number seven is that passion is a competitive advantage. Number eight is you have to raise funding to launch a startup. Number nine is you need a co-founder. Number ten, you need just one big break and your business will explode and number eleven, you should scratch your own itch.
[37:54] Rob: If you have a question or comment, please call it in to our voicemail number at 888-801-9690 or e-mail us at firstname.lastname@example.org. Our theme music is an excerpt from ‘“We’re Outta Control” by MoOt, used under Creative Commons. Subscribe to this podcast in iTunes by searching for startups or via RSS at startupsfortherestofus.com where you’ll find a full transcript of each episode. Thanks for listening. See you next time.