Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about 7 entrepreneurial blind spots. They outline some areas that people can overlook but can potentially cause issues down the road. This topic was inspired by a case study Mike is putting together on self-funded launch statistics to help people make better decisions for their business.
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Transcript
Mike [00:00]: In this episode of ‘Start Ups for the Rest of Us,’ Rob and I are going to be talking about seven entrepreneurial blind spots. This is “Startups for the Rest of Us,” episode 299.
Welcome to ‘Startups for the Rest of Us,’ the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing software products, whether you’ve built your first product or you’re just thinking about it. I’m Mike.
Rob: [00:25]: And I’m Rob.
Mike: [00:27]: And we’re here to share our experiences to help you avoid making the same mistakes we’ve made. What’s the word this week Rob?
Rob: [00:30]: Well I’m in Minneapolis, sir. I’m only one-hour time difference off from you now.
Mike: [00:34]: Very cool So now I don’t have to schedule things much later in the day.
Rob: [00:37]: That’s right. So it’s been fun. I just got here a couple days ago and you had mentioned that you’ve been to Minneapolis but this is really just my second time. I’ve been here for two days a couple months ago. And it’s a pretty sweet city. Obviously, you know the big thing everyone thinks of is the cold and it’ll definitely be getting cold here soon but, there’s a lot of really interesting things going on here. Really good culture; there’s good museums, great bands come through, and the food scene is really top notch. So far I’m a fan.
Mike: [01:05]: Well now that you’re there I can tell you about the time that I went there in the middle of January, and it was so cold that the LCD on my car literally took several minutes to light up.
Rob: [01:15]: Yes.
Mike: [01:17]: Because it just wouldn’t light up because it was –
Rob: [01:18]: That is going to be so much fun. It’s going to be awesome. You know I did a Connecticut winter and a Boston winter.
Mike: [01:23]: Oh, it’s so much worse.
Rob: [01:24]: That’s what I’m hearing. I heard that it’s colder here but less snow. Is that accurate?
Mike: [01:27]: It is. Yes, because when I was there it was god awful cold but, I mean there was very little snow. It didn’t snow much at all but it was just bitter cold, and when the wind comes through it’s just ridiculous.
Rob: [01:40]: I will be looking at what I can do to work out of the Fresno office for a few weeks there in January because it will be like 70 something there. How about you, what’s been going on?
Mike: [01:50]: Well, I’ve been going through the data migration that I talked about a little bit last week, where I had to move a ton of stuff onto new data storage system. And I kicked that off yesterday, right now it’s about 53 percent done it’s been running for, I don’t know, almost a full day at this point. So needless to say, babysitting something like this kind of sucks. It’s very distracting because if something goes wrong the whole thing stops, and then you have to go in, figure out what went wrong and restart everything and fix it. It’s just kind of a pain. But for the most, part I’ve only had to restart it once and everything else seems to be going pretty well. So hopefully this will be done by tomorrow and I can move on to other things.
Rob: [02:25:] I hate background jobs like this it totally keeps me from being able to focus on work. I keep checking it every 15 minutes, just to check on it, and that’s still like the worst way to be productive. Especially if you have something like you’re trying to write, or you’re trying to do something that requires some type of calm mind, that’s the worst.
Mike: [02:45]: It’s kind of interfering – I’ve got this other thing I’m doing right now where I’m trying to gather data for a study. And I sent out an email to my mailing list essentially to ask people to volunteer information for their self-funded products that they’ve launched, or that they’ve tried to launch. And the goal of this case study is to try and aggregate as much information as I can about different types of products that people have attempted; what stage they got to, whether they launched or not, how much customer development they did in advance, how much money they spent, how much time they spent, and whether or not they deem that as a successful product launch and are they still working on it today; what happened to it in the end.
And the goal of this is to be able to publish data around that so that people can make determinations about oh, I’m working on this particular type of product – let’s say it’s a SaaS app or maybe a WordPress plugin or something like that, and they’ve spent X thousand dollars, and four months of time on it. Is that normal for that type of product or is it in edge cases, is it an extreme. Or have they not done nearly as much as what other people have done? Because most people are kind of operating in this vacuum where they don’t know that type of information. So you get four months, six months in and you don’t know how to compare yourself relative to other products that have launched along those lines. And it’s hard to make decisions about whether or not you should keep going and push harder or whether you should walk away.
Rob: [04:08]: Remember the four to six month rule I used to throw out all the time. I was like four to six months of spare time is what you need to do to launch. Now that may not apply to what is being launched but I think that for morale, for most people that’s about the extent of what I’d recommend for a first timer, launching a product. Like if you go longer than that, you’ve picked something to hard, you’re not working hard enough on it, or you’re just going to kind of lose morale, you know, and lose motivation after that. I find it’s really hard to keep going six months of hacking away in your basement.
Mike [04:38]: I tend to agree with you but at the same time that’s a general feeling that is not backed up by fact or data.
Rob [04:45]: Right, it’s anecdotal. It’s like –
Mike [04:48]: Exactly.
Rob [04:50]: [crosstalk] a dozen people, but it doesn’t have a very high in for those who have done statistics.
Mike [04:53]: So I’ll link that case study in the show notes, in case anyone listening to this wants to contribute data to it. And I actually put in the case study at the bottom, you have the option to say hey, please make everything that I tell you completely anonymous. Or if you’re more along the lines of share everything, I may take some of the things that you send in and make a full in depth piece of the case study about that, just kind of a highlight of that. But I leave it up to the people who are kind of contributing the data to make that decision or determination based on how comfortable they feel about it.
Rob [05:22]: Very cool, so as you said we will link that up in the show notes. So the good news for me is there’s just been a lot going on the last few weeks with Drip. I mean now that the Leadpages acquisition has been finalized and announced, and we’re moving forward with actually taking advantage essentially of the vast resources that they have, we’re able to move quickly on things that have, frankly, been on my list for a long time. Some things that we’re going to be implementing in the next month or two have been like in my notebook for a year or two because they just required resources that we didn’t easily have access to, or it required to much money. You know it’s either too much support, too much money, or too much engineering time, or something. And now we just have the ability to take advantage of that very quickly because there’s just such a big team here, able to support us.
Like one example of that is, we launched a one dollar a month plan that supports up to 100 contacts. I don’t know if you remember if you heard Dharmesh talk about cheapium plan; like not going freemium but cheapium where you’re basically charging cost. And that’s the idea here i to get as close to free as possible but still keeping it reasonable. And there’s spam concerns and stuff. If you make a free plan you kind of have to have a whole team doing anti-spam stuff.
So anyways, this one dollar a month plan for full marketing automation, it’s unheard of. The tools that are comparable to us are one 199 bucks a month and up. And that’s where they start. There is one competitor who used to have like a nine-dollar plan but they pretty much, for all intents, discontinued it. So even they now are $49 a month and up. So even though this plan is loaded to a 100 subscribers it’s still a really interesting offering in the market. We think that not only can early stage people use but even people just looking to kick the tires. It kind of means you can just have a trial forever. Like if you just want to kind of try some stuff out on a simple thing, or see about the new workflow feature, or whatever, it’s like paying a buck a month to have access to it is kind of trivial. So when this goes live we will have announced it the prior week and I’m interested to see – it’s in a couple days and I’m interested to see the response to that. But, really excited about that.
And that’s one thing, again, that you can’t do as a bootstrapper because you can’t handle the support load because instantly just get way more trials and the revenues not there immediately to be able to support all those users. So that’s pretty cool. The other thing we did, which is just awesome – again this was something I’ve always wanted to do but needed the money is we were able to double our affiliate commission. We used to pay 15% recurring and we pay 30% recurring now. And right away we notified our affiliates and we just kind of got all these positive reflections. We’re like, man, if this is the stuff you can do when you have essentially Leadpages or more money or more resources, then keep doing this, keep going in this direction.
It’s exciting to be able to do that stuff because whether you come up with good ideas – sometimes you come up with a lot of good ideas and a lot of them are impractical because of lack of funds; or lack of design talent; or lack of developer resources or whatever. And just seeing things really open up. And that was the intent. Like we talked about last week and the episode where we dove in. That was really the intent. And to see two of them just come up right away and for us to be able to push those, it feels really good.
Mike [08:21]: That’s awesome. I really like the idea of having that $1 a month price point for somebody to kind of get their feet wet with Drip just because, as Dharmesh had said, it’s the cheapium it’s not freemium. But it kind of forces them to actually pull out their credit card, too. It’s one step up from a free trial or from that free plan. I think MailChimp used to have, and they probably still do; they have that 2,000 subscriber limit on a free plan but they will put their branding and marketing on there. And then for $10 a month you can pay for their 500 subscriber option. But the one dollar a month plan, that’s interesting. I like the idea of it.
Rob: [08:55]: Very cool. So what are we talking about today?
Mike [08:58]: Today we’re talking about seven entrepreneurial blind spots. And the idea for this show actually came about because of the case study I’m putting together. And it made me think about what sorts of other blind spots people either are running into that are obvious to them after the fact and they look back and they say, “oh yeah, I should have known that,” or they talk themselves out of seeing it as a potential issue because they just weren’t thinking about it or weren’t taking a step back to kind of evaluate their situation. So I wanted to outline a couple different places where people might run into an area where they could run into potential issues down the road if they are not thinking about those things.
Rob [09:34]: And numero uno is?
Mike [09:37]: And numero uno is, being an entrepreneur is more about the journey, not the goals. And this one actually came to mind partially because of you selling Drip to Leadpages. And one of the things that kind of comes to mind is that most people say I’m going to build a business and I’m going to sell it and I’m going to make tons of money and then I’m going to walk away. There’s actually a couple of different things in addition to that.
Most people don’t think about the fact that they probably have to stick around for a little while. But if your whole goal is to sell the company, when you get to that point, what then? What meaning is there in your life? What is going to make you happy beyond that? Because if that was your whole goal, if you finally achieve that goal, then what? What is your life really about at that point? So I think it’s more about understanding that if you’re not enjoying what you’re doing then maybe you’re doing the wrong things. And that your business goals are probably pretty important but they don’t necessarily define who you are as a person either. It’s really about getting to a particular place, and enjoying a particular journey as opposed to the whole focus is getting to that goal.
Rob [10:35]: There was a study done once on – it was med students who were going through medical school. And they found the people who hated medical school but were just doing it for that goal – I’m going to become a doctor, I’m going to become a doctor. Like once I get out everything will be good. That those people were extremely unhappy once they became doctors. There was some correlation there. Whether they just didn’t belong there, it wasn’t something they enjoyed and they were really being forced to do it by their parents or by societal scripts, or whether they were just naturally never going to enjoy the journey and maybe once they became doctors they were like I’m just going to retire. I’ve just got to make enough money to retire. But there’s a correlation there.
At the same time this one is really hard for me to embody. I am not a journey person. I’m very much goal-oriented and I would say, of the entrepreneurs I know, the vast majority, 80-90%, are goal-oriented. And so that’s why this is such a big blind spot. I have to remind myself constantly to take a deep breath and look around and say, these are the good ole days. You’re going to look back on this time right now in a few years and you’re going to be like, “man. that was awesome.” And truth be told I look back to the very early days of Drip with Derek hacking away on code. And he and I used to sit out behind my house by this koi pond and hammer away like that. I remember it just seemed so romantic and so fun, but it was tough work. I mean it was like we had no revenue and you don’t know if this thing is going to succeed. And then Derek and I in the office together, once we finally got an office, man I bet those days were cool. But it’s like they were fun and I remember then but, man, it was a lot of hard work. And there was a lot of stress of like is this thing ever going to take off. And then each step of the way, once the team got to about four or five, I remember starting to tell people this in like team meetings where like this is a really good time, drink this in, because being at this size, it’s a unique step. No company can stay this way forever. Drip’s not in this competitive space, not going to be able to stay like this. So we’re either going to get big, or we’re going to get acquired. We kind of talked or raise funding or something.
And there were different options there but, I think that is the one piece of advice that I would give based on this. About enjoying the journey; is just take time once a week to look around and think, boy we have it pretty good here. Like you’re not slogging away in a cubical for someone else, depressed at your day job, working a nine to five. To me that is the alternative to what we’re doing. And even though what we’re doing is and can be stressful, we are in control of it. In fact, even better advice; I was talking to Ruben Gamez from Bidsketch – this is seven-eight months ago, and I was like kind of burning out on stuff and slogging through email. There’s stuff that piles up. There was HR stuff I was handling; I mean just kind of everything. And he said why are you hating this, you’re the founder. You’re in control of this, make it change. Change this and make it fun, because that’s why we started our own companies; is so that we don’t have to feel this way. And it’s like sometimes it just takes someone to tell you that. To kind of snap you out of it and be like what do I have to do to snap out of this? And that’s actually when I hired Dawn, the assistant who then took a bunch of that stuff off of my plate.
Mike [13:39]: The second entrepreneurial blind spot is that estimates for anything that you’ve never done are going to be wildly inaccurate. And I think in my experience – and this is more anecdotal than anything else – but anything that you try to put an estimate on that you’ve never done before is probably going to take something like five times longer than you think it will and it will probably cost twice as much. And that’s true whether it is development costs, you’re outsourcing things, or trying to build a marketing campaign and you’re trying to determine what’s going to be your cost per acquisition for advertising campaigns; something along those lines. And anything that’s outside of your direct control is probably going to take at least two times longer than you think it is. Even if you’re trying to be a little bit cautious about what those estimates are you’re still probably going to be wildly inaccurate because you don’t necessarily have a good understand of what to expect when you’re trying to put those estimates together.
Rob [14:27]: So when I estimate and I was writing code, I got to be pretty good at it because I used to do it for fixed price projects. And so I got to where I would overestimate just enough that I was pretty accurate as long as something crazy didn’t come up. But that one took years of having bad estimates and having stuff not working. And so, for most people who don’t have to develop that skill, it’s just never going to happen and that’s okay. But, you then have to realize it, that you’re just kind of always going to underestimate. The problem is a lot of us just look at a high level thing and we say the feature is to add a page that does X. And into an existing app, if you just throw an estimate out – you can say “oh, it’s going to be a few days, it’ll be done in the next few days.” But until you sit there and even if you take five minutes or ten minutes on a piece of paper and you actually think through what are the database calls or is there anything beyond just some basic crud that I already have ORM for? Or maybe I’ll have to write custom sequel because that one table is big and I need to work around an index. Or maybe that UI’s going to be a little tricky. As soon as you start sketching it out it’ll start popping up of like man, that’s going to take a lot longer than I thought.
Because I remember in the old days someone throwing out I can build – a typical Web app, Web pages, it’ll take me like two to three hours. But then when I actually watch – because I was kind of being a product manager – it was a tech lead at the time. So I was coding and also looking at other people’s productivity. It did only take the person two to three hours to hack things together. But then it was almost double that in the discussion of what the page should do; going back and forth with the end user, in essence. There was kind of project management time; it was like circling back because there was a bug, so then you’d need another 30 minutes. Then there was CSS browsering incompatibility issues.
So just on and on and on. And it would literally be two to three times what just that initial two to three estimate was accurate in a sense, but it wasn’t the whole cost of building that page. The real cost was more like a full day’s work; six to nine hours. That’s where I think if you’re really going to bare bones estimate things, I think at two to three times multiple tends to be what I think about. Unless you find that you developed a skill and are pretty in tune with how long it’s going to take you to code it. It’s a lot harder to estimate for someone else. And I’d try not to do that unless I know them really well. Like Derek and I will estimate stuff together and I will throw out how long do you think it’ll take; two days or whatever? And we’ve worked together long enough that I know how he works. But if you don’t know someone, like a contractor, you’re going to be off by ridiculous valuations.
Mike [16:47]: I was just going to point that out; that all the examples and stuff that you were just talking about were all for your own estimates. But when you’re doing an estimate for somebody else, they’re skills are different than yours so your estimates or assumptions about what they do and don’t know, whether it comes to technology itself or familiarity with the code base, are going to be just off. It’s really hard to be accurate when trying to do an estimate for somebody else.
Rob [17:12]: In fact, I try to avoid estimating for other people. And if I were to have someone doing a project and they were developing or working on it, I would sit with them and help figure out what all the components were, and then I would ask them to estimate. And then, probably sanity check it again; like “what do I think I could build this in?” And walk it through to get an idea. Because, again, most developers estimate too low and that’s a problem. If they’re too high, you can talk about bringing them down. But typically they’re going to be too low. And I would almost encourage people to increase it at that point so we could get a more realistic view of when stuff will be delivered. Because that can create stress, right? That makes a journey not fun when you think something’s going to take a week and it takes two or three weeks and you’ve committed to someone or you’ve even committed mentally to yourself and then you just feel behind the whole time.
Mike [17:53]: That’s actually part of the data migration that I’m going through. I thought that it would take me a week, possibly two at the most. And here I am, almost four weeks later and it’s just kind of getting to the point where we’re pushing it out. So it sucks to be in that position but there’s only so much you can do.
This actually leads us a little bit into number three, which is you can only be productive on one or two things at a time within a given time period. By a given time period I mean over the course of several days or several weeks, not really within an hour or two. Because you really can’t multitask very well within that hour or two. But if you’re trying to do an estimate and you say this is going to take four weeks, that’s not the only thing that you’re going to be working on during that time. So that context switching back and forth between, let’s say, coding activities and marketing activities, there’s a cost associated with that. And it’s very difficult to be completely done with a particular task and then move onto the next because there’s always things that come back. There’s always bug fixes or things that need to be tweaked. Whether it’s a marketing campaign and just text on a page, or whether it’s actual code and a customer decides that “I need this to work a little bit differently, can you go in and fix this?” Well, if you’ve already moved on to working on your marketing campaigns, then you’re getting dragged back into the coding. And the reverse can happen as well.
So it’s really hard to just completely be done with one specific thing and move on. Those lines in the sand are very difficult to draw. So if you have two sets of things that you’re working on, one of them is maybe four weeks of coding and another one is four weeks of marketing tasks, chances are good it’s probably going to take you closer to ten or 12 weeks in order to finish both of those. Even though individually, the estimates are only about four weeks each.
Rob [19:26]: I think this is a type of multitasking. There’s kind of micro-multitasking, which is where you’re just sitting there and you’re checking Twitter and you’re checking your email and you’re bouncing around and you’re trying to write a blog post and you’re doing 20 things at once. Then there’s this macro-multitasking, which is what you’re talking about where you have too many high-level projects going on at once. And it is just chaos. There’s a couple things that I’ve started to do. You have to be a little bit in control to be able to do this. If you’re an employee and people are just throwing stuff at you all the time and you can’t control it, then it makes it harder. But I’ve tried to be extremely deliberate about picking what is – like you said, one or two – the highest priority things, and really digging into those. And then wrapping them up until they’re finished.
And it depends on the length of these projects. I mean if you’re trying to write code and do marketing it is hard because those are both ongoing things. There’s always more code to write, there’s always more marketing to do. But if you break it up into projects where like maybe for one-week marketing is just split test on the home page, and then it’s testing out some Twitter ads to a landing page, then those are kind of smaller projects and they may take a while to reach fruition or for you to be able to determine if they’re successful or not.
But as a founder it is tempting to start the split test, start running ads and then be like “wow, well I have some free time this afternoon so let me start two more projects like that.” But then once they do start bringing results in, it’s too many things to monitor. So it’s almost like don’t start that next thing that’s going to take a while. If you do have two hours that afternoon that’s free, don’t start another project. Instead flip back and either hammer out a blog post if you think you can. Like do something that you can start and finish in that amount of time. Something like a blog post I could see just taking an hour to sit down in front of a notebook and think about all the really good ideas. Almost take just a quick mini check-in. Not quite a retreat, but just a mini check-in of what are some things that we should be doing, what are our priorities, and do a high-level check-in like that. Or, hammer through email or just something that, again, you can start and finish in that time frame.
Mike [21:21]: The fourth entrepreneurial blind spot is being able to maintain your objectivity. And this revolves around being able to be objective about the ideas that you have or being able to question your assumptions. It’s very easy to fall in love with a particular idea that you have and assume that you’re correct rather than intentionally undertaking fact-finding missions. I think a popular name for this is confirmation bias. But I think it also involves some psychological components because everyone wants to be right. It’s not so much that you are looking specifically for confirmation of what your assumptions are, but you want to be right.
I think that those two things intertwine very closely, but I don’t think that they’re exactly the same thing. But the key point here is that you know that you’re no longer objective about something when you start to become defensive about the points that you’re making. So if you’re explaining how a product works or you’re working with a customer and they give you a bit of feedback, if you go on the defensive at any point during that conversation then you know that you’re no longer objective about it. And you really need to start taking into consideration the fact that they’re giving you feedback and you’re trying to be defensive about it. “Oh no, you should be doing this. This is how you would do it.”
There’s times where that’s an appropriate response, and then there’s also times where you need to take a look at what they’re telling you and realize that they may very well be representative of a large number of other people, and you’re so close to it that you can’t see that. You are seeing all these other possibilities, but because they’re seeing it for the first time they don’t understand it and you need to look for ways to help them understand it as opposed to trying to change that person’s mind.
Rob [22:52]: When we talk about how founders need to embrace failure or they need to learn to make mistakes, this is one of those hard ones. Because admitting that your idea doesn’t work or being open to it not working is a scary thing to do. And it’s really similar to feeling like you’ve failed. Especially if you’ve spent six months trying to come up with ideas and then you finally latch onto one and it seems like a great idea and then you get a ways in and kind of just bursts. It’s tough to admit that. So I agree. I think this is a blind spot many of us have, including myself. I found myself latching on too long to certain ideas.
Mike [23:28]: The fifth blind spot is around delegation and failing to understand that delegation is not the same as abdicating your responsibility for something. If you are delegating a task to somebody you’re still responsible for making sure that those tasks get done. You’ve simply become the manager for those tasks as opposed to the implementer. And you can go and delegate important tasks to other people. There’s a lot of people, myself included sometimes, that feel that if something is really important then you need to be the one to do it. And that’s not always true. There’s lots of things that you can delegate that are still important things.
One example of that is the bookkeeping. I mean that stuff has to be accurate. And you want to know how your business is doing and how much money’s coming in and what your ROI on the different customers is, and then different marketing initiatives you have. But you don’t necessarily need to be the ones doing those. And if you’re training somebody to delegate those tasks to, especially for small tasks, a lot of people will push that off because it doesn’t seem like there is enough ROI there to hand somebody a task when you’re going to spend almost as much time training them to do that particular task as it would for you to just do yourself. And people will quickly fall into this trap of doing everything themselves because it’s going to take too long to delegate that to somebody else.
And the reality is that you want to hire people for their decision-making ability, not necessarily for their skills. You want to be able to explain to them this is a high level of what I’m looking to have done, go do this and then use an iterative approach to have that come back to you. And you guide the output as opposed to dictating it or explaining every little nuance to it.
Rob [24:57]: It’s a learned skill. You’re not going to be very good at it when you start. I was terrible. And you got to dive in because you just aren’t going to be able to accomplish everything that you need to on your own. Even when I was solo and I had no employees and I had these tiny little apps doing a thousand, two, three, four thousand a month, I had VAs responding to emails; I had folks doing design; I had many contractors that worked with me. And again, when I first started I was terrible at. You get better at two things, one you get better at hiring so you get better people, and two, you get better at delegating. So it just becomes a virtuous cycle.
Mike [25:34]: The sixth blind spot, which I think afflicts a lot of people, is that you’re going to base the majority of your decisions on incomplete data. And there’s lots of different ways that this can manifest itself. It can either be in coding estimates or trying to figure out what you should do for a marketing campaign. And sometimes this leads to procrastination because you’re not really sure what you should do. There’s this desire to be right or to avoid being wrong. And very often that leads to making no decision at all because you want to make the best decision but you don’t have enough information to make that decision. So rather than making any decision you do nothing.
And this is very similar, I think, to the analysis-paralysis, where people have too many decisions to make and they don’t know what to do so they don’t do anything. But I think that fear of a particular outcome can also lead you away from finding the truth about a particular situation, and you’re not necessarily going to realize it. Or it’s sitting there in the back of your mind and it’s weighing on you and maybe it’s a source of stress and you just simply don’t do anything about it. I think a prime example of this is delaying talking to your customers because you’re embarrassed about a question that you’re going to ask them before you’ve even asked the question. And I think that’s probably a major factor here is that you don’t necessarily know what they’re going to say. You may have an idea of it, but you absolutely have to find out what those people have to say. They may surprise you. It may very well be good dues. But if you don’t ask those questions then what you’re doing is you’re really just making a lot of assumptions here.
And those decisions are going to be difficult to make if you don’t go out and find the data. And if you don’t have enough data you have to go ahead and make a decision anyway because these decisions are subject to change. And a lot of that change is outside of your control. There’s things that will happen that maybe you make a decision today, something radical goes on tomorrow and maybe Google indexes a bunch of things and your entire search engine strategy goes out the window. You’re going to have to change how you do things. And that whole thing is outside of your control, so waiting a few extra days, weeks or months is not going to make a difference. Google is going to move forward with whatever they’re going to do and you have to do the best you can with the information that you have.
Rob [27:32]: I really like this one. This was something my dad told me probably 20 years ago. He was a project manager for a large electrical contractor and I was kind of coming up on that path. And he told me very early on the majority of his job is making decisions with incomplete data. And so I think that if you’re listening to this and you haven’t had the experience of having to make a lot of decisions with incomplete data, or when you do you agonize over them and it takes you days, hours, weeks to make them, really think about how you can get faster at it. And the way that I improved upon this, this skill, because I was terrible at it at first and I would get paralyzed over things like – honestly we’d go to order pizza and I would sit there for like ten minutes trying to figure out which pizza I’d wanted.
And so there’s a few types of decisions, right? There’s really important decisions that are hard or impossible to change later. Those are the ones that you do need to agonize over and you need to get as much data as you can. Whether that means further testing, further conversations with customers, you really need to go all out to get that. The other decisions, the ones that are either like not that important like ordering pizza or setting what color the font should be in something, or the decisions that are easy to change later. So that might be important, but you can always change them if things go sideways. Both of those you should make very quickly.
And the skill is in learning to identify which of those three categories it fits into. And then recognizing that as you’re making the decisions. Again, I think it’s kind of a habit or a muscle that you develop to where by default think “boy, can I change this decision later?” And if I can, even if it’s important I just got to make the best one I can given the information I have. And that’s kind of been my mantra because I, personally, as more of a Type A person and someone who is – as I classically said, I’m kind of risk adverse and don’t like to fail and don’t like to make wrong decisions, this was something I really had to break myself out of a habit of because you move too slow if you agonize over every decision.
Mike [29:21]: And the seventh entrepreneurial blind spot is that making a mistake doesn’t mean that something isn’t ever going to work. It means that it didn’t work for you in that particular situation. And what I’ve seen is that if you look around at the entrepreneurial landscape there’s a lot of advice out there. And general advice is not always applicable to every situation. There’s always edge cases, there’s always exceptions. And I say always, I probably should say almost always exceptions and almost always edge cases. Because there are certain situations where that advice is simply not applicable. And it could be that the situation that you’re in, or the business that you have, it’s just simply not going to work for your particular situation.
That said, assuming that a piece of advice is going to work for you in your situation without testing it is often a mistake. You have to iterate through it, you have to make sure that it is applicable to what you’re doing and how your business is operating. And it’s common to take a look at something that you’ve tried and if it didn’t work out just assume that it’s never going to work for you in the future. And I’m not saying that you should or shouldn’t go back and do that again, but at the very least it should be something that you consider rather than summarily dismiss as we tried that and it didn’t work. Go back and take a look at the things; what is it that you did? Is there any new information you have? Because going back to what we said before, you’re making a lot of decisions based on incomplete data. And if you’ve done something, now you have more data and you can take a look back at that and say, “do I know more about this situation then I did before, and are there things that I can change or that I can tweak, and make another try at this and do better with it?”
Rob [30:51]: I always take general advice as a rule of thumb that then if at all possible to test and verify I do, like if we have the resources or if it’s something that’s easy to test and verify, I do. Sometimes you don’t. I mean you have to make so many decisions. Let’s say you’re just launching your app, you’re worried about pricing; you’re worried about positioning; you’re worried about copy; you’re worried about getting the code out and tested. There’s so much to do. You can’t test everything all at once. You just have to, at a certain point, email your list and see what works and kind of manually fix it. But for that, like when we launched Drip and when I’ve launched any product, I use the rules of thumb that I’ve developed over time.
And it doesn’t mean that it’s going to work for your case because you haven’t tested it yet. But it’s better than nothing. It’s better than a wild guess to at least start with some common knowledge. But then thinking as I have the resources, how much of this can I test? And if you’re going to test this stuff is to look at the high-level stuff first. You start with big changes in headlines or body copy, or big changes in pricing. There’s a lot you can do, especially if you even have a decent amount of traffic. And I think it’s really important to remember that that’s why all the podcasts and the conference talks and the blog post and everything, everything you read worked in one case, or maybe two cases. And even if it was a study, and let’s say it had 100 different SaaS apps were looked at, it’s still probably going to be more of like an average or a watered down version. And it still may not be the best practice for you. That’s the experienced marketers, the experienced founders that you’ll hear from that will tend to say this has been my experience but test in your own instance.
So to recap, today we talked about seven entrepreneurial blind spots. The first one was being an entrepreneur is about the journey, not the goals. The second is estimates for anything you’ve never done will be wildly inaccurate. And I would say even for things you have done, can be wildly inaccurate. The third is that you can only be productive on one to two things at a time. Fourth is maintaining your objectivity. Fifth is delegation is not the same as abdicating responsibility. The sixth is you’ll probably make the majority of your decisions based on incomplete data. The seventh is that mistakes don’t mean something doesn’t work. It means it didn’t work for you in that instance.
If you have a question for us, call our voicemail number at 888-801-9690. Or email us at questions@startupsfortherestofus.com. Our theme music is an excerpt from “We’re Outta Control,” by MoOt, used under Creative Commons. Subscribe to us in iTunes by searching for startups, and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening, and we’ll see you next time.
Episode 298 | A Startup Acquisition Story
Show Notes
In this episode of Startups For The Rest Of Us, Rob talks about the acquisition of his company Drip, by Leadpages. After finally closing the deal and making it public, Rob is able to talk about the thought process, negotiation timeline, and address some of the commonly asked questions about the acquisition.
Items mentioned in this episode:
Transcript
Rob [00:00]: In this episode of Startups for the Rest of Us, Mike and I discuss the acquisition of my startup Drip by Leadpages. This is Startups for the Rest of Us, Episode 298.
Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at building, launching and growing software products; whether you’ve built your first product or you’re just thinking about it. I’m Rob.
Mike [00:29]: And I’m Mike.
Rob [00:29]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, sir?
Mike [00:33]: Well, I’m in the middle of testing a pretty large data migration for storing the emails that are kind of on the back end of Blue Tick. So one of the things that customers have been asking for is the ability to see inside the application the emails that are being sent to customers and also the emails that they’ve received from them and whether those emails were sent by Blue Tick or whether they were sent kind of independently.
And because we have access to the mailboxes we can pull that information and display it. But obviously there’s some historical significance to a lot of those emails. So, if you sign up, let’s say today on Blue Tick and you probably want to be able to see the emails that you sent three months ago, six months ago to that person. So, we’re working on making those available inside of the application itself. And it just involves this massive data migration because it’s got to be done for every single mailbox and for every email that they’ve sent, which is “important.”
Rob [01:25]: Yeah, it’s interesting that when you’re building an app for the first time if you haven’t had tens or 100’s of users or you haven’t built something that has a lot of through put, you underestimate how hard it’s going to be to display this stuff and even store it long term. And just how large these data stores can get and how slow they get to query. So, I think by making this change early you’re probably getting ahead of the game here in terms of not having to do it once you have hundreds of customers and gigs and gigs of data.
Mike [01:53]: Well, we already have gigs and gigs of data to deal with. I mean there’s some where there’s like I was just running some local tests and I had to scale things down and say, okay, only deal with like 16,000 of these things because otherwise I would have had to deal with 250,000 and I’m just like, “No, I don’t really need to do that for just an initial testing.”
But, yeah, there’s just a lot of stuff that needs to go on. And I can’t do it all at once. It’s got to be kind of gradual migration for each mailbox which is kind of a pain in the neck. But it also kind of brings to mind that there are certain types of things where it’s easy to do when nothing is moving. And then if you have like a SaaS application where things are constantly being done or moving around or changing in the background, it’s almost like you’re a heart surgeon and the heart’s still beating and you still have to operate on it.
Rob [02:40]: Yup. Exactly. I mean I think that this is why some apps – I mean at a certain scale you just can’t do this anymore. This is why some apps that don’t add certain features that everyone’s clamoring for because it just becomes impossible to do. You know you can imagine being at, let’s say the scale of MailChimp with massive visiting, sending a billion emails a day or ten billion? I mean it’s like incredible the volume that they’re sending.
And so, while I’m sure people have been asking for automation and other features for years, you just at a certain point can’t do it and maintain the app and the throughput of the volume that you’re trying to do. And so, you have to make some of these decisions early because if you do hit scale, it can become a lot harder to do this down the line.
Mike [03:21]: You could probably do it if you were just saying, “Okay, let me toggle a flag in somebody’s account and allow them to do it.” But you still have to spin up API’s that are specific to that account and cross machines or cross data centers or something like that. And I imagine once you get to the point where you have to worry a lot about the scale and redundancy then it becomes even more challenging. And I can see how some companies would just say, “Yeah, we’re just not going to do that.”
Rob [03:45]: For sure.
Mike [03:46]: So, what’s going on on your end?
Rob [03:47]: Not much. Just hanging out. Nothing new.
Mike [03:49]: Nothing new?
Rob [03:50]: No. Oh man. I mean, I don’t want to underscore the importance in both my career and for Drip. And also the difficulty, the challenge of the last several month in that I haven’t been able to talk about what’s actually been going on with me. And I have two podcasts. I have a blog which I haven’t been updating because there’s nothing relevant that I could write about, because we were in the middle of negotiations for months, five, six months was just discussions with Leadpages. It feels really good both to close the deal because this big wave of stress kind of goes away, I started sleeping again, i started living more of a normal life.
But also, just the ability to just talk about it a little bit in public. And, obviously, I’m under NDA as acquisitions always are. Both sides are under NDA’s about specific terms and stuff. But there is still so much about the thought process and timeline and what went down that, I think, is good to talk about. I’ve always liked to share this kind of stuff because I think it helps other people. And that’s really what we’re going to do today. Kind of dive into probably the most commonly asked questions that I’ve heard since Drip was acquired by Leadpages about what, maybe, two or three weeks ago.
Mike [05:02]: So, for the people who may do exactly what I generally do for podcasts is skip the first 30 or 45 seconds. Setting the stage for them, Drip was recently acquired by Leadpages. So, could you walk us a little bit through kind of what the result of that is? Was it like HitTail where you’re selling it and you’re walking away? Are you sticking around with them? What’s going on? How did that happen?
Rob [05:21]: The fun part about this episode is you know the answer to every question you’re going to ask me, but you have to ask them to get the information.
Mike [05:27]: Yes, I feel like a futurist at this point. I’m going to say something and I know the answer.
Rob [05:31]: Exactly. So, yeah, I mean it’s a good point. This Drip acquisition really is more of a – it is a startup acquisition rather than a “sell your app” kind of thing. So, you know, I sold HitTail last November. And it was just the technology and the revenue on the website and the incoming traffic. And that’s where the value was.
And that is a very, very different kind of sale than what just happened with Drip. I think of it as selling an app versus a startup being acquired, like a fast growing successful startup being acquired, not for parts and not just for the people, which is an aqua-hire,not just for technology, which is selling your app; but the whole package. In my experience and my understanding that is definitely where there’s the most value to the acquirer. Those are the startup acquisitions where the purchase price is maximized because you’re not just taking people or technology. You’re actually taking it as a whole entity.
With a strategic acquisition like this where Leadpages – it’s an obvious fit. It’s obvious that Leadpages has landing pages and they collect emails. And the next step in that process is then to send email to people. They’ve always integrated with third parties and in this case obviously acquiring one like Drip is – it’s a pretty natural fit.
Mike [06:41]: Interestingly enough, that’s one of the pieces of advice that you might give to a single founder or a small startup where they have an existing product and they want to develop or launch a new product. And the question is, “Okay, well, what should we do?” And the answer is, obviously, try to leverage your existing customer base and launch something that is going to be complimentary to them. Or more valuable to them down the road.
So whatever the next step of their sales process is, for example, or more advanced features. And Drip really fits into that with Leadpages because Leadpages captures those emails and then you can use Drip to manage those email addresses after the fact. Now, you don’t have to use Drip but you could at this point.
Rob [07:20]: Yeah, and that’s been a big thing. Clay, who’s CEO of Leadpages, has talked about they’re continuing to integratewith all the other email providers and they want to be fairly agnostic to it so that it’s an open playing field for everyone. But there’s obviously going to be more that’s possible because now that Drip and Leadpages are owned by the same company, we can just do more things. You can do provide queuing and API’s and stuff that can just move more data easily than with a third party.
So that’s the thing. To take a step back, there are really two types of acquisitions. There are financial acquisitions where it’s based purely on numbers. And that’s like if you buy through FE International or you buy on Flippa. Those are the types of acquisitions I’ve been involved in.
And then there are strategic acquisitions and those are the kind where it is a strategic fit with someone’s or a company’s vision and their road map. When you look at Facebook acquiring Instagram, as an example, that was not a financial acquisition. They weren’t buying it for the revenue. They were buying it because it was a strategic fit into where they’re headed. It’s thus worth a lot more. Strategic acquisitions tend to have a much higher purchase price than financial.
Mike [08:26]: So, I guess on the concerns that some people might have, especially some of the customers that you have that are listening to this episode – because I think when you first started out with Drip, you kind of reached into your own network of podcast listeners and people who are in your network – one of their questions might be: what does this mean for me as a customer of Drip?
So, I guess maybe talk a little bit about that, because that’s something that you kind of have to take into consideration when you’re selling the product that you have. Whether it’s an acquisition that you’re just going to completely walk away from or you’re going along with. But you also have to take into account what’s going to happen to your customer base. Because you don’t want to make them angry because suddenly they’re no longer being taken care of. What sorts of thoughts did you have around that? And what sorts of things could they expect?
Rob [09:10]: Yeah. That’s a good question. Probably the first one that comes to most people’s mind. An early thought that I had and an early conversation that came about from it was – and Derek, who’s my co-founder with Drip agreed with this as well – is that I absolutely would not let Drip be acquired and have either the customers or the employees get a raw deal.
There are some startup acquisitions where startup gets acquired and it just gets shut down. I think Microsoft did this with Sunrise, which is a calendaring app. And I think Google does this pretty often, where they buy it for the team, they shut the app down and they integrate the technology into their own product. That, to me, hoses your customers who have invested their time and/or money into you.
There are certain deal breakers when you go into something like this. And it’s good if you know what those are. And so, I spent a lot of time thinking about what would I not let happen. What would not feel right to me. And one of them was if any of our employees lost their jobs through no fault of their own or if suddenly our customers couldn’t use the product. Because a lot of people are invested in this app, time and money, and I didn’t want that to happen. And, luckily, Clay and the Leadpages teams was totally on board with that. The whole point was them acquiring it in order to grow the product itself. They want to add more customers rather than shut it down.
And in order to add more customers, you need the team we have in place. Because even though they have a team, ours is specialized in Drip and we know, we have years of experience working on it and experience in the space. And so, that was something that I thought a lot about early on.
We’re fortunate that we’re in a position where I was approached by many potential acquirers. It wasn’t a few, it wasn’t several, it was many potential acquirers over the course of the past two years. And so, I wasn’t going to sell to someone who was going to do one of my deal breakers, who was going to go against that. And so, it was really cool that Leadpages was on board with that and, specifically, Clay was very supportive of that.
So, that kind of sets the stage of where I was coming from. The point of this acquisition is, I think it’s going to mean we can release more features faster; scale our infrastructure faster; and, even within the first couple days after this acquisition, we made a bunch of improvements to the acquisition in terms of doubling server capacity and doing all the stuff that we didn’t have the money for before. We’re bootstrapped, we’re profitable, but very cash limited as a result of growth. Typically, growing companies don’t have a lot of profit and that’s why companies raise funding is to help them manage this growth and scale and do all that stuff.
And so, it’s almost like being acquired by Leadpages allows us – you can think of it almost as we got funding through this – it’s like this indirect funding round without having to go through the funding rounds and all that stuff. We now have more budget to do interesting things. And there’s a bunch of stuff in the works. I can’t talk about that right now, but there’s a bunch of stuff in the works that we just plain did not have the budget to do.
And so, the goal of this – again, my deal breakers were: can’t hose our customers, can’t hose our employees. And then the goal of it – those are the negatives that I wanted to avoid – and then the upside or the goal of it was let’s grow this thing faster. Let’s build it bigger. Let’s do what large funding and large team can do for a product like ours, even though I personally and Derek as well, didn’t want to go out and raise a round of funding.
Mike [12:28]: So part of the goal of this acquisition was really to allow you to create more features faster and scale the infrastructure and provide a better experience and better product for the customers. That’s kind of what you’re getting at with what they can expect.
Rob [12:38]: That is the goal. And I don’t want to sugar coat it. It’s easy for someone to say, “Oh, we got acquired and everything’s going to be great!” I really do believe that and I wouldn’t have gone through with it if I didn’t, that kind of thing. I’ve done enough of these. I’ve built enough products; I’ve bought enough; I’ve sold enough that it was the opposite of a desperation move. If that makes sense. I genuinely believed the entire time and I still believe that this is – this or getting funding – was probably the right next move for Drip for it to be the best product it could be for our customers.
Mike [13:09]: Couple of things that you mentioned earlier were that there’s different types of acquisitions that can happen where – you mentioned Microsoft as an acquirer for Sunrise and they bought it and then shut it down. I think that there’s different viewpoints for that where a company will come in and they’ll just buy a product or a technology specifically for that one small piece that they want to integrate into a much larger suite of products that they have. And then they stop selling it as an individual product because they want to sell it to the suite and they want to sell it to enterprises.
And it’s interesting that this was much more of a boxed purchase, I’ll say, where they wanted the entire container. They wanted everything in it and they want to say, “Okay, let’s plug this entire block” as opposed to, “Let me just grab this one small piece of it or these ten people over here because that’s what important.” It sounds more like it was, “We want everything.”
Rob [13:53]: Yup. And it kind of makes sense if you think about what they’re up to. Leadpages announced publicly that it was, what 18 months ago or 2 years ago, they raised a big round of funding. It’s on TechCrunch, but I think it was 27 million or 30 million or something. And they said this is for strategic acquisitions. And so, it’s not a surprise that they would buy an email marketing company.
Mike [14:11]: Let’s talk a little bit about the timeline itself. I’m pretty sure you can talk about this because I saw it on Facebook and it wasn’t you that posted it, I don’t think. It was a screenshot of an email that Clay Collins had sent to you and it included the date, which I thought was interesting. So let’s talk a little bit about the timeline because right now it is July 13th of 2016. When was that email sent?
Rob [14:37]: Yeah, Clay’s first email was early June of 2015. So it was 13 months ago.
Mike [14:42]: So, it took 13 months for the acquisition to go through. Now was that 13 months of negotiation? Was it 13 months of legal work? Was it three months of this, six months of that? What does that approximate timeline look like?
Rob [14:45]: Yeah. The cool part about this is from all the research I’ve done and the reading and the talking to founders – I’ve talked to several founders who have been acquired. As soon as this started ramping up that’s where I went, was to try to get myself educated on this process. And the neat part is, my experience here or our experience getting acquired, I think is fairly typical. It tends to take a long time. It’s the dramatic exception to the rule when – again, Facebook buys Instagram for a billion dollars over a weekend – that just never happens. That happens once a year, once a decade. It’s just completely anomalous.
So for you to hear an announcement that Leadpages acquired Drip, everybody probably saw it on Twitter a couple of weeks ago and thought, “Well, that came together fast.” It actually was, again Clay emailing me 13 months ago, we emailed back and forth casually for a couple of weeks and then just kind of nothing happened. It was just radio silence. And then, I think it was in September/October, something else came up where we started talking again. And then it kind of just trailed off. We never got to a point where things got serious.
And then, I think it was November/December, things got serious again. And then we started talking more about some detailed points and how things might look. And you really started getting into the nitty-gritty. And then, eventually, there was another four or five weeks of silence. And so, it wasn’t until really until late January where things ramped up in a way that I would call active negotiations from then on.
So it was probably five/six months of pretty heavy negotiating. And I guess, to put a spin on that, it was more like three to four months of negotiating and then, the way it works is you sign a Letter of Intent. That’s what you’re negotiating upfront. And then you sign the Letter of Intent. And then you have due diligence which can be anywhere from – for companies it’s 45 days to 90 days or 120 days. They could be pretty long. As the seller, you want the shortest due diligence as possible and typically the buyer wants the longer one. But the range for startups our size would probably be 45 to 60 days.
And so, that’s when you get legal involved. It’s less negotiation. There’s still negotiation going on but it’s a lot more of like contract negotiation where you’re not negotiating these high level terms. You’re actually negotiating sentences and paragraphs in contracts. You’re trying to negotiate liability and who absorbs what liability where.
So that gives you an idea of how long this takes. And it seems like how could this possibly take this long? That’s really the question that came to my mind when I would hear these stories about – how can it take six months of active stuff? When I hear people saying it took a year, it’s like, yeah, but the first six months is really not that much time. But how does it take four, five, six months to close a deal? And now I understand.
Imagine you sell your house and there’s stuff going on constantly. There’s contracts going back and forth. And think about how much is standardized in a home sale. How that entire contract from the Realtor’s association is just done and everybody, generally, agrees on it. You don’t go through and read every sentence and red line that contract and go back and forth. Well, that’s what happens with acquisition because there are no standards. Nothing is standard. And so, every sentence and every deal point and every contract is essentially created from scratch. I know they use boilerplate and everything but they’re negotiated back and forth from scratch by the lawyers and the people involved. That’s why this stuff takes a long time.
And it can also take a long time to arrive at – you think about one point is price. And that’s the one that everybody puts on the press release, “It was acquired for this much.” But there are hundreds of other points to negotiate. It’s like, does the team stay on? Does the team have to move? How long do the founders have to stay on if at all? Well, what about stock options? Is the price paid all cash? Is there stock involved? What happens to different assets? Is it an asset-only acquisition? And it it…? On and on and on, and all of these things. That’s what takes the time, is negotiating and then once you’ve negotiated and the founders on both sides have shaken hands, it’s like, “Alright, those are the terms.” Now the lawyers get to put that into writing and that literally takes another couple of months just to sort that out.
Mike [18:48]: I remember talking to my attorney at one point about a couple of different contracts that we were working on and I distinctly remember he looked at one particular line. He was like, “That’s interesting. I’d never agree to that but let me put that in as boilerplate in some of my other contracts.” And it’s just interesting that because there aren’t really any standards to those agreements people are just kind of going on what other Edge cases or exceptions they’ve seen. And that’s really where a lot of these contracts come from, it’s like the Edge cases and the exceptions and the ways that different customers or – I don’t want to call them opponents – but people on the other end of the contract agreements that they have worked on have gotten screwed. And it’s just a matter of trying to figure out how can you get the best deal for the person who you’re working for and minimize the downside for it?
Rob [19:32]: Right. As well as be reasonable because there are certain things that you’ll throw in a contract and, in a perfect world, that would remove all liability and risk from you. And the other side would be insane to accept that. And so, at a certain point, both sides accept some time of risk, some type of liability. I mean, I’ll throw some crazy things like, what if we get into this and suddenly Rob gets killed, Rob dies from something? What does that mean for this whole thing? What does it mean for the deal and subsequent payment and all the terms of everything? It creates complexity and you have to sit down and think about that and talk back and forth. What does that mean for my family? That’s the kind of thing that lawyers have to think about. They’re anomalous. They’re not likely to happen. But if they do it sucks if you don’t have something in place to deal with that.
One other thing I want to add is throughout the timeline – and this probably a topic I will dive more into with Sherry over on ZenFounder – is I’m making it out like, “Oh yeah, it was a year and then five months of that was hard negotiation or whatever.” It was one of the most stressful things I’ve ever done. You’ll probably hear this over and over from people who were acquired. It was extremely stressful. And at the beginning I was able to continue to do my day to day work and run the company and do all that. Towards the end, it was pretty much my full time job. It was between 30 and 40 hours a week of what I was dealing with.
It’s really nice, to be honest, that I have the team that I do because those [?] were able to keep the company running. I just didn’t have the focus to push things forward and it was cool to see things still being pushed forward even though I was involved in a lot of phone calls; a lot of meetings; and a lot of getting documentation for the acquisition.
Mike [21:09]: One of the pieces of feedback that I had heard actually at MicroConf was there were several people who would listen to your talk at this most recently MicroConf back in April that they saw the talk and they said, “Oh, I’m a little disappointed because I’ve been watching Rob’s talks over the years and every single years he’s talked about the numbers and the snapshot of where he was at. And this year he didn’t.” Is that why?
Rob [21:33]: It’s interesting. It wasn’t why. I suppose it was probably good that I didn’t share revenue. But that was not the reason. The reason was – there were two things. I don’t like talking about revenue specifically. I don’t like sharing it. I feel like maybe that’s a whole other podcast. But the transparency thing can cause problems. And the people who are all into the transparency, I think you may want to go listen to the episode that I recorded with Josh Pigford a while back and how transparency came back to bite him in the butt. And it can bite you in butt in a lot of ways. One it can bring in competition who can much more easily replicate what you’re doing. Two, it can result in you not raising funding, VC’s – I’m not saying all of this are like this – but I know that some funders and some VC’s they don’t want all your metrics public. And it can impact acquisitions. Some acquirers do not want all that history up online.
And so, those are the reasons, to be honest. The reason for me was because stuff that I’ve released in the past couple years, intimate details of Drip has been – how do I say this? It has been commandeered and used to replicate what we’ve done and compete with us. And that had never happened at this scale. And so when I had HitTail or when I had these little businesses, DotNetInvoice, if people competed with me it didn’t really make that much of a difference. At the scale of Drip where we have ten people working on it and I’m paying people’s mortgages, the stakes are much higher.
And as more things started to come about that it was obvious had been used based on things I’ve been teaching and intimate details that I had exposed, I made a decision to do that less and to be a little more guarded about it. And I had long conversations with folks who are respected in the startup space and asked them, “Hey, why don’t you share this?” And they had similar stories of, yeah, I did that and then this happened.
It can happen to you eventually. That’s not a reason not to do it but it was my reason not to do it. I had hit the point where it made more sense not to share the revenue than it did to share it. And, in fact, at MicroConf I did give kind of a revenue range and said how many employees. And you can tend to figure that stuff out anyways. But, no, I didn’t give the big revenue graph. And there was definitely a thought process behind it.
Since I didn’t, like I said, I actually think that’s probably better in terms of the acquisition. It didn’t complicate things, but it probably wasn’t a major factor. I don’t remember it being a major factor when I put my talk together.
Mike [23:46]: So let’s move on a little bit to the thought process behind selling Drip. Because, obviously, there’s a lot of consideration that you need to put into the different components whether the employees are going to stay on or not; whether they’re going to move with the company. I think one of the biggest considerations is your family. Because you said that this was probably the most stressful thing that you have ever gone through. And I would imagine that it’s probably more stressful than selling your house. Because selling your house, hopefully, would only take a couple of months and once you find a buyer you can generally get those things straightened out in a month or two.
But with selling your company, that was 13 months of back and forth and ongoing stuff and you probably weren’t sleeping well near the end. That’s got to have some kind of an impact on your family. And in addition to that, there’s considerations for your family afterwards. So, can you talk a little bit about what role your family played in the acquisition and whether there were active discussions about it. Was there a lot, a little bit? Were they involved early, late? Talk a little bit about some of those things.
Rob [24:43]: Yeah, sure. There’s a lot to consider there. It was stressful and it definitely made me less pleasant to be around, as stress will do to most people. And that was a bummer. I think Sherry probably has a lot to say about that. I mean, if you’ve ever been through a really stressful time for an extended period of time, it changes the way you feel about the world and about yourself and about people around you. And it just puts you in a bad place. You can be in a bad place mood or whatever all the time. I don’t feel like it was that constant until closer to the end where things just really ramp up and they get really serious. It was something that I knew was a season.
Some people, when they’re just growing their startup, that’s how their life is. And they’re stressed all the time just building the company. I would not sacrifice myself for my company that way. I know founders personally who put on a lot of weight, as an example, because you’re so stressed and just eating like crap and they’re working all the time and they don’t have time for exercise. I know founders who’ve had divorces due to funding their company. I know founders who developed health problems and ulcers and that kind of stuff. And that has never been something I’ve been willing to sacrifice in order to grow a company.
In order to sell a company, I think that you are going to need to undergo a tremendous amount of stress. I think if you don’t undergo a large amount of stress, then you probably didn’t negotiate hard enough, is kind of how I feel. But I knew that there was a timeline to it. That was the thing. I knew that it would have to end within a few months. It did take longer than I had hoped but it did eventually close. And I had to be honest, the weight that lifted off my shoulders when that happened was tremendous. It wasn’t the same day. I remember it being surreal and just being totally in a daze for a few days. But the following week, as we started ramping things and I realized,boy, all that’s done and I don’t have to think about that anymore, my demeanor and my whole outlook changed. And I became back to normal is how I think about it.
So, there were definitely family considerations there. I had a lot of conversations – I had just a few conversations with Sherry early on and then as it got later and later and more stuff was being decided, especially – There was a decision at a certain point and like is it a smart decision to move to Minneapolis, which is where Leadpages is based. So Drips in Fresno, Leadpages in Minneapolis. There was genuinely a conversation of what is best for the long term play out of this deal. What makes Drip a success and what makes this acquisition a success for Leadpages. And so Sherry and I had a lot of conversation about that.
It’s funny, I think some people go into negotiations and they think, “I want to get everything for me, as much as I can. And I don’t care about the other party.” And I don’t go into negotiations like that. Maybe if you’re negotiating for a car, then yes. You just want the highest price, they want the lowest and you go. And you’re never going to see the person again. You’re never going to work with them again. In an acquisition like this where you know that you’re going to be working with that team and you respect that team and you respect the person on the other end, it’s less about maximizing everything in your outcome and it’s more about, in my opinion, maximizing the deal. Maximizing the benefit of this for everyone. And obviously you have your certain minimums, you probably have a minimum price. You probably have some minimum deal breaker terms – I won’t shut the product down, I won’t let the product have crazy features added to it, I won’t let my employees be fired.
But aside from that, it’s like the decisions of should we move and should the employees move were things of what’s best for the deal. And in the end we decided to move and the rest of the company totally had a choice. None of our employees had to move to Minneapolis and everyone was brought on as an employee of Leadpages. Some folks have decided to stay in Fresno or where they are, because we have remote employees. We have a guy in the Bay Area and a guy in New York. And then other folks made the decision that they wanted to move to Minneapolis. They ‘A’ thought Minneapolis was cool or ‘B’ thought being at Leadpages HQ would be a cool experience.
And so to go back to your original question, yeah, the conversations with Sherry were super helpful. Derek as well. Being my co-founder he and I talked a lot about deal terms. I talked a lot with FE International. David from FE was the broker on my side and he gave Derek and I from the broker’s perspective because he had been in investment banking and had done larger deals and so he had a lot of experience with that.
And then talking with Sherry was more about the mental side and it was about stuff that impacted the family because certain things did and certain things didn’t. Certain parts of the deal did and didn’t impact the family. And so, she was definitely helpful during that time for helping me keep a sanity check on things. Because you get so far into this deal and you get a certain lens you’re viewing everything through and it’s helpful to come out of a deal and then have a conversation and say, “Look, this is the situation. They’re asking for this. This is what I think.” And for her to say, “Oh, yeah, that’s totally reasonable.” Or, “No you’re way off base.” It was helpful.
Mike [29:16]: You mentioned that you’re going to be moving to Minneapolis and some of the members of the team had the option to also move. I would imagine that every single piece of that was probably negotiable. Because when you’re talking about an acquisition because there aren’t really standard terms for that stuff, some of that stuff probably could have been negotiated upfront for people or you probably could have gone back to them and asked them, “Hey, would this be okay with you?” But also, you’re looking at it from a holistic perspective of what’s best for the deal; what’s going to be best for the employees; and what’s going to be best for the company moving forward to be able to still do kind of what its core mission was. But the core question there is really is all of that stuff generally negotiable or is it something that you think that other companies might come in and say, “Hey, these are our terms, kind of take them or leave them”?
Rob [30:01]: Yeah, I think it’s going to depend on the acquirer and their goals. To answer your question, I think everything is negotiable and I just think that there are going to be certain deal breakers that certain acquirers have. Where maybe they say, “It is an absolute deal breaker if everyone does not move to our headquarters.” And then, as the founder, you have to decide is that something I’m willing to deal with? Am I willing to kind of force my employees to move and if they don’t then essentially they get laid off? That wasn’t something Derek and I were willing to do for sure. And the cool part, Leadpages never even asked because that wasn’t in their best interests either.
And that was a cool thing. Again, if you’re in a financial acquisition there is some alignment there but I think with a strategic there can be a lot more alignment and our goals for growing Drip and making it the best marketing automation, lightweight marketing automation app was in line. And we both have that goal still. A lot of that wasn’t hard negotiation. It was like, “Hey here’s what I think would be the best. The employees have the choice and it they want to come they can and if they can’t – some people just can’t do it due to family situations or whatever – then they don’t.”
That was a super easy point. It wasn’t even a back and forth because it just kind of was a no-brainer for keeping the company together. We already have remote people. It just made sense. But I can imagine getting into negotiations and having that be a complete deal breaker with the acquirer. And you’d have to ask yourself the question of are you willing to do that. And, again, for us, that would have been a deal breaker. That would have been an okay, we can’t do this deal. And so, if you have the luxury of having multiple acquirers who’ve approached you or if you’re talking to multiple at once then you can pick and choose the deal that works best for you.
And that’s really the position you want to get yourself into, is where there are multiple people because then you can stick to the terms that are most important for you.
Mike [31:48]: As you were talking through there, one of the things that came to mind was, I saw a talk by Eric Sink back in, I don’t know, it was 2011 or 2012 at the Business of Software. And he had talked about how sold his company, Teamprise, to Microsoft. And there’s a lot of parallels that I can draw from my mind from his talk to what it sounds like your experience was. It doesn’t sound like there was anything necessarily out of the ordinary.
Rob [32:12]: Yup. There’s a good podcast I’d recommend. If you are thinking about selling. There’s a good book called ‘Built to Sell,’ get that on audiobook it’s a quick listen. And then there’s Built to Sell radio which is where the guy who wrote that book interviews folks who’ve been acquired. And so there’s a bunch of stories of these real acquisitions. These are not the Instagrams and the billion-dollar blah blahs that are on the front page of Inc. Magazine or whatever. These are the more realistic ones where it’s a manufacturing company or retail company or service company or a tech company – there are tech companies in there as well. And those stories will really level set you for what’s more realistic. And in listening to those, that was also my experience, that Eric Sink’s discussion and then that our acquisition here of Drip was fairly typical in terms of the things that you have to sort out.
Mike [32:57]: So, I think I have probably two more questions for you. The first one is that you had mentioned that you’re going to be moving to Minneapolis to essentially work for Leadpages as part of this. So, what you said before was, the entire team is staying on and you’re sticking around with Leadpages. What sort of career considerations does that have for you? How do you justify going to work for somebody else as an employee after having been an entrepreneur for what, 10/15 years?
Rob [33:22]: Yeah, that’s a really good question actually. And it’s certainly one that I thought about. The one plus of having all this stuff take so long is you just have a lot of time to sit and reflect. You have a lot of time to think about what’s important to you and what you really want out of the acquisition and then out of post-acquisition. Because, that’s the thing, it doesn’t end at acquisition unless you walk away. And most founders do not walk away right at the end, either because they are required to stick around or because they want to stick around. Because, again, for the success of your product, there has to be some kind of hand off time frame. Can you imagine if the day that it closed, suddenly Rob and/or Rob and Derek were just not around Drip anymore? How would that work? I would have serious fears that things could go off the rails pretty easily. Like the wheels could fall off the cart because the two people who’ve been there since the start are suddenly gone.
Anyways, that’s how I think about it. I think for the long terms success of this, both Derek and I have to be around at a minimum, we’d have to be around for hand-off. And it’s not to say that no one else can run Drip better than us. Because certainly there are people who could take the reins from us at any time and be able to grow it. But the idea of the acquisition is probably shocking to some customers anyways and to hear that the founders also walked away would be a little jarring.
But I think, coming back to your question, which was how can I go work for someone else? The interesting thing – I talked to Clay about this, and I gave a lot of thought to it. Derek and I also went and visited Minneapolis and checked out Leadpages and the first thing is Leadpages is a pretty cool company to work for. And I’m not just saying that because I work there or because I’m going to be trying to hire engineers to work for us at Leadpages. But it’s just a fun environment. It’s not the crappy environments that I used to work at. You work for certain companies and it’s not very fun. You’re there either for the paycheck or the pension or whatever.
It was pretty obvious to me from our visit and from folks that I talked to because I knew folks who had worked there – who work there currently or had worked there – it’s a pretty fun company to work for. And so I figured company-wise I’ll be fine because I don’t have a problem playing well with others. I just never like working for companies that had a lot of red tape and, I don’t know, bureaucracy and politics and that kind of stuff.
And based on my conversation – you know, a lot of stuff comes from founder down or from CEO down – and in my conversations with Clay it was pretty obvious he wants to run a lean organization. I like lean, I like moving fast even though their company, now with the acquisition of Drip, they’re 180 employees, they operate like a smaller company. There’s way to stay lean and to keep moving fast because that’s the fun part. And so, that’s why where I saw it as a company-wide thing. In addition, I’ll continue to work with Derek and my whole team, who I really like. I mean it’s the best team I’ve ever worked with. And I’m able to work with Clay and, then there’s folks on the inside there. And everybody that I met, I really liked. And Derek felt the same way. We’d come back and I’d be like, “We met two or three people today and they were awesome. I would have no problems working with them.”
That’s always been my deal of working with people I don’t like. I don’t do very well with that. Working with people who aren’t on the same trajectory or have the same ferocity of getting things done. That always bothered me. And just the more people we met it was like, “Oh yeah, I cantotally work with this.” The other cool thing that wound up out of this was it wasn’t like Drip was going to be swallowed out and we were going to be distributed throughout the company where suddenly our engineers will report to the head of Leadpages engineering and our support people report to the head of Leadpages support. We got to keep the team together in essence, even though obviously we all work for Leadpages I still get to work very closely with the team.
And so, in actuality, not very much is changing here. Like me working for someone else, you imagine having this slave driving boss that’s like – I think Clay and I have this mutual feeling of we view each other more as colleagues. Just like Derek and I. I hired Derek as a contractor and then as a W-2 employee and then he became co-founder of Drip. But I’ve always viewed him as a colleague rather than some type of employee. And actually everyone on my team, if you ever hear me talk about the Drip team, when I introduce them at MicroConf or whatever, I always say, “Anna and I work together.” “Zach and I work on growth for Drip.” You’ll never hear me say, “Zach’s my employee” or “Zach works for me.” It’s just not how I think about things. I know in bigger organizations you need hierarchy and you need that stuff. That’s not how I personally think about things.
And so the cool part is it seems like Clay does as well. And so, all of our conversations it’s never been I’m going to be reporting to some backbreaking boss who’s making decisions that I don’t agree with. These are all things that have happened to me and all the reasons that I didn’t like working for other people. I like to frame questions. I realize this, I try not to be dogmatic about stuff. So I don’t say, “You should always bootstrap. You should never take funding. You should never sell your company.” That’s just not the way I think. And when people say that it bothers me because I don’t believe that’s the case.
I like to ask myself instead, I like to re-frame it, under what circumstances does taking funding make a lot of sense? Under what circumstances would selling your company make sense? Under what circumstances would working for another company make sense? And the answer may be never. There’s no circumstance. But I believe that there are circumstances where maybe you’re autonomous and you really believe that long term it’s the best thing for your employees and your customers. And you believe that you can be part of something really cool. And maybe there are other factors. For you maybe it’s a big salary. Maybe someone throws a bunch of money at you and that makes sense. Or they give you a ton of stock. I’m just throwing things out here. Any of these could be factors, but I think instead of thinking, “Boy, I’m an entrepreneur. I could never work for another company.” It’s like really? What if your boss was awesome and everybody you worked with was really cool and you didn’t hate the job and you got all these perks and the safety of this and that and healthcare and 401K and things you haven’t had for a long time?” I don’t know. There’s other factors into it and so I asked myself these questions. And I sat there in front of my notebook and I wrote all this stuff down. And as it turns out, it just made a lot of sense.
Mike [39:05]: Well, a lot of what you just said there kind of leads me to my last questions which is you probably had a choice as to whether or not to sell the company or to go out and raise funding. And, obviously, being in a position where you were profitable and you were growing the company, you kind of had that option. It wasn’t like your back was against a wall and you had no other choice. You actively chose to pursue the path of selling the business versus going out and raising funding. Why did you do that?
Rob [39:25]: That’s a good question. You are absolutely correct. I mean, aside from the cold emails that I was getting I’ll say maybe on a weekly basis – I don’t know if it’s that often but it’s pretty frequent – from venture capitalists and people looking to invest in equity funds and that kind of stuff. I have a network of people who are into startups and have money. I genuinely believe I could have raised an angel round or a seed round very quickly without a lot of hassle. And so that was something that we evaluated. Derek and I had conversations about that. Because, again, I never say you should never take funding. There are times when taking funding is a really good idea. If you’re growing fast and you know that putting a dollar in here gives you $2 or $3 on the other end and you want to grow and get big, why would you not? There are times when it makes sense.
And so, we evaluated that. And that was not off the table. We may have raised a round in the next six months, twelve months or whatever. There are some things to think about. It’s interesting, once you raise funding, you’re funding valuation is going to be tend to be higher than your acquisition valuation. So let’s just say you could raise funding at a $20 million valuation. You’re probably not going to be able to get acquired at $20 million today. It would be anomalous. It’s going to tend to be – I don’t know the numbers- probably half as much or a third as much. People actually writing you cash for a company versus giving you money based on funding valuations, they’re very different.
So, let’s say you did raise at a $20 million valuation. You can’t sell that company today for $20 million because the funding valuations are really high historically speaking. So as a result, once you take that funding you now have to grow the company to reach that valuation in order for your investors to even break even on their investment. So, if you raise funding you are signing up for three, five, seven years of just hammering on and growth and definitely growing headcount because that’s going to be a big part of why you’re raising the funding.
And so that was a question that Derek and I kept asking ourselves. Do we want to go down that road? Do we want to sit here and plan to go three, five, seven more years and to grow the company because we’re at ten people? On the trajectory we’re at, we’re going to be at 20 people on then 30 people. It’s kind of the natural way you have to go. In addition, there are situations where you do that. You raise that funding. You don’t take funding off the table. You don’t put that in your personal bank account. That goes into the business to grow it. So then you can go that three, five, seven years and if you get killed, if you go out of business, if you get acqua-hired at the end – because some acquisitions really are just a failing company and you get pennies on the dollar- if any of those things happen, you’ve spent many years of your life and basically walked away with almost nothing. And you could spend all that time grow a big business and walk away with literally nothing or hundreds of thousands of dollars which would completely not be worth all that effort.
So there is an advantage, if you get acquired at the price you want, essentially, that makes sense and the terms you want because price is just one of them; and you could also kind of have that funding. Like I explained earlier, we have the advantages of having these extra resources but there was also a fit for us in terms of the terms. And we are able to take money off the table. I actually want to quote Jason Cohen here, who I’ve long respected. He wrote a post called ‘Rich Versus King in the Real World: Why I Sold My Company’. And there’s a quote from it that I think is fascinating. It’s a really good post and it impacted me. He wrote it seven years ago, it was 2009. And just to add a little bit of context, to be king is to kind of run your own company forever and be king of the company. To be rich is to sell it and have money to live for the rest of your life, in essence.
And he says, “See, it’s good to be king but what do you do when you’re at Trudy’s North Star TexMex restaurant tucking into a chili relleno and the guy across the table looks you in the eye and offers you enough money that you never have to work again.” And it’s an interesting thing to think about. There are many paths here. And there are a lot considerations. And you’re going to have a lot of time to think about these things if whether from now until you get acquired or even if you’re in the acquisition process. And that’s probably a question that Jason Cohen just asked that you’re going to wind up asking yourself someday.
Mike [43:18]: I actually remember talking to Jason Cohen at a MicroConf over dinner once and he had talked a little bit about that. Because I told him, “Wow,” because he had mentioned that particular quote in his Business in Software talk. And he said that he had, basically, personal experience with going through that and he knew somebody who said, “Well, let me hang onto my company a little bit longer and grow it a little bit more.” And six months, twelve months later they were completely out of business and were left with completely nothing because they had chosen to go that path.
And I could see that happening if you decided to go get VC funding or angel investment or additional funding of any kind and then you grow it or something happens to the economy and everything just goes out the window. And then you’re left with nothing versus the situation he was in where I’m going to “take the money and run” but it was more of a calculated decision to, essentially, put himself in a situation where he wouldn’t have to worry about money in the future. And there’s really only so many opportunities that each person’s going to have to do that.
Rob [44:18]: That’s right. There are definitely limited opportunities to be able to do it. And the interesting thing is – I’m not even talking about, let’s say maybe you don’t run your company completely into the ground or you don’t get swiped by a competitor and go to zero. What if public SaaS valuations, as an example, they drop 57% earlier this year? There’s a Tom Tunguz article talking about public SaaS valuations and that does impact that ripples all up the chain. Because then venture capitalist’s valuation goes down, then acquisition values go down. And so, what it just that happens? Because right now there’s pretty frothy, there’s talk of bubble, there’s all that stuff.
I’m not saying there is or isn’t but per your own judgment what if we are hitting peak SaaS and things are going to come down on the other side and you can sell for a great multiple and get the terms you want? There’s something to be said for the bird in the hand. What if even broader? I’ve lived through several recessions. I remember the recession of ’93, it was a real estate recession. There was 2000, the dot com bust, 2008 housing bust. It’s 2016.
Again, I’m not saying that something’s coming here in the next six months or a year, but we do travel in cycles. The economy is a cyclical thing and we will have another recession. We will have one. Period. It’s just a fact. The timing is what’s in question. But for you to think that you can continue growing your company forever like it’s growing today, I believe is foolish logic. Because you are going to hit – let’s say a recession hits us sometime in the next three years. Those recessions can take a long time to pull out of.
So, again, you just have to ask yourself are you in this for the long haul? I did hear stories of several founders who didn’t sell – they got an offer, they didn’t sell, they decided to grow it – and then then they sold later but at half the price. So it wasn’t that they got nothing but they definitely felt like they had run their business over the top. And, again, I’m not making a comment on Drip. I don’t think it’s gone over the top. I actually believe that we’re going to – and I’ve already seen it – stuff’s starting to accelerate and everything’s continuing to go up and to the right. But I think this is something that the people don’t really think enough about in our space.
People get the vision of this founder who just goes and starts this and they’re just all about not selling their company. And so they look at Mark Zuckerberg. He started and never sold but it’s like, “Yeah but he made buckets of money from it. And he’s set for life, so he doesn’t have to worry about that.” And even like, let’s say Basecamp – formerly 37signals. They’re often brought up as an example of a company that they bootstrapped it and then they just run it forever. There are very few companies like that, by the way, that either don’t get really big, don’t get killed or get acquired. And Basecamp’s one of the few examples that I can think of of a company that’s not just on autopilot. Not some SaaS app someone has sitting on the side but an actual company with people working on it. It exists but it’s rare in a frothy space, I’ll add as well. Because if you’re in a niche, I think of like Moraware software. They are profitable in steady state but they’re in a very small niche and they kind of own the whole thing and it’s different than being an email marketing company where there’s 500 of them.
If you think of Basecamp as the counter example, even them, they got their big take home money when Bezos invested in them. He wrote a check, and I think it’s estimated – I don’t know if it’s public – but it was like $10 million or $20 million. And DHH said on an interview a while back, that was when he got his eff you money in essence. And so for them, to stick on, that makes sense. They were able to take that money off the table. And so they have different concerns then you or I, where you’re sitting there thinking, “I this fails, I’m back to square zero. I have to start something completely from scratch again after all this work.”
And it is, I think, a real concern that the folks should at least keep in mind. I’m not saying you should always sell if that happens or the economy’s going to hell in a hand basket or any of that stuff. But you have to ask yourself these questions, I think. And I don’t think they’re asked enough kind of in the mainstream press. And I think people have this romantic view that you’re going to keep your company forever or that everyone should be in it forever and I don’t think that’s the right way to think about this. I think there’s more realities that need to play into this.
In terms of Jason Cohen’s thing, he talked in that post also about he has enough money to pay for his kids college, to never have to work again. For everybody to be financially secure and like, that’s a good feeling.
Mike [48:19]: That’s the ability to buy your freedom, so to speak. Eventually, the longer time goes on, the more you’re rolling the dice. And, just like Vegas, eventually a house wins. Eventually, you’ll get hit by a bus or you just grow old and you’re not able to effectively run the business anymore. You just don’t want to or the economy goes down – there’s lots of things that can happen. So it’s a matter of risk versus reward. And when do you want to take the money off the table.
Rob [48:42]: Right. And some people do. MailChimps is an example of a company that just kept going. They never raised funding and they’re huge and they’re awesome. I really like Ben Chestnut. I have a lot of respect for him, the founder. And he has stuck with it for long term and they have seen all the recessions. Well, I guess they started in 2007 – so they saw the big 2008, 2009 dip and they’ll weather it through and they’ll be fine. And Ben will probably run that company until he retires. So there are going to be some exceptions to that. But I guess, from what I’ve seen, those are the rare ones. And he was able to – they got profitable. So, obviously, Ben Chestnut, as an example of probably doing really well for himself.
Mike [49:15]: But as you said, that’s an example of an exception and it’s not necessarily the general case rule. And I think that that’s something that people need to pay attention to when considering the risk versus reward for selling the business and taking that money off the table and setting up yourself and your family for the financial freedom. That’s part of why entrepreneurs do what they do. They want to build something for themselves and essentially profit from it. And if you don’t make the decision to do that at some point then what was the point?
Rob [49:44]: Yeah, there’s a lot to be said of that. A closing thought for me is, there’s a lot of considerations if you’re even going to evaluate this as an option. And I think the question to keep in mind is what are your true deal breakers. Not dogmatic stuff you’ve heard or you think always/never. What really are your deal breakers? And then, what is the ideal outcome? And if you can get pretty close to that ideal outcome where the terms of the deal make sense and you wind up really feeling positive about it at the end, I think that’s super important.
And I do. I guess, I’ll summarize by saying it’s been about two weeks I think since the deal closed. And I can say in all honesty, it has been really fun. I’m meeting a lot of cool people. Starting to just get work done, getting things done really quick. We’re ramping up hiring. We’re doing all the things that were harder to do as we were trudging along and I just feel like I’m excited. I’m optimistic about the future and I have a sense of personal calm that I haven’t felt in a long time. Because, of course, going through the acquisition it was – I wasn’t calm for even a few minutes at a time during that.
And so, I think that’s what I would advise someone, don’t take what the press has shown you. Try to be realistic about it and ask yourself what are your deal breakers and what are you really looking for out of all of this.
Mike [50:59]: Well, Rob, thanks for sharing the experience with us. There’re certain things that you can’t talk about but I think that everybody really appreciates the things that you have been able to talk about and the general process and things that you’ve learned going through that.
If you have a question for us, you can call it into our voicemail number at 1-888-801-9690 or email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from ‘We’re Outta Control’ by Moot used under creative comments. Subscribe to us in 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 297 | How to Charge for Startup Ideas (With Guest Ken Wallace)
Show Notes
In this episode of Startups For The Rest Of Us, Rob interviews Ken Wallace, of MastermindJam, about his new project Nugget. Nugget is a subscription based product that sends you startup ideas on a monthly basis. Ken talks about the origins of Nugget, some of the negative and positive feedback he got pre-launch, as well as his launch strategies.
Items mentioned in this episode:
Transcript
Rob [00:00]: Before we roll this episode of ‘Startups for the Rest of Us,’ you may have heard that my startup DRIP was acquired by Leadpages in the last week. And if you tuned into this episode to hear Mike and I discuss it, unfortunately Mike was on vacation this week. So this week is an interview with Ken Wallace. I think you’ll really enjoy it. But be sure to tune in next week and possibly for several weeks after, where I expect there will be a lot of discussion about the acquisition, the thought process. There was so much that went into it. It was months and months of conversation. In addition, we’ll be talking about the mental side of this, the psychological side, over on my other podcast ZenFounder at Zenfounder.com. So if you’re interested in hearing more about that, sit tight. That’ll be coming. But for now let’s dive into this week’s episode. In this episode of ‘Startups for the Rest of Us,’ I talk with Ken Wallace about how to charge for startup ideas. This is ‘Startups for the Rest of Us’ episode 297.
Welcome to ‘Startups for the Rest of Us,’ the podcast that helps developers, designers and entrepreneurs be awesome at building, launching and growing software products, whether you’ve built your first product or you’re just thinking about it. I’m Rob.
Ken [01:14]: And I’m Ken.
Rob [01:15]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. Mr. Ken Wallace, welcome to the show.
Ken [01:20]: Thanks for having me. This is amazing.
Rob [01:22]: Yeah, it’s awesome to have you here. So for folks who don’t know you, you’re probably best known for starting MastermindJam which has kind of the become the defacto recommended MicroConf and Startups for the Rest of Us service for finding other startup mastermind members. You’ve also been to several MicroConfs and you host The ‘Nights & Weekends’ podcast with our mutual friend Craig Hewitt.
Ken [01:44]: Correct. Yes. Sure. I’ve been to five MicroConfs actually.
Rob [01:47]: Indeed. Wow. Have they all been Vegas, or did you make it any of the others?
Ken [01:49]: All Vegas. Yeah.
Rob [01:50]: Cool. And you’re coming to us from Chicago, is that right?
Ken [01:53]: Yeah, the Chicago area. We actually live in northwest Indiana, so yeah. When I first started coming to MicroConfs, I was commuting the 90 minutes every day into downtown Chicago.
Rob [02:01]: And since then, you work from home now as well as with MastermindJam on the side?
Ken [02:04]: Yes. Correct. So full time working from home now, and MastermindJam. And then now Nugget.
Rob [02:10]: Indeed. And that’s what we’re here to talk about today. And the reason I wanted to have you on is I feel like there’s a lot of value in what you and Justin have put together in terms of doing something that may be counterintuitive to some of the common wisdom we hear about in blog posts. So when we were talking about this offline you said, “There’s common wisdom of like ideas aren’t worth anything, it’s all about execution.” And yet you’ve started Nugget, which is at Nugget.one. And so that’s Nugget.O-N-E. And, in essence, you are selling startup ideas. You’re selling access to new startup ideas.
Tell me about what you’re up to and kind of how you guys got here.
Ken [02:44]: Right. So, the selling access to startup ideas, we find that a lot of founders – a lot of entrepreneurs – seem to get stuck in a step. All entrepreneurs, I think, we have in common the knack of looking around the world and seeing a world of abundance, and seeing ideas everywhere we look. And the problem is how to pick one, how to validate one. And a lot of times entrepreneurs – especially tech founders -will pick one that feels interesting or feels close to home, but they don’t pick one that actually has a waiting customer on the other end that is willing to pay them money. So, what we do is we source ideas that are definitely from a person who is willing to pay money today to have this problem solved. And then we send those out to the paying audience. So what you get in addition to the actual business idea, you get a person that says, “I am dying to pay for this. I would 100% pay for this, or pay for it out of my own pocket if we could have access to software that did X, Y and Z to solve this pain point.” But then we also give you a community to help you execute on that idea and to clear the next hurdles that come up.
So, back to how we started. Justin Vincent – you might know him from the Techzing podcast – he approached me a few weeks ago asking if I was willing to help him out with Nugget. And he had kicked around a few other name ideas for this. But the point was one business idea every single day, and find a way to monetize it and find a way to really help entrepreneurs through this. Now Justin and I have kind of been – he’s been helping me out just kind of as a mentor maybe or a mastermind of two where we just kick around ideas for how to grow MastermindJam, and also kick around ideas for what was going to be his next business since he had a successful exit from Pluggio. And so, we’ve been talking for months. We met on another discussion forum, Discuss @ Bootstrapped.fm, where he posted an idea saying, “Hey, wouldn’t it be great if there was a service out there that matched people to mastermind groups.” And at that time I was maybe eight months into MastermindJam, so the sphincter tightens a little bit and you’re like, “Uh, oh. Competitor.” I was looking at him as not only a competitor, but he had just had a successful exit, he’s got time on his hands, he’s got some money in the bank, he’s going to eat my lunch. Like right away. So I reached out to him immediately, and I knew a lot about Justin from listening to Techzing and listening to some ‘Startups for the Rest of Us.’ The two podcasts have kind of had a good relationship for a long time. And then so we just kind of developed a friendship from there. Basically, I reached out to a potential competitor, I opened the kimono, I showed him exactly how MastermindJam worked, what the business was like, what the challenges were, what the hurdles were, what the vision was. And he said, “I love it. I love that business for you. And I don’t love it for me. So what else can I do?” And from that point forward, we were just helping each other out to find a good business fit for him. And he helped me out tremendously for MastermindJam pricing or for different business model questions. So that’s how we kind of became friends.
Rob [05:24]: Very cool. And for those listening, there might be MastermindJam customers or people who’ve considered using your service. And you wanted to be very clear that you are not shutting MastermindJam down and that you’re basically pursuing both ideas at once.
Ken [05:38]: Yeah, that’s correct. MastermindJam is really at a point where it’s largely automated. So all the processes that match people into groups just happens automatically. You sign up, you get it put in the queue and, based on your answers to the onboarding questionnaire, the computer algorithm basically does the rest. Really I only need to step in every week if there’s a problem with that, where maybe somebody’s answered questions in a really restrictive fashion so that the computer can’t really find them a match in a timely fashion. Or if there’s something going awry in a group and members need me to step in and help out. That’s really what I do for MastermindJam. So, on an ongoing basis, I had a few extra hours every week to help Justin out with this. So, yeah. MastermindJam can keep doing that, can keep growing. There’s still some things I’m going to do to help with marketing for that because as the MastermindJam business is, it’s almost like a marketplace where you need a certain traffic of people to make the thing work in a timely fashion. So, I still need to market that to make sure it’s viable for the people that sign up.
Rob [06:34]: For sure. Yeah, and like your – You know the headline on Nugget is, it’s changing but it says, “Receive a new business idea in your email inbox every single day. Receive a shiny business idea, receive a fresh business idea.” And so the idea is that you guys are, essentially, sourcing business ideas. And are they limited? Are they mostly, let’s say, like SaaS business ideas? Or are they software-based business ideas? Are they B2B, B2C? Is it filterable, or have you just focused on a single line, like a vertical?
Ken [07:01]: They are all over the map. The ideas are all something that can be approached with an online business. So it’s SaaS, or it’s like an ecommerce site. You know, something of that nature. Something that can be focused on online, and marketed online, and the perspective customers can be reached online. Those are really the only requirements to get through our gauntlet. The ideas range from an app to help parents find video games and mobile apps for special needs children. That was the one that just went out this morning. We had a food truck owner requested an app to help him locate where the upcoming events are in my community, “Where I can go to find foot traffic for the food truck.” These are all kind of like software ideas. There’s some biotech ideas, there’s some healthcare ideas, there’s some eBay auction tools, there’s some Amazon FBA reseller tools to help them track cost-of-goods-sold in their FBA inventory. Really, from day to day, all over the map.
Rob [07:55]: Cool. So you’re offering these business ideas and you guys have been live for how long?
Ken [07:59]: We went live last Monday morning at midnight.
Rob [08:02]: Okay. So you’ve been live for about a week and a half and your launch was –
Ken [08:05]: Yeah, June 28th, 27th.
Rob [08:06]: Yeah. And your launch was pretty good. I know both of you guys but I didn’t hear about it from you that you launched. I heard about it from the broader entrepreneur startup community. You were on Product Hunt I knew. You said you got on Ask Hacker News. There was something else. Tell us the story of like how that came about, and was this a carefully kind of calculated launch? You and Justin got together and said, “We’re going to kind of hack this and submit it to all these places”? Or did you stumble upon these thousands of visitors that you received on your launch day?
Ken [08:33]: About three weeks ago Justin and I got serious about this and we’re like, “You know what, let’s move forward with this. I think we can maybe make this work. The only way to find out is just to get it in front of customers and see what happens.” Justin and I both are in a situation where we both have day jobs and a family and a limited number of hours we can devote to this. So it kind of dragged on for about a week and a half. And I think I was the bigger hurdle. Justin could devote more time to it than I could. But the problem was I was the tech guy. So he kept waiting on me to get the site up, and get the messaging out.
In that process of getting all the landing pages up, and the logo on things, and trying to choose a tool to use as our membership site and our discussion forum. In discussions Justin had with his Techzing cohost, Jason Roberts, and also Jason and Justin’s friend Phil – who is also on their show once in a while – they were adamantly against the name Nugget. So they pulled Justin aside and just grilled him for about an hour on why Nugget was a horrible idea moving forward, there’s a lot of upside to changing the name. And so, they kind of – three quarters of the way – convinced Justin that we needed to change the name. So Justin got on slack with me, and this was here about maybe ten days ago now. He said, “Look, we’ve got to change this name. Jason and Phil cornered me, and they really want us to change the name and here’s all the arguments why.” And I’m like, “Look man, you’re in charge of the branding and a creative. I’ll go with it. I don’t think it’s a good idea. I think it’s a waste of our time. I don’t think our audience really cares about the name right now. I think they really care about solving those hurdles in their business. So, if we’re going to change the name let’s do it. Let’s make the decision tonight and let’s just get it done.” And then we spent many evenings in a row just trying to get everything transitioned over to the new name, the new logo; we’ll leave the placeholder on the old site so if somebody happened there they get redirected gracefully to explain the move. In the middle of all this, Nugget.one is still up collecting waiting list signups. In the middle of all this, somebody mentioned us on Ask Hacker News. And suddenly we have all this traffic, now, coming to the site.
So, previously it was six or seven hits a day, which were mostly Justin and I. And then suddenly we have 50, 60 people hitting us that hour. And I’m looking at the Google analytics thinking, “Wait a minute. Why is the meter pegged? Why are we getting so much traffic?” You track it back and it’s this thread on Hacker News. So I said, “Justin, we’ve got to stop and rethink about this. You can’t switch horses midstream like this. We’ve got this streamer traffic coming in and it would just be confusing to everybody; confusing to the people coming over, confusing to the original person that posted us. We need to rethink this. Maybe if this is a name change that has to happen, we do it later in a more organized fashion. But right now, this is like switching midstream. This is changing your name in the middle of your Super Bowl ad.” is the analogy I used. And so he’s like, “Fine. Fine. Let’s leave it as Nugget.”
Well, the problem with that is we had transitioned so much over. Now it’s, “Okay, put everything back to Nugget.” So we’re just wasting so much time on thinking about the name. So we finally get everything back, we’re going through the motions of doing all the testing that you do before a launch, and we didn’t really have a solid launch date in mind other than he and I were just kind of tired of not being live. We’ve got a lot of people that are signing up on our really simple landing page and we just wanted to know, we’re dying to know, how many of those people were willing to put a credit card down. We hadn’t asked them for money yet. A lot of people are always willing to sign up for Beta, but it doesn’t really matter until you ask them for money. So about 11:30, midnight on Sunday night, I sent out an email to a few people saying, “Hey, can you just double check, make sure the language is good, make sure there’s no bugs in your browser, that kind of thing.” Well, one of the people that I emailed with was Haydn Shaw. And Haydn shoots me an email back saying, “Hey, this looks great. It’s really interesting. Want me to post this on [Product Hunt?] for you?” And it’s just one of those moments where you’d really like to say no. It’s like in the pit of your stomach it’s like, “Uh, I don’t know if we’re ready for that.” But it’s like, “Yeah, go ahead. We would really appreciate that.”
The problem with that was at this point I still don’t know any details. I don’t know when he’s going to push it live, I don’t know. Is he going to do it right then? Is he going to do it Tuesday or tomorrow morning? I had no clue. So, the next morning – Monday morning at 8 a.m. – I get an email from Haydn, “Hey, I just put it on Product Hunt. You’re going to want to jump in there right away and start answering questions.” So, suddenly we go from, I think, up to that point in a week of having just the trial page up we had 180 people sign up for just the waiting list. Suddenly, that day 4.5 thousand people visited the site.
Rob [12:53]: That’s awesome.
Ken [12:54]: It was just off the charts. And suddenly, I had to actually turn off the stripe notifications because it was distracting. I would actually stop and try to look up the customer and just find out details about who could this possibly be. It was just distracting throughout my day job business day. So it was a good problem to have.
Rob [13:10]: It always is. The day that you turn off the trial notifications and the new sign up notifications. Awesome. Cool. So had you guys done any prior validation to this? I know that Justin had emailed me several months ago he asked my opinion and for some thoughts on it and I think he had a mockup of a PDF or something. But is that what you had done? You had emailed several people?
Ken [13:29]: Um-hmm.
Rob [13:29]: Did you have validation that like, “Yeah, you should move forward with this.” And got to the point where this launch started? I mean, we’re kind of working backwards at this point, but –
Ken [13:36]: He sent out a lot of emails like that and so did I. I talked to Craig on my podcast about it. Craig hated the idea [laughter]. I talked to the people of my Mastermind group about it. They loved the idea. I got a lot of mixed messages. And at the end of the day, we got enough positive signals that we thought it’s kind of like where there’s smoke there’s fire. And that’s what caused us to put up the initial landing page. It was a one-pager: “Here’s what we’re going to do, we’re going to send you this every day.” There really was no talk of a community. There was no talk of any other add-ons. It’s just like, “At some point we’re going to ask you for money, but here sign up for this.” And 80 people did. So that just kept giving us good vibes that this at the core there was something there that people wanted.
Rob [14:14]: Yeah, to get 180 that quickly it tells you that somethings going on here. Whether everybody’s going to be willing to pay for it or not is another thing. But at least you have some validation that there’s interest here. So you guys have had a lot of conversation about the business model, I suppose. I guess it’s always been – since I’ve heard about it – it’s been a monthly subscription. I know that you probably started at a low price and have moved it up. Did you give it to anybody for free, or has it always been a paying service? Talk about how you guys thought about that and what levels you’ve been at and whether that’s worked or not.
Ken [14:41]: Right after the initial landing page went up, I saw Paul Jarvis and Jason Zook launch emojibombs.com. And it was kind of a similar idea where – I can’t remember if it was daily or weekly – but they send you basically emoji that’s been personified into a character. And they send it to you in an email at $11 a year. You just click “Buy Now” for $11 a year we’ll send this thing to you. And I know the PDF he probably sent you is a lot more complicated than just this simple one-pager, “click here to buy”. So he was like, “You know, just to validate that this is right let’s put up that landing page.” So that was kind of like the start of our talks. It’s like, well if people are willing to pay $11 a year just to have something fun, would people pay $11 a month to get an actual business idea that’s actionable, and that they can actually take it and run with it; that’s been vetted and analyzed. Would they actually pay $11 a month for that? And so we sent that around to a few people. Like, for instance, [Greg Polumbo?]. He got back to me. He said, “Look, the idea is interesting. But at $11 a month do I believe that you’ve got a business idea in there that could potentially earn me five or six figures every month?” He’s like, “No, $11 feels amateurish for what you say your offer is.” And I’m like that’s interesting. So people really do attribute the potential value of the product – even before seeing it – from the price. And Justin and I know how much time we’re putting into analyzing these business ideas, but we can’t also charge for that time. So, it’s not like a one for one. This is a $1000 idea so here, pay us $1000. So we just settled on let’s start at $49 and we can test up from there. And for a few people on our trial-to-paid conversion list we can actually test coupons or discounts if we need to if that proves to be too high.
So before the launch day – “launch day” because it was all kind of unplanned – the business model changed a lot. So initially, for the first day that we had the trial landing page up, we said, “This is free right now, but it’s eventually going to be $11 a month.” And to those people – the ones that signed up – we offer it for that, because that’s the deal they saw. So we’re willing to grandfather them in at $11. But we quickly took down that offer and took away any mention of price just so we could see if we could communicate with people on the side and see what price points they’re willing to go to; $25 a month, $49 a month, is this a $100 idea? The problem is you get a lot of confusing feedback from people. You talk to my podcast cohost and he figured, “I don’t want to pay monthly for this. Because if your business is good that means I’m going to churn after two or three months. But if your business is bad, and after three months and I’m still paying this monthly fee and I haven’t found a business idea, I’ve got to ask myself why am I still paying. Because your goal is to give me business ideas.” So this is all good feedback that we’ve been working through.
Rob [17:25]: Yeah. That makes sense. Pricing is really hard. My two cents is I think making this truly a monthly business is going to be tough, and that probably you’ll want to go with just an annual upfront or – I don’t like lifetime, but that’s the concept here. It’s that someone really is kind of just paying to have access to this for an extended period of time. It’s funny, I was talking at lunch with some folks and I said, “You know, SaaS providers, if you look at a lot of them, they’re trying to go towards annual and all the WordPress providers who do annual they’re trying to go towards monthly.” It’s like we’re all trying to go for what the other guy wants.
Ken [17:56]: Grass is always greener.
Rob [17:57]: All the annual guys with a one-time fee, they want more flat revenue, whereas the SaaS know that the flat revenue takes forever to grow so we try to go for the big upfront cash payment, which is the annual payment. So, I think in the end there’s pros and cons to both and my guess is trying to go for a higher price point, but perhaps not recurring or really infrequently recurring like annual, feels like a better fit than trying to pay monthly. Because your churn is going to be – the same reason everybody points out – if your service doesn’t work, they’re going to church. If it does work, they’re going to churn. You’re in the worst position there.
Ken [18:30]: This was an endless debate, because we feel that – equal to the value of the actual ideas – we feel that maybe the ideas are almost a hook to get you into the community to get you executing on the ideas. If that makes any sense.
Rob [18:41]: It does. And I think if you’re able to monetize either a community, or you’re able to add add-on services or if there’s anything else there –
Ken [18:48]: Exactly.
Rob [18:49]: – this could be killer lead gen. But you’ve got to get that stuff going.
Ken [18:52]: Yeah, come for the business idea, stay for the – It’s almost like a masterminder, the community that’s helping you accomplish your goals.
Rob [18:59]: And what’s funny is I was looking back. So Justin had emailed me May 9th, which was about two months ago, and he had sent a PDF of this. And I sent a few different responses and I said, “I think this idea might have legs the way you’ve presented it. It will have high churn but that doesn’t mean you shouldn’t do it, because if you can get it running you can start add-on services like landing pages and courses on building and launching and I think you should go for it.” And then I replied again and I said, “Oh, and by go for it I mean don’t write a line of code but get ten people to commit to paying you $50 a month for it. And then launch the damn thing manually and see how it goes.” And so, that’s kind of where you ended up. It’s kind of funny.
Ken [19:31]: Well, we had a long discussion about that too, because originally we thought, “What about $9.99, because nobody’s going to churn at $9.99 if you’re seeing business ideas coming through right. Because it’s kind of a fear of missing out kind of thing.” And it’s like Rob advocated $50 a month, so $11 is still more than $10. Your email kept pushing us higher up the value chain.
Rob [19:53]: Yeah, what a trip. I remember thinking about this and thinking the way that a lot of us would – gut feeling – we would want to make this cheap because you think, “Ah! Business ideas. They’re a dime a dozen.” But I think what you’re providing – from what I’ve heard. I haven’t used their service, but from what I’ve heard the vetting and kind of the depth that you’re going into with these ideas is far beyond just a two sentence summary of something in an email. And I think there’s a lot of value there. And even if you have one fifth of the customers, if you’re charging five times more I actually think you’re going to be better off, unless you really are going for a volume plan and doing up sales later. But if you’re going to make money from it, I feel like there’s value here. Speaking of that specifically, talk a little bit – like maybe one example of – what is included in these emails. Because when I heard – I think I heard you explain it on ‘Nights & Weekends’ – I was surprised and impressed with the level of detail that you’re going into and kind of the resources and the research and the other stuff that you’re including when you get this idea.
Ken [20:49]: Well, the one that went out just this morning I spent three hours on it. We give the industry it’s in – or the niche, whatever you want to call it – whether it’s B2C or B2B. We give you the original user – we call it the “user submission”, but you can think of it as a user story – the actual unedited “I really wish this pain were solved” text that we got from the potential customer. And then we go into our analysis, and we try to do kind of a who, what, and how with the analysis. So who is this target audience? Where do they hang out online? Are there ways to find them? Where are their forums? Where are their communities, Facebook groups, whatever? We look at the what. What is it they’re asking us to provide? Is this technologically feasible? Is this something that’s easily achieved or you need a huge funded team? Are you building Uber or are you building a new WordPress directory? What end of the spectrum is it on? And then we talk more about the how. We dive into the how of like you want to look at these competitors and these other technologies in this space. And so, we do kind of a really thorough kind of run-down of what questions you’re going to have before you would dive into even looking more into the business. Like, “Who are my potential customers?” How you’re going to achieve the technological hurdles that we describe. And then we have usually at least three or four – but the one last night had eight or nine – links of resources that was like must reading after you read this references from what we talked about.
Rob [22:05]: And so a question that might come up in someone’s mind is, so you’re sending these business ideas out and there are tens, hundreds or perhaps eventually thousands of people that are going to be getting these. Are they less valuable – or I would say they are less valuable if a bunch of people start them all at once. Do you have any mechanism to keep 20 people on your list from snatching one idea and running with it?
Ken [22:26]: This is one thing that we’re experimenting with. When we launched we had three pricing tiers. We had the free trial, then we had the middle tier which was the standard $49 a month or a yearly for $490, and we had the higher tier which is advanced access to Nugget. So you’d get the business opportunity seven days before anybody else saw it. That was $97 a month. We hit 2000 MRR in the first two days of launch because we had people signing up for all four of those paid plans. We validated that those numbers work, that people are willing to pay all four of those plans – the $49, $490, $97, $970. And so what we ended up doing was realizing we, at the time, didn’t have enough of these ideas in the queue to start giving people advanced access plus having the normal stream of people. And it was splitting our time in a way that we didn’t want to do. So we downgraded all the advanced access people to regular paying. So that totally adjusted the revenue curve right there. So everybody that signed up at $970 or paid for the year of advanced, they got downgraded to the normal plan.
So right away we were in conversations with those people that signed up for advanced access. So now we know, this guy signed up, he wants to see all these ideas before anybody else. So you reach out to him. “Why is that? Why do you want to see these ideas?” For a lot of these people, they said, “I don’t care about the community. I don’t want anybody seeing an idea before I get to. I want the opportunity to skim your database of ideas, cherry pick the ones I want and have exclusive access to it.” Almost like on Getty images or istockphoto, you can have exclusive rights to an image. Same kind of deal. So we do have an audience that wants that. But on the other end of the spectrum we have an audience that doesn’t care as much about the ideas and they really are begging for the community, which leaves us kind of torn. For instance, before you and I got on the phone, Justin and I had a 40-minute call with a customer just to talk about that, because he was really excited about the community and kind of ho-hum about the ideas.
Rob [24:18]: What a trip. So you’re split there and I’m wondering – I mean, I’m intrigued by someone willing to pay for exclusive access, because could it be something where everybody pays $49 a month and that’s kind of the entry level and then you see how many views certain ideas have had – or all the ideas – it shows 50 people have viewed this idea. And if you want to buy exclusive access which basically removes if from the database from then on, you pay a one-time fee of however much. $50, $100, $200 depends. Is that something that’s been discussed?
Ken [24:50]: Yes. We’ve been not only discussing that anytime a customer comes at us saying, “Hey, you should do this.” we’re like, “Great. How much would you pay for that?”
Rob [24:56]: Yeah. Totally.
Ken [24:57]: Because here’s the stripe link. That kind of thing. We had one customer say, “You know, I like the idea but I wouldn’t pay more than $3 a month.” And it’s like, “Well, thanks anyway.” Another customer reached out and said, “You know, I like this idea but money’s tight right now. I couldn’t pay more than $15 or $17 a month.” And so we said, “Would you pay $20 and here’s a link? We’ll make that happen for you.” So those kinds of discussions have gone on. Customers have reached out and said, “I would definitely pay for exclusive access.” We’ve been in deep conversation with those particular customers of, what would that look like? What would the community see? Would they suddenly see this idea vanish from nowhere? There was four days of discussion and it’s just gone. What happens at that point? So we’ve really got to dig into that. But we are definitely toying with that.
Plus, there’s the advantage here that once we get a corpus of these nuggets – 30 days, 60 days, 1000 nuggets even – suddenly you can build really cool tools that help people analyze. Because before we put out the nuggets – I mean we have all these things in a database and we have facets of information about each idea. So, “Is the idea bootstrappable or not? Is it more of a funded suited thing? Is it B2C or B2B? Is this a marketplace? Is this idea really a marketplace? What industry is it in?” So somebody could log on and if we had a search tool to sell them exclusive access to, and say, “You know, I’m not interested in the daily feed, but if I could just search and see if you have any healthcare ideas that are bootstrappable with this tech, blah, blah, blah, and just look at what you have. And then maybe even set an alert; like email me when something like that shows up. I would pay a monthly fee for that.”
So we’ve had customers that are like, “Oh yeah. We would definitely sign up for that.” We’re so early right now we don’t have enough of these opportunities in the can to make that kind of a tool even worthwhile because you’re not going to log into a tool that has ten ideas in it. You want at least a thousand.
Rob [26:39]: Yeah. I have a question for you piggybacking on that. I guess it’s really two questions. I’ll break it into two pieces. One is: from where are you sourcing these ideas? And I understand that this is kind of your secret sauce. This is your Coca-Cola formula so you don’t have to tell me everything precisely, but how much are you talking about that?
Ken [27:00]: Justin told everybody on his podcast so I think I’m okay talking about it.
Rob [27:04]: Alright.
Ken [27:05]: When Craig asked me that question, I was all cagy about it on my podcast.
Rob [27:08]: I remember.
Ken [27:09]: I was listening to techzing and he’s telling everybody how it works. Right now, we’ve got a few channels in mind that we’re going to eventually be sourcing from a lot of different channels. Right now, just to get started, we’re using Mturk – Amazon’s Mechanical Turk.
Rob [27:22]: I knew it. When you didn’t reveal it on ‘Nights & Weekends’, I was thinking, “I bet they’re using Mechanical Turk in a very clever way.” The thing here is, you can tell us exactly how it’s done. It doesn’t matter, because I would never go to the lengths that you’re going to go to to find an idea and, yet, I would pay for ideas. You know what I’m saying?
Ken [27:39]: Yeah.
Rob [27:41]: It’s only going to be the people who are going to bitch and complain about your $7 a month price point that are going to go do it themselves. Anybody who is actually probably going to spend the time, and has at least a modicum of money, is not going to go through the process that you guys are doing today and that you’re going to get better at, right? If you do this for six months, you’re going to be way better than us even if you told us the whole approach to doing it.
Ken [28:02]: Yup. Mturk, I don’t know if you’ve used it, it’s kind of a hassle really. It’s not at all user friendly. And there are things that you can do through the API programmatically that you can’t do in their user interface. There’s a ton about Mturk that sucks. So we don’t want to be wholly reliant on that. Like, it was down for four days for no explanation, and it just came back up. But initially, when we first talked about this, just to see if it was feasible, Justin went on – it was like 7 a.m. on a Sunday – and for an hour he had this, they call it “”hits”, so he put the hit out and we were going to pay $1 for anybody who submits and idea to us. And then people, at 7 a.m., started submitting tons of ideas. That’s just how it begins. If we got this good a quality of ideas on a Sunday morning at 7 a.m., what would happen if we did this every day. So we’ve been testing what times a day that certain kind of people that have certain kinds of ideas that fit our audience are around answering these questions. So there’s a lot of learning that we’ve done on Mturk. But that’s right now how we’re getting the ideas. In the future, we can’t be wholly reliant on that but it’s doing good for now.
Rob [29:08]: Right. That makes sense.
Ken [29:09]: In fact, it’s given us more of a backlog than we can actually handle.
Rob [29:13]: Well, that was going to be probably my final question. The obvious question was when you’re talking about cranking out 30 ideas a month, 360-ish a year, you wonder – as an outsider – can they keep this up? Can the quality still be high? How many business ideas can someone possibly generate? And I guess what you’re saying is you’re not really generating them out of thin air. You’re using a massive distributed nervous system, essentially, of a lot of different brains.
Ken [29:40]:Yeah. Crowd sourcing.
Rob [29:41]: Cool. Well, sir, we’re at time. I really appreciate you coming on the show today. I feel like our listeners probably got a look into a couple things. One is how to cleverly use a third party service like Mechanical Turk to build a business on, which I think is cool. I always love ideas like that. And like another is that you guys have moved fairly quickly. I know it’s been weeks in between maybe the initial discussion, but I got an email from Justin less than two months ago and you guys launched within that period. And, as you said, got to 2000 MRR for a certain glimpse of time. And then, you’ve essentially gone against some conventional wisdom which says that business ideas aren’t worth anything. It’s all about execution. But you’re value adding is what it is. You’re not giving two or three sentence summaries, you’re giving this whole email with the research and like you said, you spent three hours on it and there can be value in that.
Ken [30:29]: Yes.
Rob [30:30]: Very cool. Well, if folks want to keep up with you, where should they look?
Ken [30:33]: You can go to Nugget.one. We are also on Twitter @_nuggetone. And also you can just email us at feedback@nugget.one.
Rob [30:41]: And if you want to hear more of the ongoing developments of this I would check out the ‘Nights & Weekends’ podcast with Ken Wallace and Craig Hewitt. Thank you very much, sir.
Ken [30:51]: Thank you. It’s been a joy.
Rob [30:54]: So, if you have a question for us you can call our voicemail number at 888-801-9690 or email us at questions@startupsfortherestofus.com. Our theme music is an excerpt from ‘We’re Outta Control’ by MoOt. It’s used under creative comments. Subscribe to us on iTunes by searching for startups and visit startupsfortherestofus.com for a full transcript of each episode.
Thanks for listening and we’ll see you next time.
Episode 296 | Launching 100 Projects in One Year
Show Notes
In this episode of Startups For The Rest Of Us, Mike interviews Justin Jackson about launching 100 projects in a year. Justin talks about the goals and idea behind his MegaMaker project. He talks about some of the products he has come up with and how he went about marketing those products.
Items mentioned in this episode:
Transcript
Mike [00:00] In this episode of ‘Startups For the Rest of Us’ I’m going to be talking to Justin Jackson about launching a hundred projects in a year. This is ‘Startups For the Rest of Us,’ episode 296.
Welcome to ‘Startups For the Rest of Us;’ the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing software products, whether you’ve built your first product or you’re just thinking about it. I’m Mike.
Justin [00:25]: And I’m Justin.
Mike [00:27]: And we’re here to share our experiences to help you avoid making the same mistakes we’ve made. How you doing this week Justin?
Justin [00:32]: Well, like I was saying the kids just got out of school, which just feels hectic. It’s amazing how much we rely on the kids being occupied all day. And so now it’s like they’re out. Now what am I going to do?
Mike [00:43]: That’s actually a really good way to put it, and I’ve never quite phrased it verbally before, but it’s nice that the kids have school to preoccupy them for six or seven hours on most days of the week.
Justin [00:54]: Now there is a theory. I don’t know if this is real; but there’s a theory that schooling, public schooling, really came about because of the Industrial Revolution. Because you couldn’t have parents working all day and then have kids just running around. So I don’t know if this is true or not, but that’s what I’ve heard is that a lot of public education came out of just needing to occupy the kids while mom and dad are in the factory for 12 hours a day.
Mike [01:17]: I would actually guess that it’s probably a direct result, not necessarily of the Industrial Revolution, but of child labor laws that prohibit the kids from working.
Justin [01:25]: See now we’re getting down.
Mike [01:28]: So that’s probably it. But anyway, great to have you on the show. For anyone who is not familiar with Justin, Justin lives in Vernon, BC, which is in British Colombia. Which, to me, I call it Canadia on occasion just because I live so close to the border. I used to live in Buffalo, NY, and I mean literally you could hit a golf ball and hit Canada.
Justin [01:44]: Well there you go. Do you have some Tim Hortons there?
Mike [01:46]: Yes we did have Tim Hortons. So went there on occasion.
Justin [01:49]: So you’re basically like 30 percent Canadian.
Mike [01:52]: I guess. I don’t know if I’d admit to that publicly on a podcast with thousands of listeners. But I did want to have you on the show because – just talk a little bit briefly about your history. And you’ve been the former Product Manager at Sprintly, and in 2015 you kind of struck out on your own to make your own stuff. You’ve been kind of around the block, I’ll say. You’ve got three different podcasts that you’ve run, Product People, Build and Launch, and now you’ve got Mega Maker that you’re working on. And then you’ve also got a bunch of ebooks that you’ve written, there’s Amplification, The Hacker News Handbook, The Product Hunt Handbook, Marketing for Developers; I’m sure that there are several other ebooks, and other podcasts that I’m probably missing in that list. So why don’t you, I guess fill people a little bit more in on some of the highlights for anything that I might have missed.
Justin [2:34]: I got started in the software business in 2008, working for a email service provider in Edmonton. And I kind of started my ground level just answering customer emails and doing customer support, but kept poking my nose in everything. I was interested in design and development and marketing. And eventually I worked my way up to being Product Manager in that company. And it’s actually a good definition of a Product Manager. They’re people that kind of sit in the middle of all those other categories. And then after that I went to work for a startup called Sprintly in Portland. And did that for about 14 months or something like that. And then Sprintly got sold and I had this decision to make. I could go out and find another big consulting client, go out and get a job, or I could stop working and make my own stuff. And I’d been kind of building little side projects on the side up until last November, and decided okay, I’m going to do this. And so I went to my wife and I said, “Hey honey, what do you think about this idea of me not going and working anymore, but just working on a bunch of little things and maybe trying to make a 100 projects in a year, and then documenting it on this podcast called Mega Maker?” And she said, ‘No.” And I was –
Mike [3:58]: So executive preapproval was denied.
Justin [4:00]: Yeah. No approval there. And I was like, “Please.” I was just begging her. And so the deal we struck was I said if I can make a living, if I can keep paying our bills, keep food on the table, et cetera, let me do some exploration here. And the whole idea wasn’t to like maybe go out and start a big startup. The whole idea was I had been working ever since I was 22 up until 35, working full-time for other people. And I just want instead of kind of jumping feet first into starting a company or trying to build something really big, I just wanted to explore a bunch of different things. So my wife has called this kind of like my early mid-life crisis, and it’s actually probably a pretty good description. I just wanted to try out a bunch of stuff and in some ways, to learn new product skills, learn new marketing skills. And also, just to kind of maybe figure myself out a little bit. After working full-time for all those years, let’s try something else out. Let’s learn a little bit about myself.
Mike [5:02]: That’s awesome. So how did you go from the answer of “no” to “maybe let’s see how things go for a little while”? Because it seems like there’s a gap there that you might have glossed over some stuff. Did you trade one of your kidneys or something like that?
Justin [5:14]: Well, obviously it was a conversation and I just said, “Honey, I think I can make this work.” And one of the reasons I felt confident is I’d just released Marketing for Developers and it had done quite well. I think by that point—just doing some math off the top of my head—I mean it’d probably done about $30,000 in sales or something like that. And so I felt like I’ve got this one product that seems to be selling pretty well, and I think that will give us some leeway to go and try some other things out. And my goal, revenue-wise was if I can bring in $10,000 a month just from doing whatever, I think we’ll be okay. And each month it was like an experiment in how am I going to make money this month? And there was a few months where it was scary. Like in May. May was the month where I decided I wanted to work on some software products. And so my buddy Marty and I, we had built a bulk SMS application called Network Effects. And then we said for the show, we wanted to launch two products at once and kind of examine the response to each of them. It’s kind of like split-testing product launch. And so we launched this other software product called Remote Workers, which was an online community and what I call a reverse job board for remote workers. So we were working on both of these, but because I was heads-down working on those I hadn’t been trying to make any money. So I kind of lifted my head and was like, “Whoa. I haven’t made any money this month, what am I going to do?” And I think I just toughed that one out because I knew that I was going to do a big sale in June. I did a deal with the app Sumo. And so I was like, “I think we’ll be okay.” So we just kind of toughed it out through May and then made it to June. To answer your question, every day my wife says, “So when are you going to go get a job?” And I’m like, “I’m not getting a job. This is way too much fun. I’m going to keep going as long as I can.”
Mike [7:08]: I guess what I wanted to drill into a little bit was whenever somebody is starting to kind of go down that entrepreneurial path, as soon as the question or decisions start to come up around, how are you going to make money and are you going to get a quote-unquote “real job,” then most people see that as a stable form of income and the merits of that statement are debatable at best. But most people look at that and say, “We have to have a serious conversation about it.” That’s what I want to drill into this, like what was that conversation like? Because I think that a lot of people listening to this are on that path and you have to have your spouse on board in order to be an entrepreneur. There’s really just no other way to do it. Or you’re divorced. It seems like those are the two paths that people would end up on.
Justin [7:51]: I mean I think one thing that made it easier is that we had kids quite young. We were married when we were 21 and we had our daughter Sadie when we turned 22. And before that, before 22 I had all through college, all through high school, I had run my own little business. I had a video production and Web design business in high school and college. And when we had our daughter we made a decision that I would not do my own business and that I would work full-time until all the kids were in school. And so this year our youngest, we have four kids and our youngest was in grade one, full-time. And so because that transition had happened I said, “Hey, you remember that conversation we had? Well, now all the kids are in school and now I have this opportunity. Sprintly’s just been sold. And I could go do something else. Why don’t I try to do that thing we talked about 15 years ago, and let me try to do my own business again?” And so that was part of the conversation. And the other conversation is I said, “If this doesn’t work out I’ll just go and look for a job or look for another client.” But I said, “I think I could probably go out and find something else if I really needed to.”
Mike [9:03]: And I think that that’s something that can be comforting to the spouse is if you are in a position where you are in demand; they want you to come work for them. And if you ever needed to you could fall back on that and you could go out and get a job in relatively short order. And I think that that’s applicable to probably a lot of the people who are listening to this podcast. And especially if you’re in the tech world, just because there is so much demand for tech talent that if you are talented, if you are publicly visible to a lot of people, then it makes it easier for you to find full-time employment to fall back on if you really needed it.
Justin [9:35]: I mean I think everything’s a risk. I think employment kind of lulls you into sleep in some ways. And not recognizing how risky it is. Employment is just as risky as anything else; that you could get laid off at any time. And at least when you’re running a business you’d know your own financials. You’d kind of know what’s coming down the pipe. But employment, you could just show up one day and be like, “Sorry, you’re gone.” And client work is even kind of worse in some ways. In some ways you kind of what’s coming down the pipe. But other ways, just like, “Man, this could disappear at any moment.” So I think there’s pros and cons to all of them.
Mike [10:10]: Well, sorry for that little side track there, but I thought it was important to drill into that initial conversation because I think a lot of people are going to have to have that conversation early on when they’re starting to build a product. But I wanted to have you on the call today so that we could talk about your Mega Maker project. And I guess, could you summarize very quickly exactly what the Mega Maker project is so that the listeners have an idea?
Justin [10:31]: I had this idea that why don’t I try to build 100 things. And some of these would be small little products, some of these will just be creative things for me to explore on my own. And I’ll document it on this podcast called Mega Maker. So it’s kind of like a lab. It’s like my marketing and products lab. I’m working on all sorts of little things. So as an example, we’ve got this little SMS app, what would it be like to run this as a full-time business and to really feel that? That’s a big part of this whole experiment is to experience things without committing too much. I’m going to try this out, try it on for size, see how it feels. That’s interesting. And then kind of looking at everything. So, for example, one thing I’ve learned over the past just six months is that most of my revenue still comes from things like Marketing for Developers. People really go to me for product marketing advice, product marketing teaching. And the lion’s share of the money I’ve made so far has been there.
Mike [11:37]: So it’s kind of like this gives you the ability to launch a mini product and get a feel for how much traction it gets without committing three month, six months, nine months to a single thing, which may or may not pan out or you may have to do a lot more validation on. I mean if you keep these small enough you can throw something out there, see how it goes, and it’s not just that you can see how it goes but you can see how well it does in relation to the other things that you’re building, which gives you a much clearer picture of how well it could do.
Justin [12:07]: Yes. But the other thing that I’ve been really thinking about, and it’s almost more important to me right now, is we talk a lot about product market fit. I’ve been thinking a lot about market/founder fit and product/founder fit. For example, serving some markets, you don’t really know what it’s going to be like until you actually start doing it. There’s some things I’ve launched where I’m like, okay. As an example, one idea I had was about 70-80 percent of my audience is software developers. What if I tried to bring some other types of creative people into the audience? What if I reached out to artists and musician and artisans? Let’s just see what that’s like. What I discovered is I really liked those people but it’s not really a market I want to serve. So there’s not a fit there. There’s no founder/market fit there. Likewise, there’s product/founder fit. And I think this is a question a lot of people don’t ask themselves, especially before they launch like a SaaS a business; is do you really want to run that kind of product? It’s a lot different running SaaS than it is downloadable software, than it is info products. They’re all very different. They all feel very different. And this has been an opportunity for me to try some of that stuff on. Like what would it be like to run this product every single day? What would it be like to serve this market every single day? And actually the third one that I’ve been thinking about a lot lately, this idea of company/founder fit. And what I mean by that is kind of like company structure. Rob Walling just had this quote I read about how to get above seven figures in SaaS revenue. You really need to have a team. And I’ve been thinking a lot about that, too. Up until now I’ve been just working by myself or partnering up with people. What would it be like to have to hire a team, to pay salaries, to be a leader, to be a confidant for employees, to bear the weight of providing for all these different families?
Mike [14:06]: Because you have to be—like if you hire somebody full-time, you’re essentially responsible not just for their job and their benefits and stuff like that, but in some cases if they’re married and they have kids, you’re responsible for their welfare as well. So it makes it, in my mind it’s much more challenging to run those types of scenarios. And I’ve done it before and I’ve had to let people go where I knew that they had a wife and kids and they didn’t have another job lined up. And it sucks. It’s very difficult to be in that position. And I think it’s something that you have to slowly work your way into. It’s not something that you can just jump into and be able to just day one know exactly what you’re doing and feel confident about it. I mean, working your way up towards it is probably a better solution. I know that there’s obviously the VC funded startups and stuff don’t have that luxury, they just kind of jump in head first. But as a bootstrap company I would hate to be in that position where you have to hire ten people and then half of them don’t work out, or a quarter of them don’t work out.
Justin [15:00]: And these are the things. I think a lot of product people are so desperate to build something that gets product/market fit, and that’s hard. Finding something that—a product that fits with a good market, a market that’s able to pay you, a market that had demand for that thing that you’ve built. I mean, that alone is really hard. But there’s these other vectors, which is like, does this even fit me as a person? A lot of us are kind of running away from something. We’re like we don’t want to work for the man anymore. We don’t want to work for clients anymore. And so we run towards product. But often we run towards product and we end up serving a customer base that we don’t really like, or building a product that we’re not really passionate about, or creating a company that we now have to run. We then become that boss that we really didn’t like.
Mike [15:49]: I have wrote about that a little bit in my book because I met somebody who had a seven figure business and he hated it. He didn’t want any part of it but he was so involved in it that there was no way for him to really get out of it. It was a services business, but at the same time he was so involved on the relationship side of things that it would have been almost impossible for him to sell it. So he kind of had no option. It was kind of like being locked into a job that you just didn’t like.
Justin [16:14]: Exactly. And so this is all the exploration I wanted to do with Mega Maker. So at the beginning, season one, it feels very much like watching a guy have a mid-life crisis. Instead of going out and buying a Lamborghini, I’m making things. And the story that everyone talks about from that season is, I said what would it be like to go to a restaurant and design a menu item for that restaurant and then actually make it and then market it? Go through the whole product development process, not for software, but with something like food. Because I had never done something like that before. And so I convinced this restaurant to let me do a Friday lunch special. It’s a barbeque restaurant. They didn’t have a burrito on the menu and I love burritos. So I said let’s try to make a Mega Maker burrito. There was kind of two goals with it: one was to just experience what is involved in making a food item at a restaurant, and two, how can I apply some of the things I’ve learned doing marketing and sales for software products to marketing this lunch special? And that story, I can’t even remember the other episodes, but that story is still the one that people come up to me at a conference or whatever and say that whole thing was insane. That was just me exploring stuff. Just figuring stuff out. You know when you’re running a tech event, like a conference or something, you need to get people in the seats. That’s the most important thing. And so I was like I’m going to make a list of everyone who is going to come on Friday and order one of these burritos. So I had a spreadsheet where I was calling people, emailing people saying, “are you coming, how many burritos are you going to order?” So I had this running total because I wanted to make sure that we were above 60.
Mike [18:00]: So you were essentially brute forcing your sales. Like a lot of bootstrap software entrepreneurs, they’ll brute force their way to like 20-30-50 customers in the early days. And you almost have to. That’s because you don’t know what traffic channels are going to work for you. So you contact everybody you possibly know in order to get the [crosstalk]
Justin [18:16]: Totally. And the whole time I was also telling the story as it was happening. I was doing clips on Snapchat. I was doing little YouTube videos. Just sharing the whole experience. And then the Friday came and it was like insane. We ended up selling 80 during the lunch hour. The restaurant was just packed out the door, you can’t get a seat. I was in the back actually making burritos. And so I got to experience everything. And it made me realize, one, I never want to do that again. But two, in terms of like product marketing there’s this great clip from that episode where this guy calls me over. I’m recording it and he says, “Do you realize why people came here today?” And I’m like, “I don’t know. They like burritos.” He’s like, “No, man. People are here because of the story. They wanted to come and be a part of the story.” And that kind of marketing is completely applicable to the product world. I think a lot of times people get interested or engaged because of the story and they’re kind of following along and they’re like that’s how they become a customer; is they were just following along with the story. So there were some parallels that were interesting.
Mike [19:28]: Now you’ve mentioned marketing. Obviously that was a one-time event. You got a bunch of people there and, yes, they’re involved in the story. But how do you go about marketing for some of these other projects that you’re launching, because, obviously, if you’re doing 100 of them in a year, that averages out to roughly two per week. So one every two and a half to three days, it doesn’t really give you a heck of a lot of time to do marketing for these. Do you do any follow-on marketing? Do you do advance marketing for some of these different projects that you’re launching? I know that not everyone is aimed at creating revenue or generating revenue for you, but at the same time there’s got to be some base of people that you want to launch it out to, or that you want to get it in front of, because there’s really not much point of creating something if nobody’s going to every look at it or use it.
Justin [20:11]: I was having a conversation with Lars Lofgren. We were just talking about marketing. He and I have known each other for a long time. And so we were just talking about marketing. And he said one of the best things a marketer can do is realize that they’re not going to be good at everything. You’ve really got to play to your strengths. And just hearing him say that, someone I really respect, it almost gave me permission to say, “that’s great, I can really focus on these things that I’m really good at.” And still sharpen the ax as much as I can with things that I’m not super great at. But really double down on the things I’m good at.
Mike [20:45]: And I think that’s important to know what your own limitations are. Not just on the product side of things, because obviously if you don’t know how to use a particular piece of technology you can probably figure it out. But sometimes it’s worth just paying somebody else to do it. But that also translates over onto the marketing side because sometimes it’s better to just pay someone else to do something that you really just don’t like. Which could be successful but you don’t want to do it because you’re just not good at it and you’re not as comfortable with it.
Justin [21:09]: And that’s why in the book, Marketing for Developers, I give so many different channels and so many different techniques because I just want people to be able to choose. When I was doing the customer research for that, a lot of folks would say, “Well, Justin, I’m just not good at writing blog posts.” And so for people to be able to choose and kind of explore different things and then find the one that they’re really good at. That’s where you should invest all your time and money; is in the thing that you’re really good at. And then either hire out those other elements or just don’t focus on them.
Mike [21:41]: So I guess going back to the heart of the question though, how much marketing are you actually doing for each of these individual projects?
Justin [21:47]: It really depends. I mean some of these are just things I need to get out of my system. So Network Effects, we launched on BetaList. We wanted to get a ten person paid beta in both. So ten person paid beta in Network Effects, and ten person paid beta in remote workers. We launched on BetaList for that, got enough people in and now we’re just like basically getting their feedback. What are you using it for? What do you really like about it? Are you willing to keep paying? It’s $9 for Network Effects and then the plans are similar to MailChimp or whatever.
Mike [22:20]: Is that like an onboarding fee for that?
Justin [22:21]: Yeah, it’s basically because with SMS you have to pay for the number. Unless you get a custom number it’s not very useful. And so we wanted to get people in, getting a custom number. And so mostly it’s just to help pay for some of our costs. But it also is just a great way to figure out who’s really serious about this. And, like I said, over ten people paid for that beta. And then the people that stuck around, I think there’s like, of that group, there’s about three that have stuck around. We’re like really working with them to figure out what do you guys need? What are you using this for? Some of them are using it like every day or every week. And we’re like we’ve got to focus on these folks. Who are you, what are you doing this, how are you using this?
Mike [23:03]: So like customer development –
Justin [23:03]: Customer development.
Mike [23:04]: One-on-one [crosstalk]
Justin [23:05]: Exactly. Exactly. And when we’re ready to really kind of turn things on, in my mind, it’s like you do a BetaList launch and then you get enough people to come and try it out. Really figure out who you’re focusing on, and then launch to the waiting list. Again, kind of figure out, why are people signing up? That’s the big question. Why are people signing up? And once you can figure that out, then after that I do a Product Hunt launch, and then it’s looking into other strategies like ads, SCO, et cetera.
Mike [23:35]: So you keep saying ‘we’ a lot. And maybe that just applies to this particular scenario. But are you working on a lot of these by yourself, or do you have partners for some of them, teammates, people that are working with you, either part-time or full-time on a regular basis, or is it just more one-off projects?
Justin [23:49]: It’s me for almost all of them except the bigger projects I’ve partnered up. And so my buddy Marty Dill, who’s an awesome developer here in Vernon. So when the idea for Mega Maker came around I said, “Hey Marty, you want to team up and build a few things?” I’ll find it for you, but I have this agreement that I sign with people I want to team up with. And basically it says we’re going to work on this project for six months, and if we decide to turn it into a business we both get like 50 percent ownership, and then we move forward from there. If this doesn’t turn into a business within six months, then we just let everything fold and we move on. I mean, it’s been audited by a lawyer and everything else. It’s just a way of saying, okay, this is the purpose of right now, we’re just testing out an idea. We’re building the initial thing together, and then when it comes to turning this into a company, we’ll both get equal shares.
Mike [24:43]: It kind of forces the conversation up front, I guess, too.
Justin [24:46]: Yeah. I started signing these because I was doing even small little partnerships, like I built a WordPress plugin with Carl Alexander, and we’re good friends but I had seen enough partnerships go real bad that I thought, “let’s start signing something upfront from day one.” And it gives it such a great framework because it’s like, if this doesn’t work out in six months, we just move on. If this does work out and we want to turn this into a business, then we create the corporation, we both get 50 percent of the shares, and then we treat it seriously. We treat it like a company. And there’s a few other kind of conditions in there as well. But I found it a really great way to get started on projects knowing that we’re both kind of protected and we can both kind of trust each other for that period. And then it kind of gives us a way of moving forward if we decide to take it from there.
Mike [25:35]: So one of the other things that comes to mind is while you’re going through and launching a lot of these different projects, one thing that—I’ve experienced this myself, but I’ve seen it happen to other people, is that when you start on something, that’s kind of the high point. When you’re embarking on a new endeavor and everything’s new and everything’s exciting, but then three months, six months down the road you start to get tired, you lose focus, you lose your motivation, I’ll say, to continue. I would imagine that for a lot of these projects that doesn’t happen on an individual project basis because the timeline for them is so short. But throughout the process of this, you’re doing a 100 of them in a year. Has that come into play for the project as a whole, or you really have low points for individual projects?
Justin [26:18]: Totally. Here’s the stage I’m at right now. So if we look at the timeline, it starts off and I’m just exploring everything. Every idea that pops into my head I put it on this list. You can see the list at Megamaker.co/list. It’s just a Google Doc. And anything that pops into my head I’m like, “I’m going to do that.” And I put it on the list. And it’s exciting that I’m exploring all of these things, I’m trying all of these things, I’m starting; and starting’s way easier than continuing, right?
Mike [26:44]: Or finishing.
Justin [26:44]: Or finishing. And so that was the beginning. And some of these are bigger things that I really wanted to explore. Like for example, going after a new market was interesting to me. That’s something I really wanted to explore. So even especially like physical makers. For a long time the term maker just applied to people that made handmade furniture and art and sculpture. Lately, digital makers, people that make apps and software have taken that term as well. But for a long time it was just physical makers. And I thought I wonder if they could be my audience, too? And what I’ve realized is, do I really want to go out and interview people that are making their own coffee tables or running their own Etsy shops? At the beginning I thought that would be exciting to me. But now I’m realizing that, no, that’s not going to be exciting to me. And so the point I’m at right now is I’m like, okay, at the beginning Mega Maker was about everything, and my life was about just exploring everything. Now, we’re six months in, it’s time to start focusing. It’s time to start closing down some projects, stopping some things and simplifying. And so I’m still planning on making 100 things through this year, but the show, Mega Maker, is going to be a lot more about products and marketing, software, digital products, similar things to what I’ve done before. Because I’m realizing I went out and I explored a bunch of stuff, but I’m coming now, back to one, the things that I feel like I’m good at, two, the things that are making money. And I guess those are the big things. Am I good at it and is it making money? Do I really like the people I’m serving? Truthfully, I was trying to bring these other customers into my world, but truthfully most of the people that listen to Mega Maker are my same audience. Mostly software developers, designers, product people, entrepreneurs. And so I’m going to start doubling down on those, stopping some of these projects that didn’t feel like a good fit.
Mike [28:40]: So did you find it difficult to complete some of those projects, or was it more of an after the fact that you decided this isn’t something that I really should go after because of the results of it? Was it more because of how you felt early on in going after it? Because I think with the list that you’ve got going, you can look through that and kind of pick and choose what it is that you work on. So chances are good you’ll probably be excited about it at the time. But it sounds to me, like throughout the process of this, you’re also kind of dialing things back and you’re trying to figure out what it is that you want to work on moving forward as well.
Justin [29:14]: Yeah, I mean, it was a bunch of things. One thing I realized is at the beginning I was just like a kid in a candy shop. And I had freedom for the first time in my life. I wasn’t working full-time. I’d always had side projects but now I could give all my time to these things. And I just started way too many things at once. So I’ve gone back to just like working on one thing at a time. Right now I’m working on a new book called Jolt. And it’s 20 surprising marketing tactics, things that most people don’t talk about. It’s going to be really good. It’s going to be exactly for that group of people that I’ve already connected with. So right now I’m trying to not focus on other things and just work on Jolt. Like every day, try to get some writing in. Every day try to finish another chapter. And I’m hoping to launch it July 15. And when that’s done I’ll focus on the next thing. So one thing at a time. And there were some things I just didn’t want to finish. And I think that’s okay. Especially if you start a software project and you’re like, “Man, this is not a good fit for me.” Carl and I just had this conversation because we’ve been maintaining this plug-in and it’s still selling pretty good, but I noticed like he was always the one to answer customer support emails first and I just was never getting to them. And part of it was I just wasn’t excited about it anymore. It just wasn’t a good fit for me. And I just said, “You know what, Carl, you just take this 100 percent. I’m okay with removing this from my plate.”
Mike [30:42]: There’s a certain amount of—I guess it goes into the feelings of procrastination for something, around the fact that you just simply don’t want to do it and you’re not interested in it. Because you haven’t prioritized it. So it doesn’t mean as much to you or you are dreading doing it. I think you said it much earlier in the episode, something about how a lot of times entrepreneurs are running away from something and that brought you to the idea that make sure that what you’re running towards is also something that you want. It’s not something else that you’re going to what to run away from.
Justin [31:11]: Exactly. And because of that we have to be willing to quit some projects. We have to be willing to either let them die or give them away, or sell them, or something. And I think that’s the piece that most of us struggle with.
Mike [31:27]: Yeah. Walking away from that stuff is hard though.
Justin [31:30]: Walking away from it. For example, this next phase of Mega Maker, I have an online community for Mega Maker and I know that this next phase is going to tick some people off. Some people are going to be like, “What? This isn’t about the thing you said it was going to be about in the beginning.” And I’m like, “Well, I have to change this. I have to keep narrowing this down to something that’s going to work.” And so having to upset people is really hard. Like say, I’m sorry, but I’m going to be changing the product, or I could be changing the focus or we’re going to move this way.
Mike [32:02]: Well, I think that’s also one of the traps that people fall into when they are launching a product. Because if you never actually launch it then you never have to worry about disappointing people.
Justin [32:11]: Exactly. The other thing I’ve learned is you get really good at launching and getting over those fears the more you launch. And so part of my message from the beginning, both with Build and Launch, and now this is kind of like version 2.0 of what I was doing with Build and Launch, the message from the beginning is, start small and start now. If you’ve never launched anything, don’t go out and try to launch the next HubSpot. Launch something super, super tiny, and then get that done. Get it done in a week and then launch a two week project, and then launch a three week project. And the more you do that the better you get at getting over that sense of dread, that sense of fear. And you just learn so much each time. And so the dread that I used to have from launching things, I still get nervous, like before this Jolt launches I’m going to be feeling the exact same thing everyone else is; like is anyone going to buy this, did I do the right things, am I targeting this the right way? But I don’t feel the same kind of anxiety as I used to. It’s a lot easier the more that you do it.
Mike [33:13]: That’s very much, I guess, it aligns very well with what Rob Walling came up with, which was the stair step approach. Which you can kind of apply to this, where his was more about the types of products that you’re building. But this is also about becoming more comfortable over time with doing the same thing, launching things over and over.
Justin [33:30]: I think the one thing that I really want to impress on people is that there’s no one path to success. And I think a lot of folks are trying to follow other people’s paths to success. And one of the things that I wanted to explore was this idea of you know what, I’m going to go and just try a bunch of different things and figure out what’s the right fit for me? And I think anybody can do that. You don’t have to make 100 things. But be willing to kind of try things out, look at your strengths and evaluate whether it’s really a good fit for where you want to be. Especially make sure that you’re not running into the same thing that you’re running away from.
Mike [34:14]: And I think that that’s probably a really fantastic note to leave off on. So Justin, tell the listeners where they can find you and if they want to follow on the Mega Maker story or if they just want to sign up for your email list or follow you on Twitter, et cetera, where can they find you?
Justin [34:27]: I’m right at Justinjackson.ca. On Twitter and Snapchat, I’m the letter M, the letter I, Justin. That’s M-I Justin. And Mega Maker is megamaker.co.
Mike [34:41]: And we’ll link all of those up in the show notes for everybody. Well, Justin, I just wanted to say thank you very much for coming on. I hope that this was educational for the listeners. And I really do appreciate you driving home that point at the end there about finding what is right for you versus what everybody else is doing. I think that’s a very, very powerful piece.
Justin [34:56]: Beauty, Mike. Yeah, it’s been a pleasure, man.
Mike [34:58]: I think that about wraps us up for the day. 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 Outta Control,” by MoOt, used under Creative Commons. Subscribe to us in iTunes by searching for ‘startups,’ and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening, and we’ll see you next time.