Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike do a business model breakdown of Amazon Go. They talk about the biggest challenges the store may face including security and delivery logistics. They also explore the technical and social impact of the idea.
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Transcript
Mike [00:00]: In this episode of ‘Startups for the Rest of Us,’ Rob and I are going to do a business model breakdown of Amazon Go. This is ‘Startups for the Rest of Us’ episode 320.
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 [00:26]: And I’m Rob.
Mike [00:26]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s going on this week, Rob?
Rob [00:31]: Well, as soon as our predictions episode went live a couple of weeks ago, we had a few comments to get posted into that thread. It looks like at least one, and perhaps two, of my predictions literally came true within weeks of us making them.
The predictions episode went live on the sixth or seventh of December, but we actually recorded it two weeks prior to that. One of my predictions was that there would be at least one more high profile bootstrapped startup self-funded acquisition. And I’d specified that by “high profile” I mean it’s a big company. It’s not some sale of technology. I was thinking it was actually going to be a much larger funded company acquiring somebody, and, sure enough, big congrats to Dan Norris and his team, because WP Curve looks like they were acquired. I think they announced it on maybe around December seventh.
Mike [01:17]: That’s awesome. Congratulations to Dan and the entire team for that. I also want to point out here that acquisitions were one of my predictions from the previous year. So, technically we’re both right on this one, I think.
Rob [01:29]: That is really funny. So you predicted for 2016 – which technically we’re still in – that there would be more acquisitions than IPO’s or something. And then my prediction really is for 2017, but I think it counts. As soon as we make the prediction –
Mike [01:41]: I think it counts.
Rob [01:42]: As soon as you make it, I think if it happens after that then you’re correct.
Mike [01:45]: Right.
Rob [01:46]: It was pretty cool. It was cool to hear that news, not because it made the prediction correct, but just because of all the work Dan’s done building his businesses and sharing with the world his experience in writing ‘Seven Day Startup’, and his content marketing engine book. He’s just done a lot of stuff. And now he’s doing Black Hops Brewing. He started an entire beer brand, like a microbrew, in Australia.
Mike [02:07]: Yeah. He started that a while ago, actually while he was running WP Curve. It’s been interesting to follow those things. One of the other predictions somebody pointed out was that I had a wearables prediction for last year and, apparently, Pebble decided to shut down and sell off all their IP’s. I think at the time that we recorded the episode we hadn’t been aware of the, but that’s another one. Then you also had an unmanned drone delivery previously happened as well. That happened about two weeks or so after we recorded the episode.
Rob [02:35]: It looks like on December 14th or something. So right there in time. They’re talking in New Zealand about how Domino’s Pizza’s going to start doing unmanned drone deliveries, and then Amazon did one in the UK. It was literally December 14th, Amazon completes its first drone powered delivery. I think this was yesterday. It’s kind of interesting timing. I guess these things are, I don’t know. I wouldn’t call them obvious. It’s funny, our predictions in the past, a lot of them never come true, and then we make a few predictions here and two or three of them come true within two weeks. It’s really odd.
Mike [03:05]: I do want to say congratulations to Cristoff and Benedict for selling out FEMTO Conf in Germany. This was on my list of predictions as well that more of these types of things would be popping up. But, to be fair, I knew about this one in advance, so I don’t know if we can really count that as part of a valid prediction.
Rob [03:22]: Very cool. So what are we talking about today.
Mike [03:24]: Today we’re going to do a business model breakdown of Amazon Go. If you’re not familiar with this we’ll link it up in the show notes, but you can go watch a video from Amazon that talks about their Amazon Go store. Essentially, it’s a new type of convenience store that doesn’t have any cashiers. There’s no checkout lines. There’s not even a self-checkout aisle. You just walk in, pick up your stuff, and it recognizes who you are based on when you checked into the store, and it keeps a virtual shopping cart for you while you walk through the store and pick things up. If you put something back it takes it off your shopping cart. Then when you leave it just bills your Amazon account and automatically charges you through that account so that they don’t have to swipe credit cards or anything like that. First reason I wanted to talk about this was because it’s a little bit different than something that we typically talk about. Typically, we talk about things in the self-funded, or bootstrapped, entrepreneur space. I thought it would be interesting to talk a little bit about a business that doesn’t necessarily directly relate to the things that we do on a day-to-day basis, but the other piece of it is being able to objectively look at business ideas. Part of that is when you’re evaluating your own business ideas, or your own products, and trying to get it into different markets, being objective about those instead of — obviously you want to be optimistic about the things that you can accomplish and achieve but, at the same time, you also need to maintain a certain amount of objectivity, and be able to recognize where problem areas are. I thought that by digging into some of the pros and cons in areas where Amazon Go might have some issues getting to market, or where things will work out in their favor or not based on the advantages and disadvantages, that they have that you can kind of extrapolate those things and be able to more objectively look at the things that you’re working on in your day-to-day or month-to-month.
Rob [05:08]: Yeah. I think it’s a good exercise to run through a business model like this – something that someone who’s trying to innovate on the model, in essence. I also think that it’s just a nice way to kind of wrap the year up. It’s a fun little diversion to talk about something as interesting as this, that is essentially a big company really trying to turn retail on its head; a big company that, while we think of them as a retailer in quotes because they’re ecommerce, they really don’t do much in terms of brick and mortar, and they’re trying to figure out how to automate all the things, and I think that’s a pretty admirable goal. So let’s dig in. By the way, if you haven’t watched the video – it’s a two-minute video – I really do recommend that you go check it out, because I was blown away by just the coolness factor of walking into this thing. You walk in, you push a button on your phone – which I’m sure it’s an Amazon Go app or whatever – push a button to let it know you’re in the store, then you just walk around, grab some stuff, and you put it in your bag or whatever. Then you just walk out and it charges you. This is where Amazon has innovated in such an incredible way. Online is the one-click checkout in Amazon Prime, where you only have to think about shipping. I spend so much at Amazon that I imagine that they’re going to name an entire building after the Walling family here pretty soon. It’s because of that innovation, right? It’s the one-click, no think, “I just know that it’s going to come, and it’s going to arrive from them.” And I think it’s the same thinking going into here. They’re just trying to remove all friction for buying stuff. Anytime I think about going to the store I think, “Ugh! Am I going to have to wait in line?” You have to whip out this archaic piece of plastic that’s been around for 30 years, and it’s slow. It works most of the time, and on and on and on, whereas it’s like if I can just be in and out I think it’s a really cool idea.
Mike [06:46]: Yeah. So to give a little bit more background about this. There’s one pilot store for the Amazon Go idea that’s currently located in Seattle, Washington. It’s only open to Amazon employees, and there’s not really any public information about a wider rollout. They’ve talked a little bit about possibly having as many as a couple thousands of these throughout the United States between 2017 and 2020, but they’re real sketchy on the details, and it’s not really clear when this pilot program rolled out. The idea is that it’s a small store. It’s only about 1,800 square feet, which is larger than the typical convenience store in the United States, but it’s also much smaller than a regular grocery store, which is anywhere from 45,000 to 60,000 square feet. So it really fits into that convenience store market. As we go through these we wanted to talk about a bunch of different areas, but the first question that I think we wanted to ask was, “Why would Amazon want to do this? Is this just a PR stunt, or is this something that’s really viable?” And as we talked about very early on, if you looked at their advertisements for the drone technology three years ago, you would have looked at it and said, “Well, it’s been three years. It’s just a PR stunt.” We talked about that right at the beginning of the episode. They just did their first unmanned commercial flight. So it’s interesting to look at this and say, “Well, they’ve got this idea. They know it’s going to take them several years, and that’s why they’re working on this pilot store.” I think that that’s a fascinating way to start, and I think that it’s very analogous to the way that entrepreneurs will start rolling out products, and work with a few individuals or trusted people that they can rely on for feedback, and get that feedback that they need, innovate, figure out what the kinks are, work those things out, and then roll it out to a wider audience. It really seems to me like that’s what Amazon is doing. I don’t think that this is a PR stunt. I think that they really believe in this. Now, will it actually work out in the end? Who knows. We’ll see. But it looks to me all indications are that they fully believe in this and they’re trying to work out the kinks right now. That’s why they’re using their employees to do that.
Rob [08:45]: Right. I don’t see it as a PR stunt as much as proof of concept, right? A MVP, where I bet they’ve been in labs working on this for a while – for a year or two – trying to figure out the technology. They say that they’re using visual recognition and all this other stuff. I’m thinking couldn’t you just use NFC base from your phone, or Bluetooth or something like that, but maybe that’s just impractical. I’m obviously not super up to speed on all that stuff. But why wouldn’t this be viable I think? What’s the biggest concern that you’d have in building this? It’s someone’s going to come in and steal a bunch of stuff. That’s the big thing. That’s why you have someone in the stores to make sure people don’t just come in and walk away with the stuff. And the question is do we think Amazon has the engineering prowess, and the money, to fund this to make that not happen. I think they do. I think that in order to get into the store, if you have to push this button on your phone or it doesn’t let you in the store, then now they know who you are, and if you went and stole a bunch of stuff, why can’t they just charge it? You know? That’s the whole point. I guess if someone snuck into the store, you snuck a friend in – I think they’re going to be able to figure ways around this, and that’s why they’re only rolling one out. They’re going to just see, and if that does happen I bet they’ll figure out, “Well, we do need a person on site at every store just to make sure people don’t steal stuff.” And at that point, they’ve figured out a lot of stuff. So do I think this is viable? Absolutely. I don’t think it’s a PR stunt. I think that Amazon has – they’ve come from shipping normal ecommerce sites, where you think back 10 years how long it used to take to get a book from Amazon, and it was whatever it was; a week, 10 days. Then they said, “We’re going to do everything two day, as long as you pay for Amazon Prime.” Then they have same day in a bunch of places. Now they want to go to basically instant. They want to go to where they can either deliver it directly to you, or you can just be walking down the street and Amazon is everywhere. It’s interesting when you talk about it being a convenience store, because that’s technically correct, but when I think of convenience store I think of like Circle K or Seven Eleven, which is kind of a – I don’t know – I’ll just say a crappy convenience store. I don’t tend to buy stuff at convenience stores. But the pictures they’re showing here is of – it’s almost like Whole Foods level quality stuff. It’s a convenient store with a lot of more higher-end stuff that you or I would probably be more likely to purchase, rather than hot dogs that have been sitting on a spinner for six hours, and Slurpies.
Mike [11:04]: Yeah. I think that goes into the types of products that they’re offering into the stores a little bit. But I kind of want to step back a little bit to one of the things you talked about was just the security of the place, and dealing with things like hacking attempts and theft. As you said, having that pilot store, doing that as a proof of concept, and using Amazon employees. Those people aren’t going to be stealing from the store. They’re going to be exercising the system. They’re going to be trying to identify the edge cases so that they can work them out. I worked at Wegmans Food Markets back in the year 200,0 and we actually rolled out an online shopping project for Wegmans. It was only available in one store, it was a pilot program, and you could order your groceries online, and you would show up, and you would pick the stuff up. It was, I think, seven dollars, but it would save you an hour and a half to two hours of weekly food shopping. So if you had that extra seven dollars to spare, or you just want to throw it at it, you could just place your order completely online and you just show up at a designated time. You tell them when you’re going to show up. They’ll bring it out. They’ll put it in your car. I don’t even think you sign for it. They knew who you were, so you would just basically walk away with it, which was fantastic because your information was tracked. I think they verified who you were, but that was it.
Rob [12:15]: Sign me up. That sounds great.
Mike [12:18]: It was fantastic. It was different than some of the other online services where you would order it and then it would be delivered to you. This you actually had to go to a store, but you literally told them when you were going to show up and they would have everything all ready. And they would have people go out and do your food shopping for you. So, going back to the security of it though, because they’re having those people who are Amazon employees work in there and use the service itself, it kind of mitigates that particular problem. At least for now. It delays them having to solve that.
Rob [12:46]: You have to bet that they have already tested, and are going to have their employees test, “Try to steal something.” Like go, do it. Like the white hat penetration testers. Even though their employees aren’t going to do it intentionally, they’re going to probably try to game the system and figure out where the weaknesses are before they let real people in.
Mike [13:06]: One of the other things that you had brought up was the types of goods there. You had mentioned – this kind of played back into your thoughts of what a convenience store was. You mapped it back to Seven Eleven and various other types of stores. I had a little bit of a conversation about this with my wife, and after about five minutes or so she totally tuned out, which is why we’re having the conversation on the podcast, so that I can talk about it with somebody else.
Rob [13:33]: So that our listeners can completely tune out?
Mike [13:34]: So that our listeners can tune out. Of course. But in this particular case, if you look at the different types of stores out there… You’d mentioned that you probably don’t want to go there and buy a hot dog, for example. Is that something that they would offer? My guess is probably not. It seems to me like they’re positioning it more as something that you go in, you pop in there after work or something like that because you need something for dinner. You can buy pre-prepared meals and stuff like that and then just take them home and cook them — not pre-prepared, but everything’s pre put together and you just basically take it home and cook it. I feel like that’s the type of arrangement that they’re going for. One of the things they wouldn’t do, for example, is they wouldn’t couple it with a gas station, because there’s lots of other things that go along with that. You have to have people there manning it in case something goes wrong. In terms of the workers on site, I really feel like one of the challenges that they will have is that you still need to deliver stuff to the store. You still need to have the shelves restocked. You still have to have things get pushed to the front. There are some mechanical ways to do that, but you still have to have somebody on the back end kind of fulfilling some of those needs. Logistics don’t just take care of themselves. You can automate a lot of that stuff with Robots, but there’s only so far that you can go with that kind of stuff. You still have to have somebody there doing something.
Rob [14:48]: Right. I don’t see this as being a store with zero people in it. It’s probably a store with maybe 10% of the staff that you would normally need, or 20%. You know, some drastically reduced numbers. Because if you think about what Amazon does they do a really good job of cutting costs. That’s been their big thing is to drive costs down and get stuff to us very quickly. If you think about maybe the two guiding principles that Amazon has done since they launched in – whatever it was -’94.
I think that’s interesting to think about. You do still need to stock shelves, and eventually I could see them replacing that with some automated shelf stocking mechanism. I’m sure they have those in their big warehouses. But at first I would bet they’re going to have people in there doing it. And maybe at first they’ll have someone at the front door making sure nobody without pushing the button gets in. And maybe they won’t. That’s where it comes with these – they’ll run a pilot, and then it’s like launching an app, right?. You run your pilot, you see what happens, you see what people like and don’t like, you see what breaks, you see what needs to scale. Then I could see them automating things more and more over time, using human automation up front, and then with the big 10X, 100X thinking Amazon has, I can imagine that long-term they could feasibly want to completely automate these stores where there are zero people on site, but I would doubt that they would do that at the start.
Mike [15:59]: Yeah. In terms of the other logistics, you still have to get goods to the store. There’s a difference between shipping things to that location versus taking them in that location and then putting them on the shelves, or making them accessible for the customers. At Wegmans there was a fully automated and robotic warehouse, where – I forget how many thousand square feet it was – but it was just enormous. And they had, I think, two or three people there. And those two or three people were there solely to unload the trucks, put the pallets in certain places, and then machines would come and take everything and then stock it. Then when they needed something – they needed a pallet of whether it was frozen meat or what have you – they would just go over to a computer and hit a few buttons and boom, the Robots would basically go grab everything off of the racks and then pull it down and be able to deploy it so that the trucks could come in and pick that stuff up. It was fascinating that there was this massive warehouse and there was nobody in it. It was like a ghost town. It was very stark contrast to one of the other warehouses that we had in place there. I can see Amazon doing the same type of thing for, not just inside the store putting stuff on the shelves, but longer term. If you look at the way technology is going, you’ve got driverless cars. You could theoretically have a truck pull up and drop a bunch of stuff off, and then other Robots that would move things around inside the store. But I question how soon in the future that’s going to be. In terms of some of the technical considerations I’ve seen in this, there are questions about the item attribution and tracking. You had mentioned these a little bit it terms of the near field techniques for identifying items, or maybe RFID, or something along those lines. I could see a bunch of different ways that they could do that, but the question is how feasible is it to do that at scale? Pilot program will really eliminate a lot of those questions, or at least get answers to them, and it will help them figure out how to do things in the future. I don’t think that they’re really concerned right now on scaling that stuff. They’re just trying to figure out, “How do we fix this problem?” Or, “Where are the biggest problems that we have? Let’s prioritize those, and once we get to a point where we think that those are low enough then we can deploy this out further.” I don’t see that as any different than launching a new application or a new product. You have to figure out where those problems are, and then you get to the point where you say, “Okay, now we can start scaling this up. We don’t need a fulltime support rep, because we’re not getting the tickets that you would if you had launched it with problems.” One of the questions that comes up to me is, “What about the social implications of this?” And you had said with Seven Eleven this seems like a more upscale version of it, and kind of trends more to the Whole Foods type of store. But what are your thoughts on the social implications of a store like this? Is this something that you’re going to be able to make work in urban areas? Or does it have to be in a city? Are people going to be used to that type of thing? Are they going to get themselves used to it? Or is it something people are going to shun and say, “No. I don’t want anything to do with that.”
Rob [18:53]: I think just having the Amazon name on it. This is such a brand recognition thing. I think it will be a novelty at first. And I think if I saw one – the first time you see one, just like the first time you saw an Apple store, it’s like, “I’ve got to go check this thing out.” And if it’s a cool experience, and it delivers on what they say, I don’t see why you wouldn’t go back. But if that first experience is rocky, or maybe you give them two chances or something, I think it could be tough for them to gain traction, which I think is why they probably want to roll it out fairly slowly. I think that socially – this seems like just an urban thing. I can’t imagine rolling this out in a small town or something. But that’s just me. Just based on – it’s probably mostly based on the goods I saw in the ad itself. It just feels like something that that convenience, and that speed, and that transactional nature, I think, fits cities really well. People don’t necessarily want to take time to talk to the shop keeper like they might in a small town, so I do think this would be more urban oriented, and I think there’s plenty of room in terms of room for improvement in the grocery space. I think this could be interesting. There’s another implication here, and it’s of jobs. What about the jobs it will take away from people? I think there’s this whole conversation to be had around the idea of technology in general. It just takes jobs over time. It takes some, and it creates them. It “transforms” is probably a better way to say it. It takes from lower-skilled workers and it tends to create jobs for higher skilled workers. People protested – if you recall – the buggy whip manufacturers protested automobiles, and they said, “There should be no more cars, because they’re bad.” and it was going to put them out of business. And there were a bunch of strikes when automated, I think it was cotton gins, came out. The women who had done that by hand for hundreds of years. There were union strikes and all this type of stuff, and they said, “These things are evil, and it’s going to take jobs and you shouldn’t let them do it.” And so, you have to ask yourself this question is that, “Should we not have those things? Should we not have those advancements?” The same thing with factory Robots that are putting stuff together. They do take jobs, then they create jobs for people who can program and maintain the Robots, and they create other stuff. I think that is a thought process. It’s probably too deep into the weeds for you and I to specifically go back and forth on it in this particular episode, but I do think that’s something that’s going to start entering this conversation as they roll these stores out.
Mike [21:12]: Yeah, but I think that the idea of displacing the jobs, and really just moving those jobs from one place to another, is something to kind of consider here, because it ties directly into where would you put these stores? As you said, you kind of would probably tend towards urban areas, not towards the rural areas, and the urban areas are where those highly skilled workers tend to congregate. Part of the reason for that is that they tend to get paid more. The lower skilled workers don’t tend to live in the cities because it’s expensive to live there, and if you don’t have good marketable skills that demand that you get paid well for them, you can’t afford to live there. You can’t afford to live in New York City if you don’t make at least reasonably decent money, because New York City is way more expensive to live than other cities. So if you’re essentially replacing the jobs of those workers, and eliminating them, those people can’t really afford to live in those cities anyway, for the most part. Not to say that there aren’t a fair amount of exceptions, but you’re essentially displacing those skilled workers outside of the cities. It also ties back into Amazon having this awareness, or location information, about where their customers currently are, because they’re shipping to them already so they know what their addresses are, and they could use that information to identify, “Where is a good spot for a store?” I know when we worked at Wegmans they would spend a couple of years trying to figure out, “Where is the next store that we’re going to build?” And they would get all this demographic information from people, public sources. Try and figure out, “How much money do people make in this area? Is this going to be a profitable store? Or is it going to be a place where we’re going to lose money, or we’re going to have to shut it down? We’re not going to be able to do as many things as we want. Or are we going to be able to charge the prices that we want?” For someone like Amazon, if they can look at the average revenue per users of a particular area, and they know all this data around those people that says, “Hey, these people spend a lot of money with Amazon. Let’s put a store right in the middle of them.” Chances are good those people are going to shop there.
Rob [23:06]: Yeah. That’s the beauty of Amazon has your home address, and so they know the location of the people who probably spend the most on Amazon, or who buy high end things. They have big time information advantage over their competitors. I think one of the other social implications that I didn’t bring up when you were asking about that is that the store essentially requires you to own a smart phone, and that has some implication in terms of the income level of the audience, or the potential customer. And I think that’s another one there. They’re just basically saying that that is a requirement, and they know there are so many people with phones who are willing to spend the money. I think that’s probably a good bar to have.
Mike [23:44]: Right. One of the actual challenges like with a grocery store of any kind is that the margins on grocery stores, on goods that you buy at a grocery store, tend to be really thin. They don’t make a lot of money on most of those goods. They also have to deal with what’s called “shrinkage”, which is generally referred to as stuff where the goods are just damaged, or food spoils. Stuff like that. Those types of things count against the margins that you would make on most of the goods there. I think that because of their targeting at people who have smart phones, those people are going to tend to be better off financially, and are going to be able to spend more money, and they’re going to be willing to spend a little bit extra money in order to get the additional convenience that I think a store like this would operate. In a way that disadvantage, you look at that and say you can only target these people. Well, those people have money. That’s not necessarily a bad thing that you’re targeting those people with money.
Rob [24:41]: One thing I think Amazon’s doing really well here is they’re leveraging their brand. And I think if you think about what are the parallels in our space, think about someone like a Brennan Dunn, who has an email course, and then an ebook, and then a video course, and then a conference. And think of ‘Startups for the Rest of Us’ and how it has the academy, and I wrote a book, and you wrote a book, and we have MicroConf. We’ve kind of leveraged the trust people have in us. There’s a lot of examples of this online. But I think that’s something that Amazon has as an advantage, is that imagine in it wasn’t Amazon doing this, and if we heard that a brand new company raised a billion dollars in venture funding and they want to roll these out across the country. “A”, we wouldn’t be talking about it on this podcast, because it just wouldn’t be notable, and you’d be thinking, “This is never going to work. I don’t necessarily trust the brand. Are they going to be able to pull this off?” Whereas with Amazon they have deep pockets, they do things really well, they make things work that seem like they’re not going to work, and frankly, I by so dang much from them that, for me, it’s kind of a no-brainer to at least consider and at least give them a shot. I think leveraging that trust and that brand recognition is something that is going to do really well for them here.
Mike [25:49]: The other thing that is gives them is that the fact that they’re Amazon they have all these resources that they can bring to bear on it to solve all of the smaller issues so that when they do scale it up they have those issues taken care of. But you had just said, “Well, what would happen if this was some unknown startup who raised a billion dollars?” My first would be Webvan, which they rolled out a billion-dollar infrastructure back in the year 2000 and the whole thing collapsed on them. They just couldn’t make it work because the margins on groceries tended to be so low, so they couldn’t get all the delivery stuff taken care of. But by doing that pilot program, by concentrating on one thing, and leveraging their existing resources – which essentially provides them a runway. They’ve got billions of dollars coming in on a regular basis, and they can experiment with this one thing over here and see if it works; see if it’s something that they think is going to be able to turn into something big down the road. And if it’s not, it’s not a big deal. But if it is, then they can kind of put gas on the fire and push it for whatever they can get out of it in order to make it a long term profitable thing that they can roll out nationwide. And that’s really the key thing here, is being able to leverage your previous successes to future successes, and make sure that you’re doing things carefully in a way that it allows you to experiment without breaking the bank. If you don’t have that runway of some kind you’re really just rolling the dice, and it seems to me like Amazon is doing a lot here to hedge their bets.
Rob [27:13]: All right. So to wrap us up, what are the chances that you give this? That they roll this out, and they roll out thousands of stores and it becomes a big success?
Mike [27:21]: Thousands of stores?
Rob [27:23]: Is that their prediction? It’s like 2,000 stores by 2020?
Mike [27:25]: It’s wasn’t real clear. Those were kind of guesses that I’ve seen online.
Rob [27:29]: Got it. So maybe just say critical mass, whatever that means. That in most major cities when you and I go, maybe it’s not Starbucks level on every corner, but that it becomes a viable thing, like however many Apple stores there are, that there’s that many Amazon stores.
Mike [27:43]: Yeah. I could see that happening, and I could see that happening with probably the next four or five years. Whether they get to 2,000 stores in the next three years I don’t see that happening, because there’s a lot of competition out there. I could see them certain types of stores that are already in place and offering to essentially replace them. Go to the management and say, “Hey, would you like to convert this thing to an Amazon store?” But Amazon also likes to maintain control, so I’m not so sure that they would really want to do those types of partnerships. They would really just want to say, “Hey, we’ll buy you out. Or we’ll take over your space.” Something along those lines. They’re going to have to figure out what their profits margins on each of those stores are per square foot and find places where it really makes sense for them to do that in a way that can undercut competition around them and help make sure that the place stays in business. I say this is better than even odds. I’d probably say 60% or 70%. I’m hesitant to go higher than that, but given Amazon I’m also very hesitant to go less than 50%, 50% on it.
Rob [28:40]: Yep. I think it’s going to work. I am bullish on anything Amazon tries to do in terms of their ability to execute and do crazy big hairy audacious things. So I think that we will before long be seeing Amazon stores in a major city near you. And that wraps us up for the day. 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 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 319 | Questions about the Technical Side of SaaS
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike answer listener questions about technical sides of SaaS. Some of the topics include pros and cons of including marketing website in main codebase, SaaS quality, and re-engaging a cold email list.
Items mentioned in this episode:
Transcript
Rob [00:00]: In this episode of ‘Startups for the Rest of Us,’ Mike and I answer several listener questions about the technical side of SaaS, and we also talk about how to re-engage a cold email list. This is ‘Startups for the Rest of Us,’ episode 319.
Welcome to ‘Startups for the Rest of Us,’ the podcast that helps developers, designers and entrepreneurs become awesome at launching software products. Whether you’ve built your first product or you’re just thinking about it. I’m Rob.
Mike [00:31]: And I’m Mike.
Rob [00:32]: 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 [00:37]: Well, I think I mentioned a little bit in the last episode about some of the scaling issues I’ve been running into, and one of them I got kind of kicked into the groin this morning about. I logged in and checked in my server bill is on track to be about $500 more than I expected it to be this month. So I kind of have to drop everything –
Rob [00:53]: That’s not good.
Mike [00:55]: No. It could be one of two things. It could be just like I have the wrong size for the server. But my sneaking suspicion is that it’s actually a licensing issue. So I switched over from one program to another inside [Avisure?] and I feel like they’re charging me a heck of a lot more than I probably should be. Unfortunately, the billing cycle is already more than half way through the month, so I may have to just eat some of it which really sucks. But that’s one of the things that I’ve actually been probably more concerned about, is just am, “I storing stuff in the right way that I’m not going to get – I’m not going to run into this type of thing.” Because that’s my biggest concern is if I’m not actively in there looking at how much I’m paying for the servers every month then I could get whacked with this massive bill, and I just wouldn’t even really know it until it’s too late. And it’s like, “Okay, here’s your bill.”
Rob [01:40]: Yeah. That’s one of the dangers of this metered pricing. [?] the Google app engine. Something that I was doing for a while, when we were moving a lot of stuff around, and starting new servers and stopping, is I had a counter reminder. Every two weeks it would ping up and it would say, “Check AWS billing.” And it had a link right in, and so I would just log in and I would just look at the bill. And I knew sanity check about what it should have been each month, and so if we were a lot more than half that two weeks in, or we were a lot more at the end, then I knew we had messed something up. I did it every two weeks for maybe a year. I think I only caught something once, but it saved us probably $1,000 at the time. So that may be something you want to think about. The bigger danger – you know if it’s a mistake – because I’ve made several mistakes with AWS and accidentally purchased different things, and dropped $2,700 on some reserved instances that turned out to be not what we needed, like pretty gnarly stuff. But the bigger concern I have is, “Is this a mistake, like an accident? Or do you need that much in server costs in order for your app to run? Because that’s a much bigger issue, right. You don’t want to be paying out more than you’re making from your customers.
Mike [02:45]: Yeah. And, I mean, that’s one of my biggest complaints is just that the licensing behind everything in Azure – not everything, but in certain things inside of Azure, it’s very obscure. And so if you’re under one particular program with them – by program I mean like a licensing program. If you’re under one program with them, like you might be paying one amount. And then if you’re not under that, or if you’re on a pay-as-you-go subscription, you could potentially be paying four times as much for the exact same thing. And I’m just like, “I don’t have time to deal with this.” I don’t want to have to deal with this, but I have to. I kind of sucks. I don’t know. I have an email in to somebody at Microsoft right now to talk to them about it and say, “Hey, can we kind of move up the time table on our discussion about this.” So, I don’t know. We’ll see what happens here. But that’s kind of always been in the back of my mind that I need to pay attention to that stuff. And it’s just a distraction. You know?
Rob [03:36]: Yep. This is all the stuff that doesn’t provide any value for your customers, but you have to do it. This is like handling legal, EU compliance contracts. This is frankly handling HR when you get there. This is handling benefits and payroll, and even hiring support people, and it’s just expected [dev ops?] I see as that these are all required necessary things that if they’re not there, then it is a really bad thing. But it doesn’t provide value to your customer. It’s not about building the product. And so that’s the tough part, man, of kind of being bootstrapped, is if you had a bucket of funding you could at least hire some really good people because you could afford to pay them. And I’m not saying everything’s easier once you have that, but I see – as we started growing Drip, I really saw how having more money could make a big difference in how quickly you could move, because you don’t have to do everything yourself.
Mike [04:28]: It also allows you to ignore those problems that are at a smaller scale that if it was an extra $500 a month for three to six months, that’s not a big deal if you’ve got revenue and lots of customers to work with, because it just kind of evens out over all the customers. But when you’re still working with that really small number then it is a big deal, because you don’t really have the revenue yet to cover that and do lots of other things. So it’s a very different story. And I realized something when I thought about our episode last week where I was talking about some of the scaling issues. I went in and I looked at stuff, kind of based on that episode, and I was like, “Okay, yeah. I’ve really got to get passed this and just see what I can do to move forward, because I felt like I was turning my wheels a little bit, and I think even on the podcast it probably sounded a bit like that. So I went back and I started looking at things and I realized that what’s really happening – in terms of some of my scaling problems – is just a lack of visibility. Like I haven’t gone in and looked at certain things. It’s in the back of my mind, like that might be a problem but I’ve yet to go in and at certain pieces, looked at data, or taken measurements, or done anything like that. It’s kind of a lingering fear in the back of my mind, “Hey. You’ve got to pay attention to this, or you should go look at that.” But I just haven’t done some of that yet. And this is one of those areas where I haven’t gone to look at it and it’s in my mind as a scaling issue but nothing popped up as a problem until just now.
Rob [05:48]: Yep. I totally get it. So, for me, I don’t have a ton new this week. I’m actually flying out to Boston to speak at SaaSFest. So maybe I’ll see a few folks there. I’ve also got about three or four days of work that I’m cranking on. Something I forgot to mention last week in our goals episode was I did have a goal for DRIP revenue. And, I don’t know, I hinted around about it and didn’t say it, but I kind of wanted to say it so that it’s like on the record, and that I can revisit it next year and talk about whether we hit it. But I think we can 2x DRIP’s revenue again in 2017. This is a tall order now, right, because you’re talking large numbers. I’m talking about going from –
Mike [06:24]: Five customers to 10. Is that what you’re saying?
Rob [06:26]: Five to 10. Yeah. We’re talking about something bigger than that. So I wanted to put that out there and realized that I kind of wanted to get that on the record so we could cover it again in 12 months.
Mike [06:36]: Awesome.
Rob [06:37]: Today we have a bunch of listener questions. We’re getting some really good listener questions, and I kind of wanted to do a little theme episode where the first four really are – they’re kind of the technical side, technically related questions about software as a service. And so, our first two come from Ray Smith. And he says, “I love the show. I started listening at the very start in your first 20 or 30 episodes. Then I started a non-software business and I’m getting itchy feet to get back into software and I’ve been listening for the last couple of years. A couple technical questions.” So his first question is, “When creating a SaaS app, what are the pros and cons of having your marketing website and the actual SaaS code base combined into a single project?” I’m assuming he means like a GitHub project. Like same repo, right? Or if you’re in dot net, it’s an actual project. Stuffs not broken out. The idea is that when adding features, changes or bug fixes at the SaaS app, you can then update the sales website at the same time and push all changes in one go. So he’s saying there’s a lot of pros to it. What are the cons? Do you have thoughts on this either way, pros and the cons?
Mike [07:38]: I think both of them are a trade-off. I think that it’s perfectly legitimate to either have everything all in one project or to separate them out, and I can think of pros and cons for both of them. If you are going to integrate everything I think I lean more towards the cons for each of them, and it’s more of a, “Hey, just make sure you’re aware that these are the limitations, or that these are the types of things that you’re going to run into.” If you have them combined, then you almost need a developer to make any sort of marketing side changes, and that is not necessarily the greatest of positions to be in once you’re, I’d say, down the road a little bit. The other thing is that you are limiting the technology stack that you’re marketing site can be in. I know that a lot of people tend to go in the WordPress direction for their main marketing website, because it’s just so much easier to make changes and you don’t need a developer to do it, versus if you integrate that directly into your website, let’s say that you need to make some changes solely for SEO purposes. Well, then you’ve got all those things intermingled a little bit, and it makes things more difficult to deploy just because of the fact that you’ve got to push those marketing site changes and you have to push the app changes at the same time, and because those things are comingled you have no other choice. It’s very difficult to push them separately. Now, you can split them out into, let’s say, different projects for example, or you can deploy them into different directories and something along those lines, but it still runs into the future problem of having to bring somebody on who may be doing marketing, but now you have to have a developer go in an actually make the code changes. Those are, I would say, probably the biggest cons to it. If you do separate them, that problem tends to go away, but there are advantages to having them kind of all linked into the same tech stack. One of its which is like your signup process. You don’t have to have somebody go from one domain to a different domain to sign up. The other thing is that if you have them in separate in technology stacks, or even separate servers or sites, then you don’t have to worry about redirecting somebody from one site to another and then losing some of your tracking mechanisms for having them signup and then go to a different subdomain, for example. So I’ve run into this with Bluetick where my main website is on Bluetick.io, but then the app itself is on a subdomain. So in terms of where I have people sign up, I want that to all be done on the main marketing site, but because it’s a different technology stack than the backend application now I have to figure out, “Okay, how are they actually going to go through and signup? And how am I going to pass that information over the wall to the backend to have it do its thing so that they can login when they get to that point?” There is the cookie situation where you’re trying to track things with you various marketing tools. You want to make sure that people go through your sales funnel. But, again, those are things that you can do. You can get around them, but it’s just a lot of issues you’re going to have to be aware of.
Rob [10:29]: Yeah. I think you outlined it pretty well. I think when you first start something, I’d probably have them combined. But, boy, we hit a place where we were going to have to devote engineering time to breaking them apart. And once I brought Zack on who was doing growth marketing for us, he wanted to run all these split tests. He wanted to do things and we couldn’t. We were limited by the fact that the Rails marketing site was tied into the source code of the project, of the actual application. So I think if I were to do it all over again, I actually would probably split them apart now that I’m thinking about it. There were a bunch of shared styles. There were reasons for doing it, but I think, in the end, you’re going to want someone to be able to do stuff on the marketing site. And if you build it from the start and they’re already separated, then you don’t have to come back and try to separate it later. Because it was just hard for me to justify spending two weeks or whatever to rip it out. And, in the end, when we were acquired by Leadpages, that was one of the first things that they did. They essentially recreated the site over on a new domain and now we’re at Drip.co. It was a great move, because they do a ton of split tests. They change a lot of things very quickly. They can just iterate and go quickly. I think, overall, I would probably vote towards having two separate projects. You can have two repos, and you’re just going to want to deploy them together, or you can use some type of CMS if you want to. Ray’s second question is, “How do you handle data protection? Not security, but not losing customer data? I know you can do database backups daily, etcetera, but are there any good options for doing live backups almost instantly to an offsite location? One of my greatest fears is losing customer data.”
Mike [11:55]: This is such a technology dependent question. I mean, because if you’re running Windows in Sequel server, then you’ve got one set of answers. And if you’re running MySQL and using AWS, it’s a completely different answer. And then in addition to that, if you’re using any sort of key value parastorage from either AWS, or Azure, or Rackspace, or any of those other providers, then you have this secondary set of data that is not in a database, but it is important to have that along with your customer data. I don’t know how to best answer this just because it does depend on those things.
Rob [12:30]: I actually think the answer for any relational database is going to be the same. And I think your right for key value stores like [Retis?] or whatever, I would argue that most people use those for caching, and that it you don’t necessarily need to back them up unless you’re using them to perpetually store things.
Mike [12:45]: It depends on what you’re doing there though. In Bluetick, for example, I store copies of header information from emails that I’ve synchronized from their mailbox.
Rob [12:54]: Okay, so you store them in [Retis?] or in a key value store?
Mike [12:56]: Yes.
Rob [12:57]: Got it. So then that you’d have to back up. Now is that writing to disk every minute or two and then you’re sending that off to the equivalent of S3?
Mike [13:04]: It’s synchronized. It’s the equivalent of S3.
Rob [13:06]: Okay.
Mike [13:07]: Yeah, I would say it’s kind of like that. The cache doesn’t go away when the machine restarts or anything like that. It’s just a long-term data storage. It’s basically like a non-sequel database is more or less the best way to describe it.
Rob [13:20]: Right. I think his concern is – he says, “I know you can do daily backups, but can you do stuff that’s more up to the minute – instant backups?” And any RDBMS has log files, right? And if you’re putting those log files to multiple drives – now maybe they’re not offsite instantly – but you can basically do a point-in-time restore using those log files, right?
Mike [13:40]: Yeah.
Rob [13:40]: And that should work for MySQL and Sequel server and PostgreSQL and all those.
Mike [13:44]: Yeah. That’s generally how you would do it. For the longer term storage stuff, even in AWS or Azure there’s multiple ways of having that data be sent out. Usually you can use some sort of location specific storage where you’re going into a particular region of the country, or a specific data center, or something along those lines. The other thing that you could look into is having essentially a multi-site fail over. Now, that’s not something that you want to get into on day one –
Rob [14:11]: Yeah, you’re way out ahead of Ray.
Mike [14:12]: Yeah.
Rob [14:13]: Ray’s talking about whether to have his marketing site with his app at this point.
Mike [14:19]: Yeah.
Rob [14:19]: I think that you wouldn’t even want to think about that at this point. I think, “A” if you have two hot swap databases – or not hot swap – but you have a main database, and then you replicate out to a second fully developed database, a backup that’s essentially hot and sitting there at any time, that’s you’re instant offsite backup, in essence. Or if you put it in another zone or something. That’s probably the safest way to do it. But I don’t think you need that at the start unless you’re dealing with really critical stuff. I think having your log files put to multiple drives, and written out to S3, and then having a daily partial backup, and then it’s a weekly full backup. This is the standard stuff that DBA’s would do. That’s going to get you a lot of protection up front. You don’t want to over-engineer your SaaS app when you have 20 customers or whatever. And then I think down the line, at some point, you are going to want that fail over in case something crashes. But a lot has to happen for all of that to be gone.
/// [15:13]
Mike [15:12]: Yeah. And most databases that I’ve seen you can go down to like an hourly backup that’s just a partial backup, and then you do a daily backup, and then you do a weekly backup. So you take your weekly’s, you put them offsite, and then you do your daily’s, and then your hourly’s are based off of your daily’s. So at most you would have to put in – let’s say it fails on a Friday – you’d have six days’ worth of daily backups to apply, and then you’d have however many hours of hourly backups to apply. Which is not, you know it sucks, but it’s not a huge deal, and you’d at least have that hourly snapshot.
Rob [15:43]: Right. And Ray, that’s advice from two guys who are not DBA’s, who basically know just enough to be dangerous.
Mike [15:50]: Well, I actually know more than a lot of DBA’s that I’ve met. I do agree with Rob that all the stuff I started talking about with being able to store your data in multiple geographic locations, I wouldn’t even worry about that stuff. I would just go with the hourly backup at the most, and then just work from there. If something crashes, if it’s some customer data, it’s probably not that big a deal. Especially if you only lose like an hours’ worth.
Rob [16:14]: I don’t know that I’d say not that big of a deal. I do think it will be a big deal if it happens. Just the odds of it in the early days when you have a small amount of customers, it’s just not that likely to happen. And so, you’re right, you need these backups. You want to be able to restore from them. You don’t want to lose data. But there’s always this knob you can turn of how far do you go when you only have a handful of customers.
Mike [16:35]: Right. The one thing I would point out – because I’ve seen this happen to somebody before – is test the backups. Make sure that you can restore them, because I’ve seen somebody’s business be completely destroyed because they thought they were doing backup and they weren’t, and their backups didn’t work. They not only lost their entire database, but they also lost all of their customer’s information, and the way that they get in touch with all their customers. It was all gone.
Rob [16:58]: Pretty crazy. I remember that. Our DBA does that once a month. Takes all the backups and restores them onto a server and queries it and shows us the results. It’s kind of nice. Our next question is from Roger in the UK. And he has a question about a SaaS app accessing a corporate database. So he says, “I have an idea for a product which I’d rather implement as SaaS rather than the client installing the application, because the software’s complex, it’ll be updated regularly, and therefore, the client installing it would not be practical. However, it would require access to the corporate database of the customer. How easy is it to get a client to provide the database name, user ID, and password to a SaaS app so it can access their internal relational database?” Mike, did you cringe when you read this? There’s just no chance – the answer is there’s no chance ever that this will work. No chance they’re going to give it to you. Not only are they not going to give it to you, even if they created a read-only login. You’d never make your database to the outside world. You don’t open the firewall ports to it. So, I think it’s probably more useful to talk around what are the other options, because you’re not going to have any customers if you do it this way. Do you have other ideas, maybe, for how Roger could approach this? And if he needs access to their data, how he can do that? I also think we should probably discuss whether it actually needs to be a SaaS, you know, or they need to perhaps install it inside their firewall.
Mike [18:22]: I think that was what kind of came to mind for me. You almost need this piece of software that’s in their environment that’s running, that is separate from the database. And the closest thing that I’ve seen to this type of model is where you’re essentially providing somebody a virtual machine that they can put into their infrastructure that acts more as an appliance than anything else. And that’s probably the closest thing that I’ve seen. But I don’t know as you would get somebody to hand over the database name and credentials and stuff like that, unless it was to go into something like that where it is reaching in, it’s accessing the database, but if it’s an existing database, that’s a totally different story. I’m getting the impression from the way that this question was phrased that this is acting on an existing database, and it’s providing statistics and queries and additional indexing of the data that’s in there, which is a different type of problem that you’re solving then if you simply need the customer to install a database in order to run your app. So those, I think, are two very, very different situations. Now if it’s the first one where you’re trying to analyze their existing database, you really need to have some sort of a downloadable piece of software. And if they want the latest features you’re going to want to have them update.
Rob [19:34]: Or you could build and auto-updater in it, right? Something that helps manage that, and it allows them to pretty easily update. It depends on how complex it is, but this is not out of the realm of – like .Net’s gotten pretty good at being able to auto-update desktop and server apps.
Mike [19:48]: That’s problematic though just, because of the issues that you’re going to face with like user access control in Windows. It’s actually gotten much more difficult to do those types of things.
Rob [19:57]: Yeah. When I say “auto update,” I don’t mean in the background.
Mike [20:00]: Okay.
Rob [20:01]: I mean that it pings the add man and it says, “Hey, it’s time to update.” One-click update. Maybe that’s what I meant.
Mike [20:05]: Okay. Yeah.
Rob [20:06]: That is what I meant. I meant much more of that, where they don’t have to download this big zip file and read a bunch of instructions and run command line things. They click the button, and as long as you give it the user access control stuff, it’ll go out and download it, and verify, and install the MSI, or whatever.
Mike [20:22]: Yeah. Simplistic updated –
Rob [20:24]: There you go.
Mike [20:24]: – versus auto updating.
Rob [20:26]: Yep. That’s a good point. The other idea I have here is, I don’t know to what extent Roger needs his code to be able to access their database, but it just depends to what extent. If he needs to run queries across millions of rows, then yeah, he really does need direct access. But if not, and if you’re just pulling users out to look at something or you’re just pulling different things out, you could either ask the corporations to build like a small rest layer – like a little API on top that you’re hitting from the outside – or build it for them. If all of your customers are going to be running Sequel server and they’re all going to be paying you a tremendous amount of money – let’s say the average contact value is $50,000 a year, or $100,000 a year, then build a single rest API layer, and you know that it’ll run on Sequel server. And if they’re running Sequel server, they’re probably running .Net so you build it in C#. And if you’re on PostgreSQL then maybe you build it in PHP or in Python or Ruby. But you pick a language where you almost lay something on top of it, and it accesses it and then is a couple to communicate it, like as a “conduit” is probably the best word. They would still have to install that piece but it’s a server piece that’s just communicating out through, obviously, a highly secure mode of communication, encrypted and SSL and all that stuff.
I still think you’re going to run into people who don’t want to install stuff on their servers but, again, it really depends – without knowing more about the idea. Because people do install monitoring software on their servers. They’ll install NewRelic, or they’ll install Redgate. So it’s not that it never happens. It’s that you need to “A”, get the credibility and, “B”, really tell people what they’re installing, and what it’s going to do on their servers. And if it’s going to provide them a lot of useful information, I do think that you can get some people to agree to do this.
Mike [22:04]: There’s a big difference between installing something like a server performance monitoring software, and something that goes into the core of the database and pipes any sort of data outside of the local network. That’s a big problem. Those are two entirely different things, and any DBA is not going to want to do that.
Rob [22:21]: That’s right. Any CTO won’t want to do that, unless the value proposition is there and it’s worth it. I mean, that’s the thing. Without knowing what this idea is, are there other companies that are already doing this, and doing it successfully, and it’s the standard for this type of application. What if it’s offsite backup software? Yeah, they’ll probably do that, right? Because that’s the whole point. It needs to back it up, it needs to send it off site. But you’re right, if it’s a time tracking app, then the odds of that are much, much less.
Mike [22:52]: Yeah, but even you get to a certain level, or certain scale, with the type of customer that you’re targeting, they are going to want to be able to control those things in house. They’re going to want to install them themselves. And even with an offsite backup, there’s companies that do provide appliances like that and they just buy multiple appliances and they point them on opposite sides of the country and it just propagates the backups from one side of the country to the other. And the companies are willing to pay tens of thousands for each of those appliances and it maintains in their control. They don’t necessarily have credentials to all the core stuff inside of it, but it’s an appliance. They own it. They can do whatever they want with it, and they control where the traffic goes. It’s not like it’s reaching out to some external service that they need to completely control all the traffic going into it and out of it.
Rob [23:37]: There you go, Roger. You heard it here first. If you’re building an offsite backup engine, we’re recommending using an appliance, or at least having a better chance of doing it. Now I think that depends if your certain clients are willing to do that. Certain clients of certain sizes. I think if you talk to a small or medium-sized business – let’s say you talk to a dentist, who has a couple servers running something. Or you talk to a 30-person law firm who, definitely has IT folks and definitely has servers, but are they going to be willing to pay $20,000 a year for an appliance? Or would they perhaps prefer there to be a less expensive option for getting offsite backup. So that’s where I think if you choose your customer wisely, you could potentially find folks who are willing to deal with some of these different options we’ve thrown out. Our next question – it’s our fourth technical SaaS question, and then if we have time, we’ll move onto another. This one is from John Buford. And he says, “Hey guys. In episode 311 with Derek Rhymer, you mentioned “SaaS quality” several times. Can you describe how you measure or quantify SaaS quality? Is it based on the code base, or is it more aligned with overall business in terms of MRR, low churn, big list size, etcetera? Are the differences in quantifying SaaS quality as viewed from a seller of a SaaS app versus the buyer?” This is not a common term. I just happen to throw it out and say [?] is a really high quality app. And all I meant by that was the code base was pristine. It had a tone of test coverage. Zero or very, very few known bugs, modular code, really good coding standards, the deployment and architecture are all set up. Just everything you would want as a developer from a code base was there. In addition, it looks really nice. The design is really nice. It just feels like a high quality app. That’s all I was referring to. I don’t know if anyone else’s definition would be the same as that, but I was not talking about financials, or churn, or big list or anything like that. It really was specifically from more of the technical side of things. Moving on to our next one. We have a question from Chris [Cottom?]. And he says, “Hey guys. You’re both now working on businesses that deal with tons of email, so maybe you’ll have some insight into this question. Do you have any tips for reengaging with an email list, or with leads with whom you haven’t communicated in a long time?”
Mike [25:51]: Yeah. I think that if you’re trying to reengage with people then you’ll probably want to, I’ll say, prep the email engine a little bit, and have at least some idea of what it is that you’re going to be sending them down the road. So let’s say you got a couple thousand email address that you haven’t touched base with in, call it 10 months, for example. In a situation like that you probably want to map out what it is that they originally signed up to the list for, and try and translate to say, “Okay, we’ll how do I get back on track with that? Where did things go wrong? Why did they go wrong? And how do we get back on track with that?” And map out the next half dozen emails that are going to be sent. Now, I don’t think you need to write all the text for each of those six emails, but you at least need to have a conceptual level of what the bullet points are that you’re going to cover over the course of those next six emails, and when you’re going to be sending them. Because the last thing you want to do is send out an email to those people to kind of reengage with them and then drop off the face of the earth again. I would start out by doing that, figuring out what it is that you’re going to say to them. And then, in addition, the first few emails that you send out to them to kind of reengage with them, you probably want them to be a little bit shorter than you otherwise would. Try and provide some value up front. You don’t want to just launch into a sales pitch, for example, because it’s been a while and they haven’t seen emails from you. You don’t want to lead with a sales pitch at that point.
Rob [27:10]: Yeah. I think what you said was good advice, and I think you want to provide a lot of value in that first one. This is a make or break moment, and you’re not going to get most of the people back, but you really have to be sure you explain why you’re contacting them; why they were originally on your list. And then give them something free that should otherwise cost money. Or give them a really great tip. Or give them something – depends on at what scale you’re doing this. Are you doing this to 10 people? In which case I’d do some very custom something or other. Review their website or something. And if you’re doing it for 10,000, you can’t do that, but you can give away an e-book or video course or something that is of quality to basically apologize and get them back.
Mike [27:47]: It gives them a reason to stay on your list, is really what that is.
Rob [27:50]: Yep. That’s right. There’s a whole other topic. Originally when I read this I thought it was for reengaging people who are on your list but who just haven’t opened emails in a while – kind of people who have disengaged. But there’s a really good workflow for this in the knowledge base. We go to KB.getDrip.com and search for I think it’s like “reengagement.” There’s workflow blueprints there. There’s only maybe 20 of them, so it’s easy to flip through. In essence, it sends them an email and it just says, “Hey, I’ve noticed you haven’t opened emails in a while. I’m going to unsubscribe you, basically, and if you don’t want to do that, click this link.” And you get a small portion of people to hang around and reengage a bit. The good part about that is you’re actually increasing your sender reputation by doing that because, these days, Gmail and Yahoo and these ISP’s, they look at the domain that it’s coming from, and if your open rates are crappy then they start penalizing you and sending you either into spam or into the promotions tab. So keeping that high is a good thing. In addition, it can cut down on your costs. If you unsubscribe those people, then you’re paying your ESP less money because you have fewer subscribers but your open rates will be a lot higher. That’s a good question. Thanks for the question, Chris. I hope that was helpful. Our last one is from Ali, and it’s a question about whether email lists are really relevant/effective in the US. He says, “You’ve mentioned email lists for marketing and sales throughout many episodes, and it made me wonder are things really this different in the US? I’m from Saudi Arabia. If I would ask my colleagues who work in sales and marketing about using email lists, they would not even entertain the idea – not even as a last resort. From my experience, if you send unsolicited emails – and “unsolicited” is the key here – unsolicited emails they will end up ignored or deleted, and if you persist, your domain probably will be blocked altogether. It’s all about knowing the right people in a [?] organization” and some other stuff. It feels like maybe he’s confusing kind of cold outbound email versus spamming, versus opt-in marketing lists. You have some thoughts on this, Mike?
Mike [29:42]: Yeah. Well, as you pointed out, the whole difference between unsolicited emails and things that people have opted-in to because they want to hear more about a particular topic. That right there is the fundamental difference between those two things. I will say that there is some semblance of certain types of cultures would probably shy away from certain sales techniques. And you can even translate this not just into cultures, but different groups of people, one of them being developers. Developers tend to not want to call people on the phone. So those type of people will tend towards email lists and other types of marketing efforts which don’t involve them getting on the phone and actively talking to a prospect versus that email list. It’s much easier for them. And then if you take that the other direction, you can say, okay, what about an inside sales rep. They’re used to being on the phone all day. So their natural inclination is to pick up the phone and call people. I don’t think that it’s a whole lot different whether you’re talking about different groups of people, or different cultures, they all have their natural tendencies to do one particular thing. But that doesn’t mean that it’s always the right thing for every situation. You do have to take it into context a little bit. But the fundamental thing is just unsolicited versus opt-in.
Rob [30:56]: Right. That’s a big one. That’s kind of building that prelaunch mailing list. Now there is this whole other branch of essentially B2B cold email. So there’s the CAN-SPAM Act in the US. And, obviously, if you’re sending bulk unsolicited email to consumers, that’s illegal. And there’s no way around it. I’m pretty sure if you send individual cold emails pitching a service or something, that that’s illegal. I don’t know enough about cold email, because we don’t allow it at Drip. But I do know that B2B there is a carve out in CAN-SPAM where if you’re sending like a direct, one by one emails from one business to another soliciting stuff — there are companies like LeadGenius and LeadFuze – where I’m an angel investor – and that’s a little cottage industry that’s formed around sending cold email outbound one at a time to prospects. And that has had success. There are entire books, like “Predictable Revenue” that are written around this concept. You probably have some thoughts on this, Mike, having worked on Bluetick now for the past six to 12 months.
Mike [31:55]: Yeah. I looked into this pretty extensively because that was one of the questions that came up early on. Not only did I have it, but there were people who asked me specifically. This is more applicable directly to the US because of the CAN-SPAM Act, but there are three general classifications of email. The first one is the commercial one. Most people are more familiar with this because they think if of it as the spam laws that people are running afoul of. So there’s the three different categories. There’s the commercial, and then there is the transactional emails which is if you purchase something from someone, they can send you a receipt; they can send you follow-up emails, let’s say, for you to download something. It’s generally the emails that you would send to somebody in the course of doing business with them. And then there’s this third category which is called “other.” And the documentation that I saw literally called it “other”, which is interesting because they don’t put a very good definition on any of them. They specifically say that for commercial, you’re emailing somebody in an effort to sell them something. But if you, let’s say, send somebody an email and ask them, “Hey. Can we set up a meeting? I want to talk to you.” That’s not considered a commercial email. That falls into “other.” Pretty much anything that’s non-transactional, or isn’t directly pitching something for somebody to purchase, falls under “other.” So it becomes this very grey area where you get into that situation and it’s like, “Okay, well, this one might be spam. This one might be considered commercial, this one might be considered “other.” Transactional is the one that’s really well defined. The other two are not. And it does depend, I think, a little bit more on whether or not you’re emailing with a business, versus an end-user or consumer, so to speak. But there’s a lot of grey area there that people work with, which is kind of the reason why the ESP’s are the ones that tend to be the people who are enforcing that – not the Google’s of the world or other mailbox providers. They don’t necessarily care as much, because if you get your domain banned, they’re not the ones who suffer for it. But with the ESP – you’ve run into this with Drip – it’s your IP addresses that are at risk. Not the customers. That’s really why those ESP’s really crack down on those, and really want to make sure that you are not sending bulk spam because they’re the ones that are penalized for it and all their other customers. There are revenues at stake.
Rob [34:09]: Yeah. That’s right. You look at MailChimp or Drip and we have entire massive algorithms. I won’t go so far as to say their AI, but it’s machine learning stuff that’s looking at listed or being imported. It’s looking at different signals that people signup behaviors in the app. Certainly the open and the click metrics and spam complaints. We have this whole network of we’re approaching a couple dozen signals that we look at over the course of the lifetime of a customer, all the way from the first time they entered that form all the way through their sending and we flag a lot of people and manually review them, and we always try to educate, to try to help the customer understand what they’re doing. But when you have IP’s and sending domains that you’re worried about, this is the stuff you have to have in place or else, as Ali originally mentioned, if you were sending unsolicited, then the stuff will get marked as spam and then your IP’s get dinged and then you can’t get into people’s inboxes any longer.
Mike [35:01]: Right. According to the official guidance from the CAN-SPAM Act, if you go over to FTC.gov, they’ll spell out certain things. They kind of boil it down into seven points. One of them is don’t use false or misleading header information. Don’t use deceptive subject lines. You have to identify it as an advertisement. Telling people where you’re located, giving them a capability of opting-out of future messages. But again, these are for bulk emails. And if your sending individual emails, it kind of falls into this very, very grey area. If I send out 10,000 emails – or even, let’s say 100 – it’s a very different story than if I send out the same email to 35 people and I individually click send on each of those. It’s treated differently. I also think that because of all the grey areas there, you’re in a different world when it comes to interpretation of what it is that you’re doing. And if you were to send out 10,000 of them you’ve got 10,000 possible sources of complaint. And that kind of puts you in a much higher risk category, I would say, then if you’re just emailing a few people here and there. Or even just 1,000 people but it’s over the course of a couple of months or a couple years or something like that. It’s a very different story.
Well, thanks, Ali. I hope that answers your question. And I think that about wraps us up for today. 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 at 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. We’ll see you next time.
Episode 318 | Our Goals for 2017
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike make their goals for 2017. In addition to setting their new goals, they also talk about last year’s goals and how they did.
Items mentioned in this episode:
Transcript
Mike [00:00]: In this episode of ‘Startups for the Rest of Us,’ Rob and I are going to be talking about our goals for 2017. This is ‘Startups for the Rest of Us’ episode 318. 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 [00:26]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, Rob?
Rob [00:30]: The word is iTunes reviews. We have 510 worldwide reviews. A recent review is from a username that’s a lot of numbers and letters so I’m not going to pronounce it. But it’s just from a couple days ago. It says, “Great information but why do they talk so fast? Their podcast sounds like it’s being played at 2x speed and it’s annoying.” What do you think, Mike?
Mike [00:49]: I don’t know. I always play it at 2x speed anyways, so.
Rob [00:49]: I’m the one that talks fast. So here’s the thing. I actually do listen to it at 2x speed. We don’t speed the podcast up at all. I think maybe I just talk too fast. Because I don’t feel like you talk nearly as fast as I do.
Mike [01:02]: Yeah probably. It’s weird but I’ll talk to people whose podcasts I listen to and I have listened to their podcasts on 2x speed so when I talk to them I naturally expect it to be at 2x speed.
Rob [01:12]: Oh, I totally agree. So anyways, we love reviews. We don’t love it when you call us annoying. But we would appreciate if you could log into iTunes, click five stars. You don’t actually need to leave feedback or sentences or type anything. Just hitting that five star would be super helpful for us. Keeps us motivated to keep going and helps us get found in iTunes. On another note – quick Drip update – we’re hiring another person to help with – is such a task. It’s really our first non-developer hire. We’re hire someone to help with deliverability and kind of compliance and a bunch of internal stuff that’s currently spread – like I do some of it and Derek does some of it and our support team handles some of it. And it’ll be nice to be able to get that under one roof. So I think we have our number one candidate all chosen and should get that going here within the next couple weeks. How about you? Do you have any updates?
Mike [01:57]: Well, I got an email from Tyler Tringas, who reached out to me because there was a podcast episode we did a few weeks ago where we talked about some of the different books that were out there in the bootstrapped area. And he said it sounded like we were having trouble coming up with books that were kind of written in that space. And he’s got one that he wrote called ‘The Micro-SaaS eBook.’ And it’s actually being released for free from his blog. So if you go to microsaas.co. We’ll link that up in the show notes. But you can get it for free. It’s aimed at first-time SaaS developers. I looked through it. He’s got four chapters out there right now and I think he’s shooting for 12 or 13. But it looks pretty good. It’s definitely a good resource for anyone who has never developed SaaS before. It has some solid advice in there about what sorts of things you should just completely avoid. And it’s based on his experience building a Micro-SaaS of his own on the side where he built it up to, I think, $250K in annual revenue and it was for store mapping. So if you have a bunch of stores that you want people to be able to locate and put that map on your website then he essentially provides the capabilities to integrate that onto your website and allow people to search for the different store locations that you have.
Rob [03:04]: Very cool. So I was thinking today – it was actually over the last few days – you know, coming up in the late let’s say 2008, 2009, 2010 I was just all – and even before that – I was all about being solo. I think I’ve mentioned this maybe briefly before. But I think that working in an office and working on development teams and working for managers and stuff, I just didn’t enjoy it. And so I kind of turned that into this thought of I just want to be solo; and I don’t want to manage anybody; and I don’t want to work with anybody; and I want to be off on my own doing things. And then over the course of time, I found that I just couldn’t do bigger things when I was completely on my own. Even with a team of eight contractors or whatever. And so eventually I wound up hiring folks as HitTail grew and then as we grew Drip. I mean, it’s a really different way to approach building software. But the realization I had today was you know, last week several of my team members were out of town. Anna and Derek specifically were out for several days for Thanksgiving and so was I. I didn’t see them for about a week and then they were gone Monday and Tuesday and I was in the office and realizing like I actually really don’t like doing this solo thing anymore.
[04:05]: It’s been an interesting transition for me of how much my enjoyment of work now is about having teammates; and about doing things with the team; and working with people; and helping them do their best every day and helping them excel. And then they, I think, in turn do the same for me. They kind of motivate me to do it. So, it’s kind of a random realization. But I’ve been thinking, you know, obviously if I think years down the line and I think what am I going to be up to – I don’t honestly know if I want to do another solo thing where it’s just completely me because so much of the fun and actually so much of the biggest epic realizations and the big breakthroughs that we have tend to be when I’m talking and working with another person or two other people and we’re having these in-depth conversations. Kind of like the breakthrough Derek and I had a couple weeks ago. That just wouldn’t have happened on my own. I don’t know. It’s kind of an interesting thought process. What do you think about that?
Mike [04:55]: I wonder if that’s more of a factor of what your historical experience has been when working with other people. I mean, your last job was working for the City of Pasadena, wasn’t it?
Rob [05:06]: I worked there and then I worked for a credit card company in Los Angeles for a couple of years.
Mike [05:10]: Yeah, that sounds fun. No offense there but –
Rob [05:13]: Yeah. For sure.
Mike [05:15]: Looking objectively at both of those and, granted, in at a very, very cursory level it sounds to me like you probably weren’t necessarily working with people who inspired you to do better and were working on things that were extremely interesting. So, I would almost attribute that to where you came from and what your background was. It feels to me like you would have just changed what your viewpoint was based on “Oh, now I’ve got this team, and I’ve liked them, and I hired them, and we fit together well.” Versus, you know, you come out of this environment where you either don’t enjoy the job or the management and you’re just not having a good time. And you’re like, “Oh, I hate people. I want out and I want to go do my own thing.”
Rob [05:54]: Right. I realized that it’s not that I hate working with people. It’s that I hate working with the wrong people.
Mike [05:59]: Yeah.
Rob [06:00]: You know? And finding the right people really changed the game for me.
Mike [06:02]: I was trying to put it in a very polite way.
Rob [06:05]: Yeah. How about you? Anything else you’ve been up to this week?
Mike [06:08]: Well, I ran a last minute cyber Monday sale for my book and sold quite a few copies. I shipped out a lot of the physical copies of the book several days ago. And one of the things I found out was I was looking through the people who bought it because I had to go through and fulfill the orders for the physical copies because I have them printed on demand through CreateSpace. And one of the people who bought it actually lives right in my town. I have to reach out to him at one point.
Rob [06:33]: Yeah, that’s cool.
Mike [06:34]: It was interesting. I was kind of shocked because I was going through and was like, “Oh, I’ve got to send one to -“ wait. He’s like five minutes from my house.
Rob [06:41]: Yeah, totally. Got to get together for lunch.
Mike [06:43]: Yep. The one thing I have started to run into if anyone knows of a print on demand service for printing and sending out books that allows you to just upload a spreadsheet of those – because when a bunch of them come in it’s kind of a pain in the neck to actually go through so if anyone knows of something like that definitely let me know. I sent an email into CreateSpace’s customer support to see if I could just upload a spreadsheet but it’s kind of a pain in the neck.
Rob [07:05]: Yeah. I agree. Or something that integrates with Gumroad. Because I ran into the same issue with – my 10-year-old wrote the ‘Parent’s Guide to Minecraft’ book and whenever a new order comes in one of us has to go and manually enter it into CreateSpace to print it out and it seems like there should just be a better way. Like an API or something.
Mike [07:22]: Yeah. Like I said, I emailed them and asked them if they had any information on how to do that but it would be nice if there were other options out there that just kind of integrated, as you said, directly into Gumroad so that it’s all completely hands-off so I didn’t even have to worry about it.
Rob [07:33]: Right. And to be honest, when copies of my book ‘Start Small, Stay Small’ come through, I actually do have a VA who does that for me. And basically when I get the purchase conformation I forward it over to the VA and say, “Please send this book.” And you know the address is right in there so. It’s human automation. It’s not ideal but it could save you some time if you get 10, 20 orders like that again.
Mike [07:52]: Yep.
Rob [07:53]: So, what are we talking about this week?
Mike [07:54]: Well, we are going to be, I think, revisiting our goals from 2016 and looking to see how we did on them. And then discussing a little bit about our 2017 goals.
Rob [08:02]: Yeah. We’ve done a goals episode, what do you think? Four, five years in a row?
Mike [08:06]: I think so. Something like that.
Rob [08:08]: The podcast started in 2010, if I recall. So I think we’ve done it most of the years. It would actually be interesting to kind of look back at all the goals we’ve had over the years. Do you think it would be happy or like the Boulevard of Broken Dreams to look back over those goals?
Mike [08:21]: It depends on whether it’s you or me looking at them.
Rob [08:25]: Yeah. You want to kick us off with a couple of your goals? Looks like you had four goals from 2016 and I had three.
Mike [08:33]: On that list, there were two kind of major goals and the two other ones were more strategy related in terms of how I was going to accomplish them. I look back at them now and it’s probably a little more difficult to quantify some of these. But the first one was to launch my new product by early next year. My goal was to have early access by April 1st and then email my launch list by July 1st. I was able to get it, I’ll say, the MVP ready by April 1st but it certainly wasn’t ready for prime time. And in fact, it probably took four to five months after that in order for it to get to the point where it was not even minimally useable, but useable enough to start providing value. We’ve spent the last couple of months just trying to clean up a bunch of stuff and make it so that we can iterate faster on different features.
[09:17]: I’ll be honest, I’m kind of disappointed at how long it has taken to get some of these things done. But at the same time, I also feel that, right now, the product is actually in a reasonably good position and it’s looking better. And when I’m talking to people they seem excited by it. I was talking to somebody from Microsoft the other day and they just kind of called me out of the loo and said, “Hey, can we talk about how you’re using this [?]?” And I said, “Sure.” And I got on the phone and was talking to them. I was telling them about what my product does that runs on their platform and he was like, “This isn’t a discussion for now, but I’d love to hear more about it.” So, it’s nice to get that kind of feedback. And I’m getting inquiries from people and walking through what it is that they need and how it can best serve them. But it’s hard because I still get a lot of support requests as well. So, trying to balance between all of the different things and just juggle. That’s been, I’d say, the hardest challenge over the past couple of months.
Rob [10:07]: And so, your goal was to hit early access by April 1 and you kind of got there. We give you maybe an 8 out of 10 on that.
Mike [10:11]: Yeah.
Rob [10:13]: And your plan was to launch to your email list by July 1, which is about three months after that. When did you launch to your email list?
Mike [10:19]: I, honestly, still haven’t done that.
Rob [10:20]: Oh, wow. Okay.
Mike [10:21]: Yeah. I’ve been individually going to people and kind of picking them off of the email list and following up with them based on their interactions with the emails in there. But I haven’t done like a mass email to them to say, “Hey, come sign up.” So, I’ve gone individually to people who seem like they’re more interested than others. But I’m a little hesitant right now. As I said, Microsoft’s coming in. They’re sending in a couple of consultants to take a look at some stuff. But I have some concerns about scalability. And I think that until those are alleviated – Once they are, I’ll feel better about that but I’m a little gun shy about just dropping about 20, 30, 50 mailboxes on the thing.
Rob [10:59]: Oh, geez. That’s a bummer. That’s a real bummer to have that concern at this early stage. I know that you’ve been kind of cherry picking people out and adding a customer here or a customer week or a few customers a month. But I guess I hadn’t realized it was – what am I not paying attention or something – I hadn’t realized that you hadn’t emailed your list. Scalability, yeah, that’s the concern right now. It’s December 1 right now when we’re recording this. What’s it going to take to fix that? Like how long?
Mike [11:23]: I’m meeting with them next week, so I’ll have a better understanding of it after that. I really just want that second set of eyes looking over my shoulder who’s got some experience scaling out stuff like this. That’s really all it is. I mean, could I start adding one a day for the next 30 days? I probably could. Could I add 30 tomorrow? Probably not. It would probably work but, as I said, there’s a lot of hand holding that kind of goes into the product at the moment just to get people on it, get them using it. You probably ran into this early on with Drip where somebody would sign on, you put them in and then it might have been difficult to get them to add in their email addresses or to write the emails that went with it. And, of course, you can help them out with that. You can write them for them or you can offer to port emails over. But you can’t make them do certain things. You know what I mean?
Rob [12:12]: Right. Yep. To be honest, when we were doing it before where we had our onboarding built out like kind of walked them through it like a guided set up or a wizard, I used Boomerang a ton. I would just email somebody and then Boomerang it three or four days later and check in. I was essentially, I kind of had a poor man’s Bluetick. That’s really what you want. You really want a Bluetick that’s basically pinging people. I think you could [dog food?] your own product certainly for this onboarding. But yeah, that was it. It was a lot of questions and it was a lot of “Can I do this for you?” and it was a lot of “What do you think?” and it was just a bunch of hustle; is how I remember. And then once we knew the sticking points and kind of that minimum path to awesome where people got the dopamine rush from it then we built that into code and we built the actual guided setup with the bar across the top and the trial emails that go out to people and let them know what’s next.
Mike [13:00]: Yeah. Some of that stuff like the onboarding issues that people have run into, those are some of the things that we’ve focused on. So one thing, for example, when an email gets bounced if they send it to an invalid email address, it comes back. And the software previously didn’t know how to handle that. It just kind of ignored it. And it depended on whether or not it came back directly from the server or if it came back delayed in some way, shape or form way after it was sent. Depending on which situation it was in, it might do one thing, it might do another. At this point, it now handles that and it also marks those emails as bounced inside the application. But previously it didn’t do that. So you had not way of telling based on contact in the system how the system treated it. You also didn’t have a way to pause people; you didn’t have a way to just mark it as completed; you didn’t have a way to mark somebody as, “Hey, don’t ever contact this person again.”
[13:48]: There’s a lot of these – I don’t want to call them edge cases – but situations that come up where people are using the software and then they say, “Oh, I would like to be able to do this. Or mark somebody in this way. Or if an email gets bounced, I want to tag them automatically.” And some of that goes in to actual automation and some of it’s just how do you have field in here that captures this piece of information and is that something that lots of people want. So, those are the things I’m still kind of working through. But I am kind of moving in the direction of a public launch. The website itself, I got that ready, I think last week. And there’s still a lot of work to do on it but I, at least, got a new design and some webpages out there and I’m working on putting a full blown signup process in place for that.
Rob [14:29]: Right. And you don’t even need that to launch though, right?
Mike [14:31]: I don’t need that to put somebody onboard. I can manually walk them through but I want to get it to the point where I don’t have to manually do it. That’s really the –
Rob [14:40]: Oh, that’s true. Because when you send them the email, you want them to be able to go and signup on their own.
Mike [14:43]: Exactly. Exactly.
Rob [14:44]: Okay. Yeah. Got it.
Mike [14:45]: I can get somebody on Skype Call and walk them through it but I don’t want to have to do that long-term.
Rob [14:51]: And by the way, you and I have both used the phrase “an email.” What we really mean is “a launch sequence.” You’re not going to send them an email, “Hey, come and sign up.” You’re going to build some anticipation and you’re going to tantalize them and give them a little screenshot, screen cast action. Then you’re going to, boom, drop the hammer on them. Here’s the big discount. Time limited for that – right? It’s the standard?
Mike [15:09]: Um-hmm.
Rob [15:10]: Okay. Just making sure. I would hate to see you make that mistake. I know you –
Mike [15:14]: No, I’m definitely not doing that.
Rob [15:17]: Here you go. Our app is up. Probably once a quarter I just get from some random start-up that I must have signed up here about a year ago and I get this random thing, “Hey, Blaze app has” – I’m just making a name up – “blah-blah app has launched. Come sign up.” And it’s like “A” I don’t even remember what you do. “B” one email’s not going to get me to do it. “C” you didn’t build any anticipation. Just kind of making all the rookie mistakes and, I mean, you can obviously 10x your signups if you do it over a sequence and you build some anticipation.
Mike [15:47]: Yeah. One of the things I’m looking at doing as kind of a marketing tactic for this is setting up stuff inside of Bluetick to more or less just demonstrate how it works. As opposed to having somebody come to the website and go through a tour, say “Hey, why don’t you come over here, enter in your email address and you’ll see exactly how this works. This is what’s going to happen. This is what would look like if one of your customers or one of your prospects was on the other end.” And then just be very blunt and open and honest with them and say, “Look, I’m marketing to you. This is all automated but you wouldn’t know that probably unless I told you. And this is how you can make it look for the people that you are pursuing as leads.”
[16:25]: I did some of that when I was onboarding people and it worked really well. I had the little disclaimer at the bottom, “Hey, by the way, this is completely automated. I’m not touching anything here. And if you don’t respond then you’re going to get another email and here’s the time you’re going to get it.” It would be great to be able to have those things injected in there and use that as more of a demonstration of exactly how it works and what it’s going to look like from the other side. Because that’s one of the concerns that I hear from people is, “How is this going to look to my customers? How do I make sure that it looks like it is personalized and it has that warm fuzzy feeling as opposed to this was some bulk, automated, cold email?” Or what have you. That’s the thing. They want that illusion of personal touch and –
Rob [17:07]: Sure.
Mike [17:08]: – there’s some things that they don’t get that from.
Rob [17:10]: Got it. So when they enter their email and they click submit, they’re actually going to receive an email that says, “Hey, this is a sample.” Or were you going to just show them like a screenshot of a sample?
Mike [17:19]: My intent is to build out, essentially, a series of emails and workflows inside of Bluetick that will walk them through. And if they take certain actions, it will do different things. And at the bottom of the emails I would basically just say, “P.S., if you do this, this is going to happen. If you do this other thing, then that’s going to happen. If you don’t do anything, then this is what will be next.”
Rob [17:38]: Got it. But will they be receiving actual emails in their real inbox –
Mike [17:41]: Yes.
Rob [17:42]: – with this? Yeah. See, I think that’s super cool. I was going to say if not, you should do that. Because that’s the true demo of it is for them to really see what the customer sees.
Mike [17:48]: Exactly.
Rob [17:49]: That’s cool. So we’re 21 minutes in and we’re one bullet of 14. Let’s move on. This may be a little bit of a longer episode. My first goal for 2016 – so the one that I set a year ago – was to 2.5x Drip’s revenue. And at the time that I set this goal we were on pace at our current growth rate to hit 1.8x. I actually think we will hit – it’s going to be very, very close to hitting 2.5x. A lot of that help was Leadpages – the acquisition and then their marketing team. Something interesting that they did is when Leadpages acquired us and then did the $1 plan and then the free plan, is they actually nuked about $22,000, $23,000 in MRR. That actually set us way back on this goal. And this was just a personal goal that I had set up for myself. Leadpages goals for Drip are totally different. So that actually set us back and then we’ve since, of course, caught back up to it. So, anyways. Yeah, 2.5x I think we’ll either hit it or we’ll be really close. Something like 2.4. And given the level of revenue that Drip was at a year ago, this is not too bad. Not too shabby. How about you? What’s your next one?
Mike [18:54]: My next one was to rerun some of my, what I called ‘life experiments’ because back in 2015 I hadn’t done so well on them. And this year I’d say I probably did about the same as I did last year where they ran for a while, I was doing a bunch of different things and then things got busy with Bluetick and I kind of took my eye off of that stuff. So early on in the year it was good and then mid to late year I just didn’t do so much. So I kind of focused on Bluetick more than let’s say going to the gym and going to random events and stuff. There’s like a Renaissance fair that is south of Boston that I wanted to get to this year that I just didn’t get to. And then there is a gaming meetup nearby that I’ve been going to meets every week but I don’t go every week. It’s nice to get out and do things like that and just kind of meet new people. You work from home all the time and you don’t get out much so there’s not a whole lot of social interaction. So it’s nice to get out of the house and do other things. I really just want to kind of open my horizons to other stuff, to new things and get me out of my day-to-day.
Rob [19:54]: That’s what you mean by ‘life experiments?” Like the meetup and the Renaissance fair?
Mike [19:58]: Life experiments is more like trying new things and doing things that I wouldn’t normally do is more it than anything else.
Rob [20:04]: All right. My second goal for the previous year was to support Sherry with her ‘ZenFounder’ book. I was planning to be second author on a book that she had outlined and was planning to write. Kind of like a founder of mental health. Like how to stay sane while starting up type of thing. That’s still on the docket. To be honest, the Drip acquisition just decimated any time that I had to be able to contribute to that. And then the relocation and kind of the chaos that that created – planning for a move; planning to sell a house; shut down Sherry’s private practice; pull the kids out of school; find a new place to live; get the mover. Just everything that goes along with that was literally hundreds of person hours and it was all the nights and weekend time that Sherry probably would have spent writing the book. So this did not happen in any way, shape or form – and in fact, I don’t even know – I think she has maybe less than a chapter kind of drafted up. I think this will be on her docket here in the next year. I wouldn’t be surprised if she gets it all or mostly done in 2017.
Mike [21:03]: The third goal on my list was to be a lot more deliberate about where I spent my time. So to kind of draw delineations between work time and family time and then me time. And my intent was to work less and enjoy my off time a little bit more and generally be healthier. That went well for the first few months. And then after I got to that pre-launch beta period for Bluetick, things went downhill for probably four or five months. And then I think things are getting back on track at this point. So the last month or two I’ve been going to bed earlier, turning off all electronics and stuff like that. And just kind of taking it easy in the evenings. So, I don’t know. I’m not sure how to rate this one. Probably 6 or 7 out of 10 as opposed to anything else.
Rob [21:41]: Cool. And my third and final goal for the previous year was to make three to five angel investments in Bootstrapper. These are post-traction B2B SaaS apps. So in essence kind of going after the folks who are building real businesses rather than raising crazy rounds for B2C stuff. And I definitely made two investments and there was a third that is still in the works basically. And they’re having actually – I’ve committed to it but they’re having a delay in getting some paperwork together. So, I’ll say that I’ve mostly made this goal. In retrospect, five is just a little ambitious for me given how little time I have to devote to this and just how few really – I don’t know. I’m trying to say investment worthy companies that there are and that kind of came across my desk at a valuation that made sense. Since I am somewhat a small time angel investor, I’m not going to invest in rounds when people have valuations of $7 million or something. It just doesn’t make sense for me to write a check. It just doesn’t make economic sense. So for a deal to really be a fit for me and my skill-set where I can provide value, which is why I’m investing in things. Not just to get a return or to have a dog in the race, but I want to actually be able to contribute and offer advice, insight and opinions. It’s kind of niched down in terms of opportunities that I think are really a fit for me. I’m going to be moving forward keeping it kind of a more modest goal.
Mike [23:01]: My fourth goal was to be more complete with my planning. And the intent there was to create full plans rather than partial ones because I have a tendency sometimes to have things more in my head as opposed to written down on paper. I’ll scope out the first set of things really well and then after that I won’t drill down and write down a lot of the details until I get near the end of something. And then I kind of thrash a little bit. I did reasonably well with this. I would say that I definitely got to a point with Bluetick last year where things kind of went off the rails for a while and things are, as I said, kind of getting back in the right direction at this point. A lot of the plans that I came up with are starting to look like I can actually go back and pursue them. But some of the plans that I did put together, they basically just got delayed is really what it came down to. I do have a full blown marketing plan for Bluetick set out and I have a road map for the Product for Features and stuff. But even with that product road map things get moved around a lot which I’m not really comfortable with but, at the same time, customers are asking for stuff so I kind of have to slot in what they need versus what I think that the product needs just because they’re using it, they’re running into issues and it’s like those things need to be fixed.
Rob [24:11]: Yeah. And there’s a balance here between having a longer term plan of like, “Over the next 12 months I want to do this to revenue and here’s the general idea of how I’m going to get there” I think is one thing. And even having that in writing is probably good like “here are the tactics I’m going try. Here are the growth sprints or whatever.” I feel like planning product road maps is really difficult. Like we move ours around quite frequently based on customer request; based on response to the market; based on the realization we have of like “Oh my gosh, we shouldn’t have been doing this the whole time. We really need to get that in sooner.” Based on performance; based on someone trying to send spam through your system. There’s all these things that make you respond so my thing has always – we tend to roadmap about 60 to 90 days out. And I think if you’ve planned that out really well and have it written in order 60 to 90 days, I think that’s plenty of time. As early as you are where you’re still getting customers in who are going to find deal breakers for them. I’ll be honest, when we were at your point we were literally planning maybe a week out, sometimes two.
Mike [25:08]: Okay good. That makes me feel so much better because it was like I’m not anywhere close to 60 days.
Rob [25:13]: No, but we’re such a more mature product, you know. And we have more developers and you just have to do things a certain way. But you’re trying to just hammer out little things to keep your people around. And I think that when people have deal breakers and they’re like, “I can’t use your software until it has this,” we would drop everything and just do that. We would build that to get that next customer. It was like, “What can I build to get the next customer in the door.” So, all that to say, yeah, there’s a balance here. I think that having some long term plans but being really flexible with certain other ones at a different phase of your business I think is important. All right, 2017 goals. Looks like you have four, I have three. You want to kick us off with your first?
Mike [25:47]: Sure. So the first one is to log at least 100 days of exercises coming here. And under the umbrella of exercise I’m including both going to the gym and doing things around the house that are more physical exertion related. If I’m going out in the yard and clearing a bunch of brush and stuff like that. Moving rocks and stuff around. I kind of log that as a checkmark under the box of exercise for the day. Obviously, if I just walk up the stairs and back down or something like that I’m not going to count it. Because there’s certain things that you can do around the house that really should count as getting out of your chair and doing a little bit more than you probably would on a regular day.
Rob [26:23]: Is that why “exercise” is in quotes in the outline?
Mike [26:26]: Yes.
Rob [26:27]: Is that your case of exercising? That’s funny.
Mike [26:29]: Thanks for calling me out on that.
Rob [26:32]: Totally. My first goal is – it’s an interesting one. And it’s one that I’ve kind of struggled with and really had to think about. But you know I went on my retreat where I got strep throat a couple of weeks ago. And one thing I realized is that I really don’t want to start anything new in 2017. I don’t know if I can unequivocally say that I will not for the next 12 months start anything new but that’s kind of how it feels right now where basically you and I have the podcast, we run three MicroConfs now – two in Vegas, one in Europe – I have a podcast with Sherry and I’m still all in running Drip. And I’m still at the point where I’m kind of recovering from this year. Even the past couple years of just pushing hard, growing Drip and then the acquisition and kind of all the chaos and stress that created. And so, as I sit here today, I don’t really have the desire to do anything new. I’m talking like stuff that I might do and say, “Hey, launch a new app. Hey, write a book, start a new podcast.”
[27:25]: Whatever I might do with free time. It’s an interesting non-goal almost. It’s something that I want to – I don’t know that I’ve ever done this. You know what, last time I did this was in 2010 when our second son was born and I really kind of worked kind of the four-hour work week. I was working about maybe 10 to 12, 10 to 16 hours a week. That was when I had that whole portfolio of Micropreneur businesses – DotNetInvoice and stuff. It was right before HitTail. And that was a great time and I eventually got really bored and felt like what am I doing with my life. And that’s when I geared up and acquired HitTail and kind of 10x’d all my previous efforts. I think the one exception to this non-goal may be that if Sherry decides to really write the ZenFounder book, I want to do that with her. But I wouldn’t be, you know, the driving force. I would be probably adding my voice to it and helping her think through some stuff.
Mike [28:12]: I think there’s something to be said for intentionally doing nothing, so to speak. There’s times when you’ll go through like a rough patch or things are just really, really busy and you kind of need a break at that point. And you’ve been heads down on Drip for so long that running a startup is not necessarily the easiest thing in the world to do. It takes a lot of time, dedication and focus and it becomes something that you’re so focused on and you’re devoting so much of your energy to that there comes a point where you just kind of need a break I think. So it sounds to me like you’re probably close to that point or, you know, and it’s not to say that you’re just going to walk away and just go off and do something else as opposed to Leadpages. But coasting is not a bad thing.
Rob [28:54]: Yeah.
Mike [28:55]: You know you can’t always have a goal every single week. It’s hard to maintain that level of exertion for years on end. You can do it for a little while but you can’t do it forever.
Rob [29:05]: Yeah and it’s interesting. You use the word “coasting” and I guess I feel like I don’t think of it as much as coasting as just not starting anything new. I still want to be all in on the stuff that we’re doing, you know. I don’t want to coast on MicroConf; I don’t want to coast on the podcasts; and I don’t want to coast on Drip. I just don’t want to add anything new. Because it’s the new stuff, right. Like you’re going through right now. Just the tremendous amount of energy that that takes to get something from a standing stop to any type of worthwhile point, it’s a lot of effort. I genuinely do see this as a temporary thing. I do not think I’m done for life. But it’s almost like if you’ve ever burned out, it just takes a while to recover from that. I don’t know if I burned out or not. I just know that looking back on this year- there was obviously a lot of good that came out of it – but it was a very exhausting year. I’m looking ahead and think about just kind of being all in on what I have and not adding anything to that plate, it feels like a good thing to strive for.
Mike [29:59]: My next goal for 2017 is to make Bluetick profitable. And by profitable I also mean including my time.
Rob [30:05]: Woo hoo! So not ramen profitable?
Mike [30:06]: Yes, not ramen profitable. Something that if there was nothing else that I could make a fulltime living doing it. And I think that there’s definitely some challenges with this. I’m sure we’ll talk about them at length in some other episode, I don’t think we should do it here because we’ve talked at length about it very early on just the challenges of this past year. But I feel like it’s in a good spot at the moment. And even with some of the concerns I have about scalability, I still feel like a lot of the stuff is well written enough that it can be broken out and it can be made to work better without nearly as much effort as it took to get there. So we can talk about that some other episode. I’m sure we will. But that’s kind of my goal for the next year is to make sure that it is a profitable product moving forward.
Rob [30:48]: That’s a good goal, man. To me this is the number one thing that you could be focused on all year. And I think it’s really measurable. I think it could be a really good win for you. So, glad you have that in here. My second goal is to do between one and three angel investments this year. I’ve really enjoyed this process of getting to know founders and of, like I said, being able to offer advice and to be able to contribute financially and help their business get to the next level. I would think that even without trying too hard, I’ll probably just stumble upon one over the next year and I think top end might be three angel investments. And this is a way for me to feel like I’m really still in the game with these startups because I am invested and I’m seeing the monthly revenue growth and I’m seeing the struggles they’re going through but I don’t have to go through them first hand. And I can still do a 30-minute call or an hour call and I feel like dispense, “Here’s what I’d do in this situation.” But I don’t have to then go do it. This is probably my way of really staying in the thick of things without perhaps really staying in the thick of things.
Mike [31:53]: It gives you a layer of abstraction between you and the actual problems. My third goal is to blog publicly at least every two weeks. So that comes out to 26 total blog posts over the next year or so. But I’ve got a lot of ideas that I’ve written down that I just haven’t sat down and allocated the time to write those things out. But there’s still a lot of things that are just kind of jumbled up in my head so I kind of want to get those out. Somebody asked me before if I was going to write another book and I don’t see that in the near future. But I definitely see that, for me at least, writing about or documenting some of the things that I’ve been running into helps me get it, not just out of my system, but helps me think through it a little bit better and gives me a little bit more objectivity. I kind of want to make an effort to set aside the time to make that a priority and, not so much to get it out there so that people can read it, but more to get it out of my head and become more objective about certain things.
Rob [32:46]: This one’s interesting. I like the ambition of it. Are you like me where a blog post for you is like maybe between two and eight hours depending on how much time you invest in it?
Mike [32:57]: It could be. I actually thought a little bit more about this and – I didn’t write it down on the notes here – but my thought process behind this was to allocate between one and two hours per week to writing. And if it’s done at that point then it gets published and if it’s not done it still gets published. I’m really going to be working with hard deadlines in terms of the time that I’m allocating to it. So, it’s not going to be stuff that’s highly polished; it’s not going to be stuff that is extremely well thought through but it helps me get things out of my head. Because I write on a regular basis anyway, I just don’t publish it. So I think that by doing that it will give me that outlet to just put it out there and give people an opportunity to comment on it or talk about it or give it as points that could go up in discussions or what have you. I see it as just a way to get that stuff out of my head really, like I said. I’m doing a lot of that stuff now anyway, I’m just not publishing it. That’s not helpful for other people and that’s one of those things that I like doing is I like helping other people. And because the stuff that I write for the most part now isn’t published, it doesn’t do that.
Rob [34:04]: Yeah. I like the one to two-hour timeline for you. Or kind of a time box because otherwise I think – I do believe your focus should be Bluetick. And that if this goal distracts you from that that I should not basically. I think if you can set yourself a two-hour time limit every two weeks that’s perfectly reasonably.
Mike [34:22]: Yeah. And I think some of the topics are going to be related to things that I’m running into for Bluetick as well. I have some experiments that I want to run in terms of pricing plans and that will probably be turned into a blog post about what I’m doing and why. And other people might find it useful. They might say, “Yeah, that sounds great but it wouldn’t work for us and here’s why.” And that’s fine. But the idea is more for me to think about those things a little bit more objectively and by putting that tight time box on it then it forces me to finish in that time. Because you said that it could take you anywhere from four to eight hours to write a blog post. I could easily do the same thing because there’s not real end date for writing a blog post. It may take you an hour, it may take you 25 but if you don’t put that cap on it, it could easily go forever.
Rob [35:08]: My third and final goal for the next year is to exercise two days per week. I have typically been exercising about one day a week, one and half days a week. Kind of finding it hard to really carve out the time. But since moving to Minneapolis I have found since we live right next to a lake that it is so much easier to just get out for 20 minutes and just run. In our neighborhood back in Fresno, it just wasn’t really feasible. There were no sidewalks and there were all these busy streets and it just didn’t make a lot of sense. So I found this a lot easier. I think the challenge will be in the winter. I’ve run a few days when it’s in the 20’s and the low 30’s. I have kind of the proper gear for that at this point I think. So we’ll see if I’m disciplined enough to really carve out the time. But I’ve just found that the more I do that kind of the better I feel overall. It’s funny, I looked at this goal, you know, two days a week is about 104 days of exercise a year and you basically have a very similar goal of 100 days. So, I think both of us are looking to stay in shape now that we’re as old as we are, huh?
Mike [36:07]: Yeah. I mean, you look at the raw number of 100 and it’s like, wow, that’s a lot. When you break it down like you just said, two days a week is actually not that much when you look at it across the entire year.
Rob [36:19]: No, it’s not. And to be honest, I would love for it to be three days. I’d love for it to be every other day. But those just aren’t realities for me these days given what’s going on. So I don’t think this is overly ambitious. I think it’s very realistic. But certainly an ambitious one would be a three day a week exercise plan. And for my fourth – it’s somewhat of an honorable mention because I just can’t be as specific as I would like to be on the podcast – but I have goals for Drip basically. And these days there are some secret revenue goals, although I’m not as in charge of that as I used to be given that Leadpages handles the marketing so well. I have more product goals about giving certain features out and just making it basically the best marketing automation tool available. I’m not going to sit here and lay out the roadmap of everything we’re going to build but I definitely have some very specific things that in the next 12 months if we don’t build I will be displeased. Maybe by the time we get back here next year, I should be able to point backwards and say, “Hey, that’s when we launched this, this and that. Those are the three components that I was trying to get out.” I apologize for the vagueness in advance. But in retrospect, I’ll be able to talk a little more about it.
Mike [37:24]: Awesome. Well, I think that about wraps us up. I’m sure we’ll be revisiting some of these throughout the year. And it probably makes sense to take a look at these in April or May or so and just make sure that we’re at least on target for some of these. And if we’re not we can start revisiting that.
Rob [37:38]: I agree. And as a listener, 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 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 317 | Our Predictions for 2017
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike make their predictions for 2017. They also look back on the previous year’s predictions and evaluate whether or not they were correct.
Items mentioned in this episode:
Transcript
Rob: [00:01] In this episode of Startups for the Rest of Us, Mike and I talk about our predictions for 2017. This is Startups for the Rest of Us episode 317. […] Welcome to Startups for the Rest of Us, a podcast that helps developers, designers, and entrepreneurs be awesome in building, launching, and growing software products, whether you’ve built your first product or you’re just thinking about it. I’m Rob.
Mike [00:26]: And I’m Mike.
Rob [00:27]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, Mike?
Mike [00:33]: Well, my wife and I rescued a cat this week. There was a cat that was coming up the driveway and our kids were looking at it. It was very friendly and it seemed, obviously, like a stray of some kind, but it got close to us and it was kind of rubbing against my son, and he was patting and he’s like, “Can we feed it?” and of course because you don’t really want to go feeding random stray cats, because they’ll never leave. But this one was like scrawny as all hell. It was probably only about four or five pounds when we found it, and it was full-grown, so it was just obviously in need of some love and care. But it was somebody’s cat. I don’t know whose it was, but we think that somebody just dropped it off. We took it to the vet and had them check it and see if there was like a chip in it, and there was nothing. Posted on Facebook groups and tried to find its owner and haven’t been able to find it, but over the course of about four days, it ate probably close to four pounds of food, which is just an ungodly amount of food for a cat that was that size. So we’ve decided in the end to keep it. So we’ve taken it to the vet, had its shots, and it’s been hanging around in the basement for the past week or so.
Rob [01:35]: Oh geez. Are you prepared for the responsibility? I guess cats are a lot less responsibility than dogs, but have you had a pet in the past?
Mike [01:42]: Well, we already have one cat, so right at the moment, that’s why this one’s in the basement. We’re keeping them separate for the time being, because our other cat is not, I’ll say, very friendly. I’m not exactly a cat person; I’m more of a dog person to begin with, but our upstairs cat is just, you know, she wants to be left alone, left to herself. She just wants to sit in a corner. She’s more a cat that’s like, “Pet me. Stop.” It just does not want to be involved in any way, shape, or form, unless it’s dinner time. So we’re keeping them away. This upstairs cat is definitely not particularly happy that there’s something in the basement, although, I don’t think she really understands what is down there, but she does not like going near the door anymore. She used to go down there all the time and now she’s won’t go near the door. So it’s probably going to be like a month or two before we can integrate them together. But we’ll see how it goes. The kids are in love with the new cat and like playing with it, and we’ve been locking one of them in a bedroom and then just letting the downstairs one come upstairs and hang out a little bit. But we’ll see how it goes.
Rob [02:42]: Sounds good. I wanted to bring up a subject we talked about last week, which was Wistia pricing plans. And when we were on the show, I’d said that Sproutvideo was cheaper. I think it has a –whatever it is – a $15 plan or a $25 plan. And I mentioned that Wistia is basically starts at $100 and I think you said that they had a $25 plan. But since then I went there – because I was talking to someone else a day or two later and we went and looked and it was like, they have a free plan that’s super limited. You get three videos. So it really is hyper-limited. And in essence, they start at 100 bucks at this point. Just to clarify.
Mike [03:18]: They used to, and it’s funny because I’m on their $25 plan. So I used to be on a $100 plan with them, and then they moved a lot of their pricing plans around and it made more sense for me just to switch down to their $25 plan. And then since then, they’ve gotten rid of that and now they only offer the $100 plan again.
Rob [03:35]: And so they start around $100 and then Sprout does have a $20, basically a $25 plan that is, again, it’s a bootstrapper plan is how I think about it, because it doesn’t have all the features that Wistia does but it is a perfectly competent platform and you can capture emails and do stuff – just not as much fancy stuff as you can with Wistia. Other thing for me is, first time ever this week going to Disney World. Actually taking the kids there as a surprise. I’m pretty excited to get down there and see what’s up. I’ve been to Disneyland a few times but I heard that it’s quite different. It’s a different scale. Have you been there? Have you been to Disney World?
Mike [04:10]: I have. I’ve been there I think twice. So we went down there with the kids both times and we took my mother-in-law once as well, just because she could help out with the kids. But it sprawls. There’s a lot to Disney World. Do you know where you’re going, or?
Rob [04:23]: Yeah. We’re staying in one of the resort hotels and then we have basically three days and we go to three different parks. So we’re not doing Epcot; we’re doing all the other three parks. The thing I’ve been really impressed with, with Disney is the level of technology that they’re using. So I’ve received basically a print on demand booklet that says, All-in family vacations, has the Incredibles on the front. You flip it over and it’s like your itinerary is all custom-printed inside, it looks really sharp. Then they send you the wrist bands and those must be NFC or something, because they say that’s your FastPass, that’s your key to your door of your hotel room. That’s your meal ticket. It’s like everything. And each of them is monogrammed. It’s etched with the name of the person. It’s really, really pretty impressive. And then I’ve been selecting FastPass stuff online in advance and I’ve been able to move that around and it’s super flexible and I’m impressed with the level of sophistication and really feeling like we’re not just going somewhere and going to spend days standing in line, but actually able to plan this thing and feel good that things are taken care of.
Mike [05:22]: When we went to Disney World, we went to a couple of the different parks. We went to Epcot and we went to the regular Magic Kingdom and there was – there was also, I think it’s Animal Kingdom?
Rob [05:31]: There’s a wildlife, yeah.
Mike [05:33]: So we went to those, but we ended up spacing it out a little bit. So we were there for about a week, I think, and we went to a different park every other day, and what we found out was that the kids were just wiped out by the end of each day. So the next day it was like a recovery day, and we would just stay at the hotel or go someplace else and not let them be as overwhelmed. And then the following day we would go to one of the parks. And we found out that that worked well. But they were younger then. So your kids are older than they were, so I think that they’ll probably be fine.
Rob [06:01]: We’ll see. I’m sure we’ll all be exhausted by the time it’s done, but we basically have three full days down there and then the two book end days are our travel days. So it’s nice to do it. And we’re actually recording a couple of weeks in advance, so this is over Thanksgiving, which is why we decided to do it now.
So let’s dive in to our predictions. In a true Startups for the Rest of Us tradition, we like to look back at the predictions we made last December. We made predictions for 2016. We each have four. We’re going to look at those, evaluate whether we think they became true, whether we think we were correct with them, and then we’ll wrap up the show with our predictions for the coming year. So you want to kick us off with your first prediction that you made last December for 2016?
Mike [06:41]: Sure. So the first one I made was that lots of churning would happen in the wearables’ category. And I had said that I didn’t think that I saw most of these going anywhere and that it’d be a few years before any of these became really big. And one of the things that I had mentioned specifically was that I didn’t think that the Apple Watch was ever going to be a big thing like the iPhone or the iPod. And I would say that this probably turned out to be true. I look at the landscape and I don’t see anything that came out where everyone was like, “Oh, I have to have that,” or, “I really want that.” And even Apple this past year came out with the Watch 2, and there wasn’t really a lot of hubbub about that from the community or from the people who were out there investing in those types of technologies. They looked at it and they said, “Yeah, that’s okay. It’s a nice incremental improvement, but the first one was not so overly impressive that it really made a big difference in my life.” I even saw some people who they said that they regretted getting it. And I think that there’s a lot of those different wearables, especially when you see things like the things coming out from Fitbit and various other companies. There’s just not a lot to them. They augment what’s going on already, but they don’t necessarily change how you live your life, or what sorts of things you do.
So again, I think that this came true or it just was status quo I’ll say more than anything else. But I think it’s going to be a while before the wearables category really starts to take off, because it’s going to be a while before people figure out what is it that the consumers really want or would really alter their lives or make them better. And I don’t think it’s really obvious what those things are. I think there’s a lot of opportunity, I just don’t think that there’s – there’s not that killer feature yet that people are like, “Oh, I absolutely have to have that.”
Rob [08:17]: My first prediction for 2016 was that single-round bootstrapping, also known as fundstrapping will become a common, viable option. And I would say that it has become more of a viable option. I’m not so sure it’s common. I had imagined more people taking this road. Although it is more viable, it is more popular, and I’m seeing more people seek this road as they hear about it, right, as we talk with the Jordan Gall or Justin McGill who have really done the fundstrapping model. Or when I had Bryce from India VC on the show a few episodes, that seemed to really resonate with people on the thought of being able to raise around, to get there faster, and to be able to basically quit your job from day one but not be beholden to VCs and not be beholden to this implied series A. I think it’s really appealing to people and it has a lot of the pluses of bootstrapping with some of the benefits of basically raising funding. And it’s a mix. So I think this is a partially accurate assessment. I think maybe I’m ahead of the game, but I do continue to believe in this model and I think it’s going to become even more popular over the next year or two, especially as a lot of the startups space and specifically the SaaS space continues to be really competitive.
Mike [09:27]: My second prediction was that we’re going to see a lot more bootstrappers in our circles concentrating less on making money and more on doing what they’re enjoying doing, and more or less living their lives in their own terms – less consumerism and less accumulating of stuff and more doing what they enjoy. And I don’t know, I think this one’s hard to gauge. I definitely wouldn’t say that this was an obviously accurate statement, but at the same time, I wouldn’t say that it was obviously proven to be false either. It’s somewhere in between, but it’s hard to measure that as well.
Rob [09:54]: I think we need to make more concrete predictions, because some of these are hard to gauge, you know?
Mike [09:59]: Yeah.
Rob [10:00]: So my second one was Twitter will become less relevant over the next year, returning to its roots, it’ll be journalists and technorati and it will be ripe for an acquisition. And this, of all the predictions I’ve made, perhaps over the past several years, this one I think was dead-on. And this was not – it’s obvious now that this is happening, but this was not on people’s radar a year ago. Twitter was still growing and people were on it and stuff. So I remember making this and thinking, “Boy, I’m kind of going out on a limb with this one.” And I’d say this is really accurate as we’ve heard lately with acquisition talks and failed acquisitions rumored, all types of stuff. So what do you think?
Mike [10:40]: I’ll admit. I thought that you were definitely going out on a limb on that one, but I’ve noticed that even I’ve stopped using Twitter nearly as much in the past 12 months as I have in the previous couple of years. So it’s interesting to see that. It’s not something I would have expected, but anecdotally from my own experience, I’ve used Twitter a heck of a lot less this past year than I have in the previous couple of years.
Rob [11:00]: And you’re not alone. You said growth is basically mostly flat-lined and the revenue is not growing as fast as people want. It’s still growing but the stock market doesn’t love the growth and then, like I said, there have been acquisition rumors that have fallen through. So I think I nailed it on this one.
Mike [11:18]: My third prediction was that there’d be fewer IPOs and more acquisitions in the tech space. And I also felt like there’d be more stagnation from the unicorn companies. And if you look at some of the classic unicorn companies like Airbnb and Dropbox, they still obviously exist and there’s nothing wrong with them – at least it doesn’t seem to be in terms of their business model – but they don’t appear to be doing anything radically different and they’re definitely not on the same growth trajectories that they used to be. It seems like they’re still growing but not nearly at the rates that they were before. And I’m not seeing anything new from them. I am seeing that they’re going through and acquiring certain technologies or other companies that will help augment their services, but there’s nothing so dramatically new there. I also haven’t seen very many tech IPOs this past year, but there have been acquisitions as well. So those acquisitions have continued to happen. Drip is an example of one of those things. You didn’t go IPO with that, but I don’t think you ever really had intended to do that either, but there was that acquisition and then there’s other companies out there that have been acquired in the past 12 months as well and it’s – I would say that this is probably more accurate than not. But again, like you said earlier, it’s hard to quantify because we haven’t really put any sort of benchmarks on these.
Rob [12:30]: My third prediction for 2016 was that public markets would continue to value companies lower than their private valuations. And what was going on at the time was that folks were raising these funding rounds from venture capitalists and the good companies were getting these really high valuations and then they would go public, and their per share price would actually be lower than their most recent round. It was like going public was a down round. And from what I’ve seen this year, it has continued to be that. I think there was a big hit. You know remember, we made these in November, December last year and there was a massive hit, especially to SaaS, to B2B and SaaS valuations last January, where I think SaaS valuations were right around seven times annual revenue and they were cut to about 3.3 within a two-week span in January. Now they’ve since recovered and they’re up in the – let’s say between four and six range, depending. But there has continued to be – I’d say this has continued to be accurate. This is something that was already playing out in 2016. I wouldn’t even venture to say what’s going to happen in 2017. It depends a lot on what the public markets do. But it’s an interesting twist in that if you looked 5 or 10 years ago, and especially even 15 years ago, during the .com boom, the public valuers were always higher than private, because that was the scale up, is that you’d raised your series A, your B, maybe a C – and then you go public and you’d get this big bump whereas people who were, you know, even as of last year, people who were in on the last round of investment were basically losing money when the IPO happened. So it was this interesting frothy market.
Mike [14:02]: So my fourth and final prediction last year was that drone technology was going to take a serious step forward based on the FAA regulations for registering drones over eight ounces. And I look at the technology itself and it feels to me like things have come a long way. Now I don’t know really whether that was driven specifically by those new regulations, but if you go look at toy magazines for example, or websites where they have drones as like a peripheral thing, not necessarily – you don’t want to go to a drone website where all they sell is drones, because obviously that’s – it influences in the wrong way. But if you look at things like, for example, a Target newsletter or a weekly flyer or something like that, you will see small drones in there that you really didn’t before, and they’ll have several different variations of them. So I do think that the technology has taken some serious steps forward – whether it’s directly influenced by those regulations, I don’t know for sure. My suspicion would be yes, but it’s hard to say definitively that that was exactly the reason. But I would say that this was relatively accurate.
Rob [15:00]: My fourth and final prediction for last year was that virtual reality would be a hit with the early adopters set in 2016. And I would say this is not accurate. I think it’s still too early. I just think we haven’t hit that. Even with early adopters, I know there’s a lot of headsets coming out and there’s AR fighting VR, and it’s a really interesting space to watch. But it still feels like early days and I definitely wouldn’t call it a hit yet. I wonder if in the next – it’s kind of hit eventually, right? So in the next 12 to 18 months I think things will go. But definitely didn’t happen as quickly as I had imagined.
Mike [15:40]: So those are our 2016 predictions. Why don’t we go into our 2017 predictions? Rob, why don’t you kick us off?
Rob [15:46]: So my first prediction for 2017 is that there will be another high-profile acquisition in the bootstrapped space. And by another, I mean, Drip being one that happened this year that is an example of our little community that started with a few bloggers and you and I talking on a mic and then getting 100 people together in a room in Vegas in 2011 has really grown, and not only in size but just in the apps we’re building and the impact we’re having both on our lives individually, on each other with all the masterminds that come out of the community that we built, as well as the apps that are coming out of it. And they’re becoming higher and higher profile, and so I’m going out on a limb and I’m saying that there’s going to be another – when I say high profile, I don’t mean a technology sale of a web app for a 3.5 times annual net. I mean another one that’s a big funded company or a larger company buying someone that we know – that we know by name in the Microconf circles, in our podcast circles, and folks who we’ve talked about in the past on the show. And I don’t know of anything that’s coming specifically or I don’t know specifically who it’ll be, but I have a few ideas and it’s just some potentials.
Mike [16:52]: Bottom line you’re saying you’re not cheating with insider information.
Rob [16:55]: Exactly. That’s what I’m trying to clarify here. This really is a prediction and not just me gossiping about rumors that I’ve heard or anything.
Mike [17:03]: Sure.
Rob [17:04]: How about you?
Mike [17:04]: Well, my prediction for 2017 is that health insurance rates are going to become a much bigger issue for self-funded companies. And I’ve heard talks quite a bit about this over the past – I don’t know, maybe three to six months I’d say – where people are starting to ask more questions from the bootstrapped community. And I think that this coming year it’s going to become a much bigger topic, just because the way the election went and there’s all these questions and uncertainty moving forward. And the reality is that if you look at the health insurance rates for a self-funded company if you’re self-funded, you’re running the business, and you’re the only employee, for example, you have very little data to go on in terms of what other people are paying for health insurance and what’s common and what’s not. So there’s all this obscurity around what should you be paying for your health insurance and what is normal? And I think that as people get more comfortable asking those types of questions, that’s going to come up – and I think it’s going to become a much bigger issue in our circles for people – not just in what it is that they’re paying but who they’re using and what’s common, what’s normal, and quite frankly – do they even need it? Are there other ways that you can go about solving this particular type of problem for yourself and for your family that may not necessarily be options for – I don’t want to say mainstream people, but for people who are W2 employed for like a large company. Are there other options that people in our circles are going to come up with that are helpful and useful in that specific situation that would not be generally applicable outside of that situation?
Rob [18:35]: And I would say this is already an issue today. So you’re saying it’s going to get worse?
Mike [18:41]: I’m saying that it’s going to get worse and it’s going to get talked about. I think that previously –I’ve seen a few talks about it here and there, and I’ve seen some conversations happening here and there, but I think that those types of conversations are going to become more mainstream in our circles, just because the sheer cost associated with paying for your own health insurance is starting to rise dramatically – and I’ve noticed this myself with my own insurance, where from one year to the next I might be paying $3-400 a month in addition to what I was paying before, which that can be easily 30-40%. And you look at that and you say, “Well, okay, what other options do I have here?” What I’ve seen is that some of the insurance companies, they’ll just jack up to your prices until they get to a point where you’ve decided that it’s no longer worth it for you to have insurance through that company, and then you’ll go to some other company. And I think what they’re doing is they’re essentially price testing on their own customers to see who’s going to tolerate those price increases and who’s not, and using the knowledge of their current customers to help them basically extract more money out of their customer base. And if a bunch of them cancel, so be it. If they don’t, well, that’s fine, they’ll get the extra money, and then they’ll kind of adjust that. But because not everybody’s health insurance renews on the same month of the year, they’re able to do that on a monthly basis – and essentially I feel like they’re price testing that month in and month out and adjusting their prices over the course of the year.
Rob [20:07]: And this is mostly a US only prediction, because a lot of the countries in the world take care of their folks and don’t let the insurance companies do what they do here. So my second prediction is that startup crowdfunding in the JOBS Act here in the states which allows non-accredited investors to invest through sites like Indiegogo, and they just launched this week – they’re crowdfunding. I’ve gone back and forth on this but I think I’m pretty confident that it’s going to fizzle out. It’s not going to have legs like Kickstarter and product crowdfunding has, where you do something and you get a product in the end. I think that people like to think about this idea of putting $100 into a bunch of different startups, and that that’s fun and exciting, and I think there’ll be buzz about it, but I don’t think it’s going to take off in any meaningful way. I think that like the good startups, and the best that are raising money are not maybe going to go to crowdfunding. That they have either the connections or they have the traction to get known angel investors and people on angel.co and institutional investors and that kind of thing, and that startup crowdfunding will probably be filled with a lot of noise. There’ll be some signal there but it’ll be people who basically can’t raise or aren’t able to raise through their network, and so it’s naturally – again, this is just my prediction – naturally going to be the lower end and the startups that are less likely to be successful.
Mike [21:29]: My second prediction is that the bar for building a SaaS is going to continue to become harder to reach. And I feel like there’s almost this tipping point that’s starting to happen, where companies are – instead of taking that approach where they go out and they do the customer development and do a lot of the upfront work that has traditionally been done to identify the market and the different channels you can use, and customer validation and all that, I feel like that is still a viable channel, but I think that people are going to start moving more towards the model of building a service around that offering first and offering more of a comprehensive, complete solution for people that’s all manual driven, driven by people on the backend, and then once they’ve figured out the market, transition into building software to kind of SaaSify the whole thing so that they can go mass market with it.
I’m starting to see this in a couple of different places, but I don’t think that it’s really become mainstream yet, but I think that this year we’re going to start to see a lot more of that because the risks associated with building a services company, I think, are dramatically lower than they are for building a SaaS where you’ve got this long development cycle upfront and then you start putting customers in it. And the funding that is required to do that type of thing is substantially more than if you were to build a services company where you’re charging people 500, 1000, 2000 dollars out of the gate, per customer – and yes, you’ve got a lot more cost behind it, but you’ve also got the ability to put in five customers, and that’s 10k in revenue – whereas if you have a SaaS offering and you put in 10 customers, you’re probably only getting like 5 or 600 dollars a month. And the revenue that is different between them is just – it’s dramatic. You can build a services based company like that very quickly, because you’ve got the revenue coming in. And well it’s very easy to make adjustments to the processes that people go through, but it’s much more difficult and much more time consuming to change a software package when you don’t have enough volume going through it to be able to justify or be able to clearly say, “Look, this particular piece,” or, “This feature needs to be changed,” or, “This feature needs to implemented.” You can change the processes much, much faster than you can change software, and I think that people are going to start to go in that direction and it’s partially due to the fact that that bar that people have as an expectation for how good a piece of software is when they first sign-on to it is so much higher now than it was two, three, five years ago.
Rob [23:50:]: So I actually think this is really already going on. This is the concept behind Brian Casel’s talk at Microconf here last year about productizing services. What are you saying that’s going to be different than what’s already gone on?
Mike [24:03]: What I’m saying is that we’re going to start to see a lot more of this type of approach, where people build – so like take for example, Brian Casel where he was talking about Audience Ops – and I think there’s a difference between just building a services-based company versus building a services-based company and then leveraging that into a SaaS product that you build as a follow-on for like the lower-end market that you’re not addressing because you don’t have the manpower and they’re not willing to pay that level. And I guess if you were going to point directly to Brian with Audience Ops, they’re coming out with the Audience Ops calendar. And that’s out on their website; you can go take a look at it, but they are moving in the direction where they have this Audience Ops process that they’re putting in place and they’ll do it for you as a service, but based on all the things that they’ve learned, they’ve said, “Okay, well, if we’re going to build a product out of this, how do we go about doing it and what needs to go into it?” They’ve already done all the customer development. They’ve learned all the different things that need to go into it, now they’re distilling it down into a software package that they can sell. That’s the model that I see coming to the forefront, where people will build the services company first and then build the product afterwards – as opposed to doing it the other way around or just going strictly on the software-only model.
Rob [25:12]: My third prediction for 2017 is that we’re going to see a correction in the US stock market and I think it’s going to be 20% or perhaps more. I’m not commenting on the broader economy. I don’t necessarily think that there’s going to be any type of recession or anything, but the stock market is averse to uncertainty, and that’s when the stock market does crazy things – goes up really fast or down really fast. And I think that if anything, our president elect, Trump, is someone who inspires uncertainty. I think some of the things that he’ll wind up doing over the coming year will probably have a negative impact on the stock market, and I also think that obviously it’s pretty obvious that interest rates are going to be coming up after historic lows and that always sends the stock market down as people come in and now put money into T-bills and other things that are going to pay higher interest rates. So I’m not one to have bearish predictions in general; I tend to like to have a positive outlook on things, but I for one I’m keeping my eye on the stock market and the economy as a whole, and thinking that we’re due for some type of correction, I think, that most people who follow the market would agree, that we’re probably pretty over-valued right now and that something needs to give there.
Mike [26:18]: My third prediction actually relates to that a little bit. And it’s not so much directly related to the stock market correction so much as it is about the uncertainty of the future. And I think that what we’re going to see, as a result of that, is that some of the more small-scale businesses or small-scale entrepreneurship is going to pick up steam, and I think related to that we’re also going to see a lot more of the small- scale entrepreneurial meet-ups around the world.
I think still Tiny Conf this past year is split out into three different locations. There’s the – there used to be just East and now there’s East and West and then there was the East, West and now there’s Europe. I think that we’re also going to start to see various meet-ups that are completely unrelated to those around the world as well. I’ve seen some start popping up over in Germany and in London, and I feel like this is the year where we’re going to start to see those types of things advertised a little bit more, and become much more common. Even two, three, four years ago, around here – like I only live an hour outside of Boston and I’m just not – I haven’t been seeing those types of things. And now I’m starting to see them. I’m starting to see them pop up even around where I live, which it’s interesting to see that because, yes, I live near Worcester which is I think it’s the second largest city in Massachusetts, but historically, there has not been a lot of activity around this particular space and I think that with the uncertainty that’s coming up, with the president elect, Trump, and all the other things, the interest rates going up, I feel like companies may very well start cutting back a little bit, and when those types of things happen, if companies start letting people go, there’s one of two things that usually happens with people that either leave their jobs – whether it’s voluntarily or not – they tend to either go back to college or they start their own business. And I feel like a lot more people are going to end up going out and starting their own businesses, because to them they’ve been working at those companies for a while, yes it’s been great but there’s starting to be a downturn and they say, “Hey, you know what? I’m a little bit too old to go back to school. I don’t want to. I’ve been down that road before. Let me go out and start my own thing, because I have the awareness or the knowledge of the different markets and confidence to go out and try my own thing.”
Rob [28:23]: As I said in the very first original micropreneur.com, reports that people could download – it was that Lead Magnet or opt-in reward – there has never been a better time in history to start a software company. And I think that’s continued. I wrote that in 2008 or 2009, and I still believe that today. My fourth and final prediction for 2017 is that the first package will be legally delivered with an unmanned drone. This will be somewhere in the world that I don’t think it’ll be in the US, due to the regulation, but I think some country in the world will not care and that a consumer package is what I mean, is someone paying for something. I know there’s already a disaster of the leaf drones where they maybe get medicine to places where the roads have been decimated by a flood or an earthquake or something, and that’s already going on. And in times of emergency, people are allowing that to happen. But I’m imagining someone either paying for something like from an Amazon or walmart.com or food – ordering food and having that delivered.
Mike [29:23]: I was just thinking tacos.
Rob [29:25]: Tacos is really good. And the reason I said legally is that there’s already been – there was a story two weeks ago in New Zealand where somebody took a drone, programmed it, and wrote and put a note on it and like a $10 bill and it flew down to this sausage store or like a butcher, I guess, butcher shop of some kind and it said, “Please, give me one pound of sausage.” And they put the change in an envelope and attached the sausage to the drone and then it flew back to the guy. And I think the cops sighted him. You’re not supposed to fly unmanned drones over people, you’re not supposed to fly them out of line of sight, and so it was there. So that’s why I’m saying the first packets actually legally delivered with an unmanned drone. And I do mean a consumer or a purchased product.
Mike [30:11]: I could definitely see this happening. I’m kind of with you. I’m not sure whether it would be inside the United States or not. My suspicion is not, but I could potentially see where they allow it in a particular test scenario or something along those lines. And so are you thinking that this would be something that is outside of a test scenario or outside of like tightly controlled circumstances?
Rob [30:32]: Yeah. I think that it’s going to be tightly controlled for the first year or two, period. I think that they’re going to basically program a drone to go do something and they’re not going to monitor it super closely, but that it’s going to be unmanned and not piloted. That it’s going to be programmed to do that.
Mike [30:48]: I don’t mean tightly controlled as in them not really paying attention to it, I mean tightly controlled as in, oh, they’ve got a government auditor on site watching the whole thing from beginning to end just to make sure that it works and nothing major goes wrong, and if it does then somebody can ask questions of that person. I mean more of a, they look at the laws that says that they can do it and then they just go do it. Does that make sense?
Rob [31:11]: Yeah, it does. I don’t know that it matters, whether there’s an auditor on site or whether – I don’t know. I think that if something’s delivered legally with an unmanned drone, whether the government is really active in that and it’s part of a pilot project, I think that fits the description of what I’m looking for. I think it’s similar. We can make another prediction about unmanned vehicles, right, about basically self-driving cars. I know they’ve – at least one state, maybe two, have kind of legalized them for test purposes, but I’m curious to see if we’ll start seeing any unmanned trucks or unmanned cars really starting to take shape here in 2017. I don’t have a prediction about it, but it’s definitely something we’re going to see unfolding here pretty soon.
Mike [31:53]: I think eventually, yes, but for the time being, I don’t know about that. I could see it being done on highways for like long haul stuff – I don’t know about inside of a city where you’ve got lots of things going on. I think that people would be a lot more hesitant about. But driving across the country a couple of thousand miles, I could definitely see stuff like that happening.
Rob [32:12]: Long haul trucking and stuff?
Mike [32:13]: Yeah.
Rob [32:14]: They’re saying that’s going to be disrupted pretty early.
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