Josh

Rob: We have another incredible story today on Startups For the Rest of Us. In this episode, I chat with Patrick Campbell, the co-founder of ProfitWell on how he and his co-founders bootstrapped it to a $200 million exit. Even if you’ve heard other interviews with him about this acquisition, I focused on questions that I had not heard answered elsewhere.

I asked a lot of questions about the actual transaction, like what was the stock versus cash split? How long did you have to stick around? What was the revenue breakdown of consulting versus SaaS when you sold? As well as talking through his and his co-founders thought process as they were deciding whether to sell.

Before we dive into that, I try not to do this often. But if you feel like you’ve got value from the show, I have a favor to ask you. As you probably know, MicroConf is the in-person, online community, and event series that is tied to Startups For the Rest of Us that launched out of this podcast.

MicroConf was created by Founders for Founders. We are doing a survey to find out how we’re meeting people’s needs, how we’re not, where we can improve, what we can do. We’ve done one of these maybe every three or four years at most.

We’re just trying to make sure that everything we do with MicroConf, because we have a staff running events, community, mastermind matching, a YouTube channel, and we want to make sure that everything we do helps bootstrapped and mostly bootstrap founders meet, learn, launch, and grow, so we have this seven minute questionnaire that will greatly help me and greatly help producer Xander and the rest of the MicroConf team.

If you go to futureofmicroconf.com and complete that survey, honestly, I would really appreciate it. Feel free to mention me on Twitter if you want to let me know, and I will personally thank you for it, @robwalling. When you complete the survey, you’ll also be entered into a drawing for a free ticket to either MicroConf Europe or MicroConf US in 2023. Those are our flagship events.

Again, if you feel like you’ve got value from this podcast, this would be a way to perhaps give a little value back. With that, let’s dive into my conversation with Patrick Campbell on his $200 million exit of ProfitWell.

Welcome back, Patrick Campbell. Thanks for joining me on the show, man.

Patrick: What’s up, man? Good to see you.

Rob: It is good to see you. It’s been a while.

Patrick: This goatee is working.

Rob: It’s working?

Patrick: Yeah.

Rob: All right.

Patrick: I haven’t seen you with this much facial hair in a long time, so I’m excited for this

Rob: I accidentally grew it while we were on a camping trip. I came back and I did a live stream, and people were like, this looks great. You should keep this forever. Only people didn’t like it. were my kids, but Sherry was like, you look better with it, and people were like, it makes you look younger. How does facial hair make you look younger?

Patrick: It’s really funny. The reason I have a beard—you’ve known me when I didn’t have a beard—is because I got called out for being too young in an exec. Not my exec team, but an exec meeting for a customer. I was so caught off guard that, insecurely, I was like, I’m just going to grow a beard now.

Now that I’m getting older, I’m like, oh, I’m going to start being clean shaven just to reverse back in age. I don’t know. Guys with facial hair, it’s a mystery. We’ll have to talk to the beard brand crew if we ever need to get down this rabbit hole.

Rob: Indeed. Folks, I’m sure everyone is aware. You bootstrapped ProfitWell with co-founders, sold it for, I believe the numbers are $200 million or north of $200 million. I’ve seen differing press releases. I see you as a future TinySeed investor.

Patrick: There we go. Einar already hit me up. Literally, it’s in the announcement. Einar DMs me and I just went, come on, man, give me a couple of days.

Rob: Let the body sink in the cold at least. You’ve spoken at MicroConf. Frankly, your journey started with ProfitWell as a consulting agency called Price Intelligently that you then built ProfitWell out of, which I think of as like stair-stepping or self-funding. It’s like you have this engine that’s generating money and you use it to basically build software products.

Most people don’t make that turn. There’s a lot of Dev shops, SEO shops, and marketing shops that try to productize. It’s very hard, so obviously you guys did something special. I’m curious, I have a bunch of questions that people have asked me and that I’ve been thinking about not only the acquisition itself, but the process of getting here. I think let’s start at the end. It’s a hero’s journey of like, here we are, you got a big bank transfer on a certain date a few weeks ago.

Patrick: An uncomfortable one.

Rob: Yeah, to where it’s like, whoa, I’m not just rich. Maybe generations of my family never have to work again. I mean, it’s a lot of money, dude. What does that feel like when you look at this huge sum with more commas than you’ve ever seen?

Patrick: Yeah. You know what’s really interesting about that? I think I’m going to stay at the end, but a comment you made about like the—we don’t call consulting, we call it services. We can get into that later if you want. I think that a lot of times why a lot of Dev shops end up not being able to get the product because they get hooked on the revenue. You personally get hooked on basically taking the money off the table.

To have, I would say, either the courage or the risk to basically say, okay, I’m making six figures right now, I’m taking profits off the table doing really, really well, to say, all right, we’re going to take that to zero next year or we’re going to slowly lower that revenue, even though I’m getting better and better bringing that money in. It’s a hard thing.

For us, the reason it worked well is we always were reinvesting all of the profit back into the business. To answer your actual question without going too much on a tangent, I did the Dave Ramsey thing. We did the Dave Ramsey thing, where we were paying off our house aggressively. We bought a house in Salt Lake City, so everything over an emergency fund was going to the house.

In January this year, I had, I think it was about $12,000 in our bank account. Just Jenny and I, and a paid off house. We should have waited a little bit, but we were like, screw it, we don’t have kids, we don’t have any major emergencies, like the company is in a good place, my paychecks are going to keep coming in.

It was one of those things where it’s pretty crazy to go from that to feeling, essentially, like you won the lottery. I say it that way because this is a very champion problem, privilege conversation, like don’t worry, I recognize that for anyone listening. But I think one of the crazy things was, as a founder, especially an indie or a bootstrap founder, you always know that you’re going to get there. You are always like, I’m going to fail or I’m going to get there. But then when you actually catch the car, you’re like, oh, what just happened?

That was the feeling because I know I worked hard for it. I know the team worked hard for it. But it’s hard not to feel like you’ve won the lottery. I think that it’s been a couple of months since it closed. What’s been crazy is I realized that having means, essentially, you are the same person.

That’s both amazing and also terrible because you think, oh, once I have money, I’ll change this or I’ll change that. It’s only been eight weeks, but it’s like, oh no. The things I’m bad at, I’m so much more bad at the things I’m good at. Now I can amplify those particular things. I think that’s an initial impression or at least an initial impression after a couple of weeks of being able to sit on it.

The best advice I got was just to sit. I’m not jumping in anything. I think I told Einar, I was like, I’m sitting till the end of the year, probably. I don’t even have any mutual funds. I have no index funds. I have nothing except some crypto, so I’m just going to sit on it and come up with a thesis and a plan, probably in 2023.

Rob: Stuff is on sale right now, man.

Patrick: I know.

Rob: I’m envious.

Patrick: The best advice, just wind back, hang out. Just wait a little bit.

Rob: I think I hung on for about two or three months before I just had to start. I just couldn’t sit on cash. I could sit on a chunk of cash, but I started dollar cost averaging or I should say, we. Sherry and I started dollar cost averaging into some index funds, into crypto.

It was 2016, so it was a good time to get into crypto and an okay time to get into stocks. It wasn’t amazing, but I felt, oh, my God, the markets overvalued. Why am I buying in? But you just have to do it.

Patrick: You just got to the dollar cost average.

Rob: Yeah, that’s what we did. But you’re at a great place in time. You have a lot of money to move around, so that’d be good. Can you talk about the split? I imagine it was a split of stock and cash. Can you talk publicly about that?

Patrick: What I can say publicly is about half and half. It was definitely a stock component, definitely a cash component. It’s also one of the reasons we didn’t talk about the final number publicly. I was talking to you before we were recording. It’s kind of weird what you communicate, because in some ways, this is a bit of a merger. But it’s an acquisition because obviously, we’re getting bought, but Facu is now running the product.

I’m on the board of the exec team. Peter is still running a big portion of sales. The way I looked at it was that we’re kind of moving to a larger vessel, which is cool, but with a company that has a very, very unified mission with us, which is really cool. I think that there’s probably maybe three companies that we could have had this unified vision with at the detail that we have.

That’s been the cool part in terms of why we wanted stock to be a good portion of the deal and stuff like that. Now, I don’t have an earnout, but I intend to be here for four or five years. I intend to see this through the IPO just because I think it’s one of those things that I’m just excited about.

That’s a weird feeling too, because I’m still working just as hard. Those of you who know me, I work my butt off. It’s just one of those things. I still love what I do, which is great.

Rob: Yeah, it’s a great place to be in. This deal, north of $200 million, have you talked at all about what revenue you were doing in total? What percentage? Because you had the services wing and the SaaS wing, how did the percentage break down?

Patrick: Yeah, not doing public with the revenue numbers. It’s just interesting too. Again, what you choose to be public with. There’s not a huge incentive to be public, unfortunately. There’s a huge debate I always like. I tweet every so often like, show me a company that’s over $10 million that’s truly transparent that’s not public. It’s very rare.

As soon as we hit $10 million, I can tell you, we were over $10 million in revenue, we just stopped talking about it. I talked about it at MicroConf when we hit the 10 million.

Rob: I remember.

Patrick: That was the last time that I was public, actually, with those numbers.

Rob: That must have been 2017 or was it 2019?

Patrick: I actually don’t even remember. It might have been 2018 or 2019. What’s interesting is that it was $10 million in total revenue. Mostly or partially of that was the services revenue at the time. Every single quarter since then, the services revenue wasn’t growing at an exponential pace, but basically, the MRR pure software revenue was growing at a very, very doubling kind of pace. We ended up at sales around 50/50, basically.

Our services revenue, the reason I quibble with the word consulting is that what we did, which I think a lot of people who were trying to stair step in terms of consulting or service revenue should do, is actually started off with software. It was a pure software product, originally. For the first six months of the business, we realized that iterating on that product was going to cost so much money, just time. We started putting humans like myself, basically, to kind of fill those gaps.

I think what ended up happening is we basically defended our margin, and then anything that we could fit within that margin, essentially was game, so we could grow the business, we could grow overhead, whatever it was. We set the margin, basically a 50%. That business was doing, I think, north of 50%. Not by much, but it’s doing about 50% margin, and then our SaaS revenue was 95% margin, something crazy like that.

That was one of those things where I think if you can defend a margin and then grow within that margin, keep going. I would argue, with services revenue, as long as you can keep that as its own separate unit, which is what we did, we had a Price Intelligently, retained team, or revenue recognition team for three different products. All one company, but growing in parallel, if that makes sense.

Rob: Yeah, it does. What was your total team size?

Patrick: I’m trying to think of how many one-on-ones I had the day of the announcement, because we announced to the team and literally like, cool, we’re going through 83 conversations just to like, here’s your offer. Everyone came on board. I think we’re at about 90 now if you count the pre-Paddlers. The whole company now is about 350. Good portion of the 350 is us, which is great. But I think we aligned on culture so much that it’s been a smooth transition so far.

Rob: Yeah, I’d heard you talk about that. I believe you had a conversation with Justin Jackson. I think I heard it there, where you’re digging more into the culture, and how impressed you are with the founder of Paddle, and just how the two of you jived. Were you reinvesting most things back into the business then, versus taking a lot of money out of it? It sounds like it was highly profitable, but you were reinvesting a lot of it.

Patrick: Everything. My average salary was $72,000 a year. I think, I can say, I was making $150,000 at the end in terms of my annual salary, but it was definitely no profit sharing, nothing like that.

Rob: Right. Typically, when you’re reinvesting like that, you’re doing it for an end goal of an exit.

Patrick: Yeah, totally.

Rob: Otherwise, you’d pull money out as you go. You cashflow it over. I’d imagine, you and your co-founders, had you had conversations about, we are growing this thing to exit at some point?

Patrick: Yeah. This is a really important thing, and I’ve talked about it a lot. Forgive me if you’ve heard this from me before, but I think you need to align, I would argue, not only your co-founding team, but probably your exec team on what the goal of whatever entity you’re building is.

I think ConvertKit, Nathan, they’re aligned on what they’re doing. They’re doing profit sharing. I think what we did is we wanted to build a very large company in a more traditional sense. Nathan wants to build a really large company, but they’re building it in a different way. I think that’s a really important thing.

We would always check in. Frankly, that’s what kicked off this process. We were checking in and we went okay, do we want to go the profit sharing route, because that’s always an option because we’re bootstrap? The answer was no. Two other options, we’re raising a traditional venture for the first time, because we hadn’t raised any capital before or doing M&A.

We actually didn’t even think about the M&A part until Christian started talking to us. It was one of those things where those were going to be those two paths. That’s kind of the thought process that we had.

Rob: Have you talked at all or can you talk about the ownership split between you and your co-founders? I know there were co-founders early, then someone came in late, and everything. Do you have three co-founders?

Patrick: Yeah. It’s really complicated, actually. It’s overly complicated. These original board advisors or board members and advisors at this point, they’d been like that for years. I think all three of us, we’d never started a company before.

They were part-time, I was full-time, which rarely does that work out, because there’s always some consternation about who’s doing what and you have this cut, but you’re not. There’s always just all these different surface areas for conflict. We certainly had all those surface areas be full of conflict.

The folks I call the co-founders, the people who were in the trenches the whole time, or Peter Zotto who runs sales and revenue, and then Facundo who runs our product, basically, and engineering. I’m probably not going to get into splits just because it’s not my story to tell in terms of these types of things.

Rob: It’s personal.

Patrick: I do think it was really important, even though we were bootstrapped, I think, just because I know a lot of the listeners of the show. For one, I think it’s totally fine to do Mailchimp or a lot of small businesses, where the owner owns 100% of it as long as you’re super upfront with your team.

If your team is hurt when you sell and there’s no outcome for them, you were always upfront, which I think is what Mailchimp technically did. There were a lot of armchair quarterbacks who were all like, oh, yeah, you should have given more. It’s like, no, no, he overpaid, and everyone knew what was going on.

I think what we chose was a different route, where every single person in the company had equity. Every single person who was there over their cliff basically got some sort of outcome. We accelerated, everyone’s vesting, who was in the company at the time of the sale. It’s just one of those things where we choose to spread things a lot, but I don’t judge people who do the opposite. You have multiple options when you’re trying to build something.

Rob: Right. Did I hear you say that you minted X number of millionaires or something? I don’t know if you talked about that. What’s that breakdown?

Patrick: Yeah, we minted. I got the numbers in front of me, 13 millionaires, 33 people made over $100,000, 98 people over $10,000, and then 124 people received some sort of consideration. Those were folks who were inside the business and obviously a lot of folks who had left the business since.

Rob: Who had left, but they kept the equity.

Patrick: Yeah, of course. What was unique for us too is we did profit interests in management interests, that type of a structure. Our team didn’t have to pay anything to get their equity. It wasn’t like options where they had to exercise them. It was one of those things, where each year, because we were running all the profit back into the business, there were no taxes. It wasn’t one of those things where they had to pay taxes on it on a continual basis. Even if there was, the company took care of it.

Essentially, it was one of those things where they just own the equity. That was another option. I think options, there’s a reason they exist, but there are some trade offs. I think if you’re in a bootstrap company, it’s a huge selling point, especially someone who’s been burned on options.

It’s like, hey, no, no, you own these. You own these outright. You have to vest them, but you don’t have to buy them. You’ll get taxed basically at a liquidity event rather than out on anything else, or any distributions which we didn’t end up doing.

Rob: Yeah, there are a lot of different options, people. I don’t mean stock options. I mean, there are a lot of different ways to do this. There’s profit sharing. There’s, like you said, the Mailchimp way, which I think was just more bonus-oriented and just paying high salaries plus bonuses.

There’s true stock options, and then there’s profit interests, RSUs. There’s a lot more than I think people commonly think about. Especially when you are bootstrapped, you have to think about it a little differently than just going the traditional path. Did you ever consider taking funding?

Patrick: We had one point. In the early days, you get very enamored by the inbound, because you’re like, oh, I’m pretty, and you don’t realize you’re just on the other end of BDR. It’s basically these associates who are trying to hit you up.

I think what’s interesting is you reach a point where you’re like, I’m not going to talk to any of these people, and then that makes them more excited. What ended up happening is a couple of years ago, I got an intro because I respected the person doing the intro to someone. I had a conversation with them, just a random coffee. They basically threw a term sheet in front of us.

Within two meetings, we knew this was just a game to get us off the sideline. I did work mildly to get us off the sideline, but we never ran a formal process, anything like that. The way we funded the business was not only through all the profits, but in the early days, I cashed out my 401(k). I was pretty young when I started the business, so it was like $14,000. I think I had to pay half of it to tax, because they hit you pretty hard on that.

Basically, I lived in Boston on beans and rice basically for about nine months before I started paying myself a very small salary. Again, no kids, no mortgage. These are all caveats. Also I didn’t have any student debt, thankfully. That was a really, really big thing that I had some scholarships that basically wiped my debt out.

Rob: I feel like bootstrapping is both simpler and more complicated than raising funding. For me, it’s simpler to run the business. There are fewer stakeholders, but it makes getting there, I think, a lot harder. One of my regrets is I didn’t raise half a million bucks with Drip, because I’ve been grinding for years.

Patrick: Sorry, I’m interrupting you. I agree, because as soon as we knew that ProfitWell was going to be free and the barrier to accuracy was going to be something that was actually really hard, we should have raised money, even if it was $1-$2 million seed or small Series A. We should have done that immediately, because I think it would have knocked two, three years off of the life cycle. This was my first business, and I think it’s just things you’ll learn as you keep going, so I wholeheartedly agree.

Rob: I was doing a talk on how bootstrappers, if you did come across, suddenly you signed a big annual deal with a customer and you have $100,000 in the bank, or if you do take a small amount of funding, or whatever. If you suddenly have money, here’s how, as a bootstrapper, I would think about spending it.

One of the things I said early on that I was like, this is crazy accurate. But in your personal life, money saves you hours. It saves you not having to drive to the store. It saves you paying someone to help you. But in your startup, in your business, money saves you years, which is exactly what you’re saying. Having money gets you there faster.

You think two to three years, I think similar. Not that I was in any huge hurry, but I think it makes it a little bit of an easier path. You can hire more senior people there. You don’t have to live on beans and rice and cash out your 401(k).

Patrick: I think the counter argument too is that, I don’t know about you, but in the early days, if I think if I was able to convince people I was worthy of a $1 million seed round or a $500,000 seed round, I would have wasted the money. That’s another thing too.

It’s kind of like you pick your poison. Yeah, in hindsight, two to three years, will I ever do a bootstrap company again? It’s not an easy yes. Even though I have all this knowledge, it’s like, I don’t know.

The other thing that I don’t think we talked enough about is I think that there’s a massive trade off in terms of network when it comes to bootstrapping. Things like MicroConf, this podcast, some of your, I don’t know if you consider them competitors, so I’m not going to say them.

Rob: […].

Patrick: Yeah. They’re different. But I think that a VC, even an angel, when you raise money from them, not all of them are great. Even the average ones, if not the good ones, they’re incentivized to make you successful. You get invited to the events, you get invited to the retreats, you get invited to all of these things, and it’s kind of a reactionary thing that you have to do. Whereas with MicroConf and these types of things, you have to choose to look at the content.

There’s obviously so much content now that it’s easier to get that funnel going. I think that’s the thing that it can be very, very lonely as a founder in general. I think you’re even more alone as a bootstrap founder if you don’t actively choose to build your network.

The best advice I got was, actually someone told me, never to go to events, work on your product. The best advice I got was that stupid advice. You should go to every single event, unless you have a built-in network. I was like, okay, yeah, that doesn’t make sense, but let me see what happens. Then the network just paid back tenfold, which is great.

Rob: Right. I want to be clear. I’m certainly not saying funding is greater than bootstrapping. There are just trade offs that a lot of bootstrappers don’t think about. They think about the freedom or the simplicity side, but folks don’t consider. That’s where this podcast has been for bootstrapped and mostly bootstrap founders.

That’s how I say it these days, because I realized, probably 2013-ish, it was right on time. Customer.io raised their round. I said, woah, they’re funded now, because to me, it was bootstrapped or funded. They’re like, yeah, raised a quarter million, we’re not going to raise again.

I was like, wait, what? You can do that?  He called it fund-strapping, which I don’t call it. I was like, this is intriguing. That was where I started thinking like, funding for bootstrappers, this could be a thing.

Patrick: I like what you’ve done with Tiny and what Indie.vc, which is no more. Even some of these rep based financing products and these types of things, because I think what it does is it helps with, in my opinion, funding probably shouldn’t exist. I think there are amazing angel funds.

There’s amazing angels out there, but there’s a lot of crappy ones. Especially in Europe, if you’re a European founder listening to this, you’ve probably dealt with something like, great, that person put in $30,000, and they have 30% of my company, two board seats. This makes no sense from a US perspective. I think the evolution has been really interesting, but I’m probably not the best person to go deep on it.

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Very cool, man. It’s funny. I asked just a couple founders I know like, hey, what questions do you have for Patrick? I have this huge list. We’ll never get through them all, but I do want to cover a couple more. Someone asked, how many months did it take from the first contact with Paddle until it closed?

Patrick: Months. Yeah, way too long. I was talking to a founder yesterday. He sold to a PE firm whose whole shtick is they close in 10 days and I was like, holy cow. He’s like, yeah. Because now he’s working with this PE firm. Would you like a roll up? He’s like, yeah, that’s our thing. We close in 10 days. I don’t know about you, but I did not close in 10 days.

We went from conversations in October, November. We kicked off a process through early January, signed a term sheet.We had a number of options to sign. That was a 12-hour day of just ourselves, the 10 top people of ProfitWell sitting in a room all day.

I think this was kind of a unique way to do it. Basically, Facu, myself, who were kind of the main people involved in the deals and things like that, we presented the options. We walked away and let the team debate it for a couple hours. Then we came back and we said, whatever you choose, we’re going to fight the opposite. That kind of helped challenge.

We went through those 12 hours, signed Jan 15, and then diligence, contract negotiation. Paddle had to raise money to fund the deal. It was one of those things, where literally, January 20 something, the market starts to tumble. War in Ukraine starts to kick off, so all the stuff is happening.

Thankfully, one of the advantages of going with KKR for the fundraise was that they’ve been investing since the 70s or 80s, so they’ve kind of seen everything. They weren’t fazed. There were other funds that they’ve only been around for 8-10 years, so they were like, oh, my God, freaking out with a downturn or potential downturn that’s happened.

We closed. Signed April 8th. We did a split sign and close, cleaned up a bunch of stuff, had everyone sign stuff, and then we closed two weeks after that, basically. The best thing, if anyone goes through this, even if it’s an aqua-hire or something, we all then went to London for the all company summit. Within weeks, everyone was together, ProfitWell folks, Paddle folks.

I would say even if you’re a small team, even if you’re a couple people, go to the HQ, go to wherever your team’s going to be, and go there for a couple of weeks. I stayed for about a month and a half just to be in the office and stuff like that. They have a remote culture, but it was still good for the people who came into the office. Yeah, it was a long timeline.

It was extremely stressful. If I didn’t respond to your email, your tweets, or something during that time, that’s why, because every single day was a new fire. But it would be all existential. It’d be like, oh crap, there’s this thing. Oh, are they asking this because it’s bad or they’re asking this because it’s a problem? Oh, no, they’re just asking. Great.

You have these constant emotional resonances, because I had never been through this before. I had a couple of Sherpas help me out. Some people had gone through deals, but it was still really tough just because it was a lot.

Rob: Yeah, it’s always longer than you want it to be. It’s always more stressful. I don’t know how many times you hear that it’s really stressful from people who’ve gone through it. I certainly was not prepared for the level of pressure and anxiety that I endured, lack of sleep, and all the things. Every day I woke up and I was like, well, today’s the day it all falls apart. That’s what I kept saying.

Patrick: That’s the thing, too. Let’s say they have the money, which was not necessarily the thing for us. Let’s say they have the money, even then, there were 86 lawyers, so this lawyer for their thing is saying that this is wrong. Well, is the business person over they’re going to go, well, we’re now over the scales?

They’re going to find bad stuff. It is just how it works, because they either think things differently or you didn’t clean this stuff up, because why would you? You’re not a venture-backed company, you don’t need to clean some of this stuff up.

That was definitely a nerve wracking thing. Now that I’ve gone through it, I’m like, great, I want to do this more because now I went through all the tinglies already, so now I can do better. But yeah, it’s interesting.

Rob: I also think you hit a point. I don’t want to speak for you, but everything since then, for me, has been way easier. Even though now with TinySeed, we’re dealing with tens of millions of dollars, we’re doing these events, we’ve had stuff go well and some stuff not go well. COVID hit MicroConf, that was devastating, I have gone through more actual stressful moments since selling Drip.

I’m like Zen. I’m like a stoic. I think there’s a couple things with that. When the volume turned up to 11 for four to eight months, it sounds like it was eight months for you, I think you just have to adapt at a certain point, or you crumble.

I think the other thing is, for me, having money in the bank, I’m always like, yup, worst case, I’ll still be okay. There’s a certain level of comfort that I think we’ve never experienced in our lives if you grew up working class, whatever, if you didn’t grow up with money. 

Patrick: First, I think building a business and sticking with it is the best self-help program ever. I don’t know about you. I don’t want to speak for you, but thinking of my emotional maturity when I started the business to my emotional maturity now, it’s insane. I wouldn’t have got it without starting a company and getting kicked in the face every day for years.

I think the other thing is that’s something that’s interesting about knowing thyself as a founder and know thyself of what you want, because the stuff sucks. If you push and you’re resilient, on the other end, there might not be a pot of gold, unfortunately. But there is going to be like, holy cow, I learned so much. Your emotional resonance on so many things just comes down.

It’s funny you say that. I know, that sounds like a very champagne problem about sleeping, or you didn’t say sleeping better at night, but like, okay, I’m going to be okay with cash in the bank, but this is also why I don’t think you should do what we did. I think you should take money out of the business.

You should schedule it. You should literally like, once we hit this milestone, I’m going to take the next X thousand dollars out of the business, or I’m going to do this, I’m going to schedule this race. There were years where I was making $50,000 a year. I shouldn’t have done that.

I just shouldn’t have done it. What was happening is, as we got closer to this point, my risk aversion was going out of control, because all of a sudden, I have a paid off house, but I have $15,000 in the bank. You know what I mean? That’s a very different feeling.

A paid off house felt great, but also like, yes, we have a bootstrap business, but you get into your own head. I think you should take money off the table. That might be a justification to raise a round at some point as well. It’s just to take some money off the table and go from there as well.

Rob: Right. That is absolutely something that I think founders should consider once they’re north of $1.5 million, $2 million ARR. Right now, the valuations are not amazing because of the market, but historically.

Patrick: Wait six months if you can.

Rob: Yeah, wait six months. We’ve started talking to a few founders through the TinySeed syndicate who want to raise secondary. We’re like, yeah, it’s a nice opportunity, I think. I totally agree. I remember back when Rand Fishkin was running Moz and he tweeted, we are about to raise another round.

I think they’re doing $35 million ARR. He says, my assets are typical brands, super transparent. He’s like, I have $10,000 in the bank, a rented apartment, and a car. He’s like, should I take secondary? I feel guilty doing it. Everyone’s like, are you serious, bro? Take $250,000, take half a million, take six sum of numbers.

Patrick: It’s crazy. The guilt is so weird. It’s so weird. I grew up poor, working class. I had a union dad, so everything having to do with corporations, and management was evil, so this ironic career I have. It was fascinating, because even thinking about secondary, even thinking about profit distributions, even thinking about a raise, we had to put it into the plan.

That’s why I suggest that, because every time we’d come up to it, we’d be like, ah, maybe we should just hire that next salesperson or that next engineer. I was talking to you before the call, we exited. But because I’m intending to be there for a long time and a lot of the team is as well, it feels kind of dirty. I genuinely feel like, oh, can I tweet about money? Can I tweet that I’m at the St. Regis for a vacation now? Can I do those types of things?

I don’t know. I’m getting warmer to it, because I think that it’s just reality. You got to live your truth and show people you’re not an asshole. But even since the announcement, there were some people treating me weird. There’s this vendor that I love and who was great, but now that this has exited, we hung out and he’s treating me as I would imagine. He’s saying some weird stuff and I was like, dude, it’s just the same, which is such a weird concept.

I’ve already been hit up by a family for money. It’s just kind of crazy, but not in a gross way. It wasn’t in a gross way, but they probably wouldn’t have done it unless this happened. Again, it was a very well-intentioned way, but now there are all these interesting things you have to deal with.

Rob: It’s a trip. That happened to me too, actually. Someone pretty close to me and my family hit me up for money right after and I was like, wow, this is so weird. This doesn’t feel good.

Patrick: When I told Jenny, I was like, hey, we should just make a philosophy. Because if we agree we’re not going to do it, it’s easy enough just to be like, well, we’ve decided unless there is always room for you, food, whatever you need. It wasn’t because of someone being destitute or anything like that. It was more of an opportunity based thing.

In terms of investing in family and stuff, it was like very, okay, well, we have to see this person at Christmas. Even if we’re fine, we don’t want them to be weird. We’re still in the middle of talking about it, but it’s kind of wild.

Rob: As you said, it’s a champagne problem, but it is still an issue that you have to deal with.

Patrick: Yeah, totally.

Rob: I want to ask you a couple of questions about Paddle. You’re now part of Paddle, which is payment processing. You didn’t name competitors, so I like that one. Your competitors? I mean, come on. We know who the payment processes are in our space, Stripe, Braintree, or who I would think about.

What do you think about competing with Stripe specifically? It feels like everyone likes them. They ship a lot. They’re high quality.

Patrick: Wait, Stripe’s got a great brand? What are you talking about? Yeah. To take a step back, and this gets into some finickiness about definitions. Paddle is not a payment processor, Paddle is payment infrastructure. I know that’s like, what the hell does that mean?

Basically, the way to think about it is, let me think of a metaphor here. Stripe creates the roads. Stripe also creates the trucks and logistics through Stripe billing. Stripe has the roads. They have billing with the trucks. The thing, though, is Stripe’s truck is really good up until a certain point, like probably a million in ARR. Some people go well beyond that, but there’s a reason.

I can say this from a data perspective. Everyone’s going to think I’m biased now, but we saw this in the data beforehand. You can find me talking about it before the acquisition or before we even talked to Paddle. But right around a million ARR, we would always get hit up by people from ProfitWell and be like, hey, we’re outgrowing Stripe, we want some of this, who should we go to? We would send them this article that has 21 different subscription management systems on it, Recurly, Chargebee, the whole gambit.

The way to kind of think about the metaphor is Paddle is not just the truck, but kind of like the logistics network. What I mean by that is, let’s say you’re a founder and you’re selling a particular product, and you want to start selling in Eastern Europe, Western Europe, Venezuela, Brazil, or whatever it is. What Paddle does is it stitches together all of that infrastructure so that you just have one interface. They handle all of the taxes, they handle everything.

The difference really is you plug it in. What people don’t realize is that we’re a customer of Stripe. We’re one of Stripe’s top 200 customers, Paddle. We’re a customer of checkout.com. We’re a customer of Adyen. We’re a customer of a bunch of these different payment processors.

What we do is we sit on top of that. We basically route the payments to whoever has the best payment acceptance, whoever has the best for that particular country, because Stripe is not as great in Brazil as some of the other ones are, et cetera.

What’s kind of cool is because it’s called a merchant of record, basically, all of the different payments go through Paddle, so they handle the taxes. Essentially, you don’t have to pay a tax bill for your sales. Those taxes are just kind of taken care of.

It’s a little bit more nuanced. I think of it as a middle layer rather than an infrastructure product. This is kind of what fits in the thesis. Paddle does it for you when it comes to taxes, currencies, and those types of things.

ProfitWell was very geared towards like, we do it for you when it comes to retention. We do half of it for you when it comes to pricing. How can we continue this kind of do it for a metaphor or do it for your mission of running and growing your business, basically? The vision is when you plug Paddle in, a dollar that goes in should be worth a lot more on the way out just by the nature of using the software. That’s kind of how we think about it, if that makes sense.

It’s a little bit more nuanced, like, is there a crossover with Stripe? Absolutely. Is there a crossover with Chargebee? Yeah, but we have customers who use all of these things, because it’s a little bit of a different nuanced space in the stack, if that makes sense.

Rob: It does. Especially as you get larger, these things get more complicated. Tracking metrics and paying sales tax. Every other week in TinySeed, there’s a question about either VAT or if you’re a UK limited company, because we have an EU fund now.

Should I be thinking about paying sales tax in the US? Then there’s the US companies saying like, well, what is France going to do, come after me? There’s all that, and then there’s the VAT as a whole other different story. Yeah, I get the nuance. I think I now understand more about Paddle than I did, because I had assumed that they were much more similar competitors to Stripe.

Patrick: I think they get you a pair to Stripe in the indie community a lot. Because if you’re a European company, you go typically with Paddle because you know how complicated the tax stuff is. If you’re in the US, you’re just starting in the US. You don’t really realize, when you start sending in Europe and you get a letter, a tax letter and you’re like, wait, what? You get that as a kind of reaction.

I don’t know. It’s interesting, because this do-it-for-you concept, I think, is where most softwares going to go in the next couple of decades, not with AI and everything like that. I just think the UX is getting to the stack in the right place, like the priority stack.

For example, I didn’t realize this before even talking to Paddle. Let’s say something goes wrong with Prague having its own tax authority inside the Czech Republic, inside the state that Prague’s in, it’s just so complicated. If there’s a problem there, you don’t get the letter. Paddle gets the letter, which is kind of interesting.

There’s a whole team of risk and a whole team of lawyers at Paddle that just handles this stuff for you. I didn’t even realize that, because most of our sales are in the US and things like that. It’s just kind of fascinating how complicated this problem is.

I think that Paddle has suffered from that, too, because it’s a little bit of a black box. People look at Stripe, they’re 2.9%, Paddle, 5%. They’re like, oh, they’re the same thing. Why is it more expensive? Well, it’s more expensive, because Paddle goes to jail, you don’t go to jail. They’re handling all this stuff, so it’s really interesting.

Rob: Yeah. It’s kind of like PEO the first time I heard of that for hiring. They are the organization of records or something. I don’t even remember what the term is, but your employees are actually employees of that PEO. Therefore, you can get group health insurance, and then they handle a bunch of compliance. I think it’s similar. I don’t want to compare directly to that because all the PEO suck.

Patrick: Yeah, it’s a little more complicated.

Rob: Yeah, but that’s what it is when you get into this stuff. I know you have a hard stop in two minutes, so I just want to ask you one last question. I know you moved to Puerto Rico. Is it true that if you live there enough days during the year, you can backdate your residency to the beginning of the year, and then you can avoid, I’m assuming, income tax or long-term cap gains?

Patrick: Yes, I moved to Puerto Rico. Being a Midwesterner who grew up poor, I am very embarrassed to talk about this, but I think it is important. It is a tax haven. There’s a couple of things. Would I be in Puerto Rico without the tax incentive? Probably not.

Jenny and I were looking at potentially going to essentially a warmer place, because we’d always lived in Boston or Utah, so colder places or typically colder places. We wanted to kind of consider somewhere it was warmer. As this deal was going, we’re like, while Paddle’s remote, it might be the opportunity to go for it, that type of thing.

I heard about Act 60, it’s what it’s called. We came here and the first thing I’ll say is, every single person who has come here solely for the tax benefit, ends up leaving. Every single person I meet that’s leaving, they’re not really expats because it’s in the US, but there’s a lot of people who end up leaving.

We got this apartment from a group of two people who are leaving. I was like, oh, you’re leaving before the requirements? They’re like, yeah. They were only here for taxes.

We came here and we’re like, okay, taxes, it’s not nothing, but could we live here? Could we see ourselves here? We’re going to have kids soon, all that kind of stuff. We checked all the boxes and we’re like, yeah, and there’s a tax incentive.

Long story short, to answer your question, I am going to be paying taxes. Don’t worry. I’m going to be paying a significant tax bill. It’s not like I’m going to zero or anything like that. Yeah, you get long term cap gains for the value of the equity while you’re here.

There was a value before I moved here. Then there was a sale that increased the value while I was here, so there’s some of that that’s going to be tax free, and then my stock going forward will theoretically be tax free if I meet the requirements, which the first year is tough. It’s 183 days and I realized and started to count my days, I was never in a place for 183 days previously.

There are some other requirements. You have to buy a property, and there are some donation requirements, and stuff like that. I will say if you are considering this at all, there is another portion of this that if you have basically a service business or even a software business, there is another tax act that basically you get 4% income tax, and there are some other incentives to it.

What I will say is talk to a lot of lawyers. Feel free to contact me, because the first lawyer I talked to, everything was yes. Every question I asked, well, what about this? He was just trying to get through and get his $5000 basically to file, because it is a lot more complicated than you think. You’re probably going to end up paying taxes if you’re going through a sale. It’s not like a homerun, but it is very advantageous for folks who are founders and stuff like that.

Rob: Sir, thanks again so much for coming on the show.

Patrick: And on tax havens.

Rob: And on tax as well. I think if a bootstrapper or anyone selling a company hasn’t heard of it and it becomes intriguing, I think it’s nice to spread the love.

Patrick: Totally.

Rob: You are at @patticus on Twitter. You are now the CSO of Paddle.

Patrick: I already changed it.

Rob: That’s pretty cool. I saw that on Twitter, and it says formerly ProfitWell.

Patrick: Chief Strategy Officer. As Matt from Summit says, it is the black card of executive roles, apparently. I have no direct reports. I gave up my last direct report last week. It’s crazy.

Everyone, if you’re early in your business, you’re like, why would you ever want that? It’s like, well, just keep managing people. It’s hard. Yeah, it’s really hard. Awesome, brother. I appreciate you, man. I will say it.

The MicroConf community and you, personally, just been so huge in teaching me so much. Just thanks for doing all that, because would I be here without it? I don’t know, but definitely, it would have been a harder path. I appreciate you, man. I appreciate all the stuff you do.

Rob: Thanks so much, man. I really, really do appreciate it.

It’s quite a story. It’s a real testament to bootstrapping that someone can build a company and exit. At this level, I’ve ceased being surprised by these exits. You see, Mailchimp is $12 billion. There are many bootstrapped companies and mostly bootstrapped companies that are having these seven, eight, and nine figure exits.

As I said, it’s a real testament to the capital efficiency of being able to grow a company like this without having to raise massive amounts of funding. It’s a testament to the subscription model of SaaS. I call it the business cheat code that we get for free, because recurring revenue is so incredibly powerful, and it’s so valuable as a driver of enterprise value. 

Thanks again for joining me this week. This is Rob Walling signing off from episode 611. I’ll be back in your ears again next Tuesday morning.

Rob: They’re commenting on things that they haven’t themselves done. I think it is easy to follow a path of too many voices and too many people saying too many things trying to be experts. That wasn’t necessarily the case. There was a lot less valuable information back in the day, but the couple sources of it, at least, you could probably trust that they were valid and that they were giving you good advice, versus today where you really have to separate the wheat from the chaff.

This just might be another episode of Startups For the Rest of Us. I’m Rob Walling. Thanks for joining me today, I’m doing a Rob solo adventure. I’m going to be talking about four topics. The first is the benefits—even for software founders who want to start their own company—of working a day job.

The second topic is bad habits I learned as a solopreneur. Then I’ll talk about why the college dropout narrative is such an annoying […]. Lastly, I cover, what would I do if I were starting over today? I get asked that question now and again. I’d like to have a more or less definitive answer to share with you today.

My first topic is on the benefits of working a day job. Even if you’re going to be a founder, you’re going to start your own company. There are tremendous things that I have learned and I’ve seen other founders learn at day jobs, at full time jobs. Frankly, ideally working at a startup. I think you can learn some good, but some bad habits at Fortune 5000 companies, at large companies.

The good habits often are process and structure—how to work with others and structure of the company. Really, you think about how they hire, how they retain, how they train, and how they evaluate. There’s all this stuff that you can pick up. But I also think you learn a lot of bad habits there about moving slowly and taking six months to ship something that should probably take a month and bureaucracy, politics, and all these things that we don’t like.

In a perfect world, I would honestly say I think you’d get more benefits out of working for a startup. This doesn’t need to be a venture-backed startup. How many thousands of bootstrapped and mostly bootstrapped startups are there in the world that are hiring developers, designers, customer success, sales, or whatever. I think there’s a tremendous amount that you can learn from having that day job.

Do I wish that I’d never had a day job? Pretty much. I wish I’d started a company in college and then it had taken off. We’ll get to that in the third topic of today. Dropped out of college and never had to do the unhappy slog that I endured working day jobs. I didn’t hate all my day jobs, for sure.

It’s interesting. When I see founders who have never had a “day job” and have never worked as a developer, designer, salesperson, customer success, or whatever it is at a startup or at a big company, there’s a certain level of understanding of how businesses work and how they should be structured that I know they miss out on.

Again, I’m not saying you have to, but I do want to point out some pros of working a day job because I do think there are a lot of benefits. I’ve kind of run through a few of them, but it’s just general office communication and culture, like when to CC versus BCC, when to put multiple people in the to line of an email, how to run a meeting, how to use Slack properly? These are things that can be taught.

As you grow an org, you yourself should have the basics of this in some type of employee handbook where someone brand new coming out of college or someone who’s never had a day job, if they join your company, you should have a basic explanation of these things. They seem like common sense, but they’re not because when you first start out, you just don’t know.

Other things I learned were how to use basic technology tools. Straight out of college, I worked construction for two years, and then I got a job as a developer. That was when I learned to use tools that are now antiquated, but really, I learned email, I learned basic design skills, and just a lot of stuff that today would be Google Drive, Dropbox, Notion, Airtable, and Trello.

If you haven’t worked at a company, oftentimes, you just won’t be exposed to these tools. It’s not that they’re that hard to learn, but there is a ramping up or a learning curve. If you go out and start your own company, you don’t know these tools exist. Obviously, Drive and Dropbox, but maybe you’ve never heard of Notion or Airtable because you just weren’t in those conversations. That can make your founder journey, your startup journey, a little more difficult.

Some other things that I learned were how to structure teams. Whether it’s all developers on a team or a developer paired with a UX person, a designer, or a product person in these little pods, they’re just job titles in general. Why shouldn’t we make up our own job titles? There are a bunch of reasons for this. I probably am not going to go into them here in the interest of time, but making up your own job titles is a mistake. That’s something you’ll learn if you work for a company.

How to hire? I was involved in the hiring process. Even before I started a single company, probably 30 different hires, which means I literally did hundreds of interviews. I used to do the initial phone screen. We were at a credit card company and I would do the first 10- or 15-minute phone screen just to make sure someone was reasonable and should be brought in for an in-person interview. We had an office in Los Angeles.

Just learning that hiring process, being part of it, learning how to evaluate people, and then making a thumbs up, thumbs down decision. That was a skill that I had to learn. It was not there from the start. When I became an entrepreneur, it was really nice to have that skill.

Firing is another one. If you do get into supervision or management, you’ll learn when you should fire and you’ll learn how to fire. Leading, managing, I could keep going for a while. But the bottom line is, I think if you are working a day job or you are a freelancer right now and perhaps you don’t want to be and if you want to have product income, I would say, absolutely go for that.

Is it better on this side, is it better on the other side? When you’re an entrepreneur, a founder, and you are basically calling your own shots and fulfilling your own destiny, in my opinion, it is. I would never go back. But I also think that you should do what you can to learn about companies while you have the chance. Look at the silver lining of your situation. Even if you don’t love that day job and you want to escape it, there is so much that can be learned by working for an organization.

The second topic I want to cover is some bad habits that I learned as a solopreneur. I read The 4-Hour Workweek in 2007. I was already trying to be a startup founder and entrepreneur. In fact, there was an email artifact that I read here on the show 50, 70 episodes ago. You can actually search for Email Artifact from 15 years ago. I think it was the episode title.

I was talking in there about just how early and nascent things were 15, 20 years ago. When I read The 4-Hour Workweek, it made me realize, oh my gosh. I had this realization that I should go hire VAs. I was still doing email support because I had a product that was working when it came out.

I believe The 4-Hour Workweek came out in 2007. I already had DotNetInvoice. I was doing all the work myself. In The 4-Hour Workweek, the big lesson I took away from it is delegation. I did appreciate that lesson because I didn’t realize that I could hire people for so cheap.

I was imagining trying to hire someone in the US to do support on this little product I had that was doing $3000 a month. It just wouldn’t have made sense. But to hire someone part time overseas who could do it was incredible.

There are a bunch of benefits that I learned from being a solopreneur, for sure. I was learning everything and doing everything on my own. One of the big drawbacks for me is I really got stuck with the idea that you should hire task-level thinkers, and it trained me poorly to scale. It trained me that looking for cheap resources, whether it’s junior people or whether it’s folks that are overseas, was the way to go. That was the scrappy bootstrapper thing to do.

I think in the early, early, early days, it was. When I had my first $1000, $2000 of income, it was. But I then didn’t make that transition to realizing, you know what, I should spend more and I should hire project-level thinkers, owner-level thinkers. It took me a decade at least to make that decision.

I’ve talked about it here on the show that one of the hard parts of running Drip in the early days is that we were cash-strapped, so I hired all junior people and we trained them up. Many of them were project-level thinkers. They were great, great people. They were good at their jobs, but definitely, that frugality seemed clever to me at the time. For a while, it was. But it was a bad habit that I had to unlearn once I was growing a company that was growing at a pretty strong clip.

The other side of that is I learned the ability to delegate as a solopreneur, but I kept that idea in my head that I was always responsible for everything. It all came back to me that in essence, I was the owner-level and the project-level thinker. I think learning earlier that I can hire folks who could handle larger projects would have made my entrepreneurial career a little easier.

While I was running these small, amazingly profitable lifestyle businesses, it was great. It was a skill set. I could bring people on, they did tasks, and I kept them very profitable because they were just contractors. But the moment that I did want to grow that team and hire full time, I was not as prepared for it as I would have liked. It took me a while to make that transition from more of the lifestyle bootstrapper to an ambitious, growth-oriented bootstrapper. It’s different skill sets.

Dan and Ian talked about this on the Tropical MBA last few months about what made them super scrappy and clever in the early days actually was an anti-pattern that it became detrimental to them down the line. I guess that’s really what I’m saying here today.

My third topic is about why the college dropout narrative is annoying […]. Here’s what I’m talking about. I read a headline the other day that said, The newest billionaire in China is a 23-year-old college dropout. It’s a headline and it’s clickbait. It just doesn’t mean what it used to.

I think in the ’50s, or the ’60s, you’re going to college and you’re dropped out, it was a huge deal, like, what are they going to do? They’re going to be an alcoholic, they’re going to just travel Europe and do nothing, and waste their lives. Today, it’s not the case. You’re not dropping out because you couldn’t hack it. You’re dropping out because you built a business that’s taking off like a rocket ship. You can always come back to college, you can start another company, or you can get a job with the skills that you’re building.

It’s more of a rant than anything. Every time I see this now. I’m like, someone was a college dropout. If I’d built a great business, I would have dropped out of college too. Then I would have gone back if it wasn’t successful. The downside of this was just so low that using this phrase, I feel, is disingenuous.

In fact, I would attest that if you start a business, and it takes off, you are in college, and you’re making a full time income or more, if either of my sons did that, I would say, drop out of college, man. Stop going to college and follow this path. You might have lightning in a bottle here.

Most people start multiple businesses in their lives. Most entrepreneurs start multiple businesses. Right at the time when you’re getting enough confidence as you’re in college to kind of risk it on your own and your parents are no longer forcing you to go to school, I don’t see what other alternative you would have.

I do. The other alternative is to let the business flounder, be part time or whatever as you continue to go to college. There’s a whole other conversation about the worth of college and how the cost in the US compared to the actual value it gives. It’s not at all what it used to be.

My wife and I have had this conversation with our boys about there is college money if you want to go to college. I think there are developmental reasons to do that. But also, if you decided instead you wanted to start a company, we will angel invest in you.

We will make sure that you can do this if this is something you’re passionate about, you have some traction, and you’ve shown validation, I don’t see why we wouldn’t encourage that. I think college is now one of many paths that can get you where you want to go because the world’s changing and the old scripts are now, I would say, much less valid than they used to be.

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My fourth and final topic for this episode is, what would I do if I were starting over today? This is a question that I often get if I’m on a podcast or I’m doing an in-person talk. I talk about the recent successes or whatever and someone will ask that. Like you’re 21 and you’re starting over today, what would you do differently?

Sometimes I think it’s asked kind of in a trolling way of like, well, you’re successful, but we can’t relate to that. I can’t relate to that because I’m not successful yet. I would say, mostly because you haven’t put in the work. It’s probably my assessment of folks who asked it in that tone.

I do think there are a lot of folks who are genuinely asking. I think the question should probably just be rephrased. What should I do? I’m a 22-year-old and about to graduate from college or I’m a 19-year-old and I want to start companies. What should I do? I actually think that’s just a better question because what would I do if I was starting over today?

I do want to point out that this is different than if you were to ask me, if you were going to start your next SaaS, Rob, what would you do? Because I have a whole mental framework of, I don’t plan to ever start a SaaS. But if I did, there’d be a bunch of stuff I would do. It’s not what I would recommend if you’re a 20-year-old, 25-year-old. Really, age doesn’t matter.

I’d say an inexperienced startup founder who wants to make it, who wants to launch a product and support themselves full time, or maybe have a multimillion-dollar business and bootstrapped or mostly bootstrap this thing. When I think about it, I really think about a couple of options, and it’s within the stair-step approach. What I did was the stair-step approach. One key of this is I worked my ass off.

I think a lot of bootstrap founders who become successful don’t have to work that hard forever. But in the early days, you’re probably going to be doing nights and weekends, unless you have a really nice arrangement. I wasn’t lucky enough to have that. I think that’s just something that’s going to take. It’s going to require working hard.

I love the framework of the stair-step approach to bootstrapping because I have seen so many founders do it. It’s a nice, predictable on-ramp into working your way up. We’ll go through these two options. Option one is something that I did. I’ve seen others do it, but most people don’t want to do it.

They think of reasons not to do it. Some of those might be valid and sometimes I think they’re excuses, but it’s to save up money. It’s to work a day job, save up money, and buy something. Buy something on sideprojects.com, 1kprojects.com, MicroAcquire, Quiet Light, or FE International, and frankly learn marketing from that project.

Ideally, if you bought something with existing traction, you could see what marketing purchase had already worked. You could double down on those and grow it. Most people don’t want to do this because they want creativity, they don’t want to inherit someone else’s code base, or what if I get ripped off? There are all these thoughts. But frankly, buying something saves you 6, 12, or 18 months depending on time building and trying to find product-market fit.

To be honest, what I did is I was working a day job and then I was consulting nights and weekends. When I started out, I was billing $75 an hour for the consulting, then it was $100, and then it was $125. As it went up, I got a stockpile of $10,000, $11,000 in what I called the business account.

Sherry and I talked about it and I said I want to use this to grow a business, whether that means to go full time, consulting eventually, or to buy software products, I didn’t really know. I had never heard of anyone acquiring or doing these small acquisitions. So we agreed that the income that came from my day job went to the personal account, as well as hers. Then anything that I did on the side, I could use to “grow the business”.

What I eventually did was I dropped $11,000 on DotNetInvoice. That had enough traction. There was some SEO. I believe there were some Adwords going on. I don’t remember all the approaches at the start, but I learned some stuff from what those guys were doing about what was working and what wasn’t. There were already customers, and I tripled the price because you should always raise your prices.

I told the story over and over, so I’m not going to go into it here, but it was really an interesting option. Yes, it took time to find it. That one kind of stumbled in my lap. But then I wound up acquiring (depending on how you count) 20, 25 more small online businesses over the next several years.

Some of those were content sites and just barely making hundreds of dollars a month from AdSense. Others were full blown ecommerce sites, SaaS products, ebooks, and downloadable software. I did it many times and I would rehab them. Basically, I was a value buyer and I would rehab them. The profit that came off of those allowed me to quit my full time day job. It is an interesting approach if it’s something you want to consider.

Option two is to build an app for an app store. I’m defining app store as not just iOS App Store, but the Shopify store, the Salesforce ecosystem. HubSpot has one, Zendesk, HelpScout, GitHub, Heroku, Atlassian, AWS, Magento, WordPress, and Squarespace. I could go on and on.

In fact, over at rocketgems.com, an indie hacker and fan of the stair-step approach named Ramy put together essentially an essay called 68 B2B SaaS marketplaces with opportunities for indie hackers. That’s probably what I would do because this is step one of that stair step approach. All you need to know is how to rank in that app store.

As long as there’s enough traffic for it, they handle all the marketing. The distribution is done. You don’t need to think about them. One of the hard parts that we see with a lot of TinySeed and with a lot of MicroConf companies is they have a good product, they’re trying to find product-market fit, but they just don’t know how to market. They don’t know what to try next and they don’t know what to do next.

With this approach, if you can get in and get essentially that free traffic from the App Store, now it’s not free because you’re probably paying them 10%, 20%, 30% of your revenue, depending on the App Store, but it makes things a lot simpler. I think as a permanent solution, if I wanted to build a multimillion-dollar SaaS company, I wouldn’t do this, but this to me is that step one. If I were starting over today, I would use one of these app stores.

They didn’t exist when I was starting out. I am envious of folks who are starting today because they have this benefit. In fact, I’m going to go through some pros and cons of starting companies today versus 10 or 15 years ago.

Me and another old-timer are waxing poetic on the podcast. We say things like, man, remember how easy SEO was 15 years ago? You could just do this and that. It sounds like it was all sunshine and roses. But in fact, it was very much not so. I actually have more benefits of starting today than I do the negatives. There are more pros than the cons of starting today.

One of the benefits is that labor is cheaper now than when I started really in 2002 to 2003, which was when I started launching my first thing. There was no Upwork and there really was no hiring internationally by an individual. It just didn’t exist. The first time I ever heard about it was Tim Ferriss talking about it. It sounded like it existed. People kind of knew about it for a year or two.

Bigger companies had done the offshoring thing, but an individual hiring another individual in another country, there was no Skype, there was no way to communicate with them except email. How would you pay them? There were just so many complexities that don’t exist today. Not only are those things better today, but frankly, labor is just cheaper. It’s a global economy. That wasn’t something that we could do back in 2005, 2010.

The second benefit of today is there is so much more specific tactical information available about how to start startups. You think of pre-this-podcast, pre-Microsoft, pre-whatever. Wherever you go for your resources today, they probably didn’t exist 15 years ago, so I was very much in the dark.

In fact, the way I learned marketing was I read a bunch of internet marketing books, which was like info marketing. Even the old school folks who used to write actual physical sales letters in the ’90s like Dan Kennedy and Joe Polish I think.

I got to be honest, a bunch of their stuff, I’m pretty judgy about it. It did not fit my style. It was way hard selling and their products were not great. I don’t think they were selling info products, really overpriced. I don’t think that a lot of them were fair or 100% ethical. I’m not calling out those two names in particular, but just that space was known to be pretty crappy.

I didn’t have to take that away from it. A lot of their tactics and a lot of their thinking were actually pretty accurate about how to market, how to sell, how to write copy, how to write an ad, and how to give someone some time pressure to buy. There were all types of stuff. That’s how I learned it.

I would just go buy books and read through it because there just wasn’t anything online like you can get today with. There were remote events. There were in-person events. There were articles on Reddit, SaaS forum, and entrepreneurship forum on Reddit. Stack Exchange, Stack Overflow, these things are amazing. There is so much more specific tactical information available today than there was 10 or 15 years ago.

In addition, there are more marketing options available today. When I looked back at the list that was possible back then, it was just a handful. I’m not going to name them all, but you could do cold outreach, you could do SEO, pay-per-click ads became available around there, and then there were display ads. That was kind of it because there weren’t social networks. I guess Hacker News came around that time and there was Digg. These were literally the five or six things that I knew about.

There were obviously in-person events, there’s cold calling, and other things. But for someone bootstrapping a company, you didn’t have access to those more expensive things. The number of options available today with all the social media groups, these places where entrepreneurs, and your potential customers hang out, all the ad networks, there just is a lot more online you can do today. While some of the Adwords and Facebook ads are expensive and they get more expensive over time, I still think there are so many more ways to reach people today online than there were 10 or 15 years ago.

The next benefit of today is these app stores that I already talked about are just an amazing opportunity. I think that goes without saying or I guess I’ve already said it in this episode, but I think that today is where I would be going. In addition, there are more things available to buy. There’s actually a thriving ecosystem with the brokers and the marketplaces that didn’t really exist. I think that’s a nice opportunity, as you heard in option one.

I think another pro is that if you build something, if you build a SaaS app that’s even doing $5000 a month in MRR, it’s sellable today at a really good multiple. Back when I was buying stuff, you could sell it for 12–18 months’ net profit. It was just brutal.

While that is good when you’re acquiring, it’s really tough if you work your butt off and you build a SaaS company for $5000 a month, $60,000 a year. You can sell it for almost all profit. You sell it for $60,000–$90,000, there just isn’t a ton of value. You just have to build up these cash flowing businesses versus today.

Let’s say you build a SaaS for $5000 a month. Again, for easy math, let’s assume it’s 100% profit, $60,000 a year and you sell it a 5X profit multiple, so you’re getting $300,000 for building the SaaS company. Its long term cap gains if you hold it for longer than a year, although that’s not tax advice. That’s just amazing. It’s an amazing nest egg and an amazing way to basically angel invest your way into your next company.

The last couple of pros of building today, there’s a bunch of them. But in the interest of time, one is there are more communities—MicroConf, Indie Hackers, Dynamite Circle, ecommerceFuel, and Rhodium Weekend. There are so many amazing groups of people who are helping one another.

Going back to the tactical information being available, a lot of that is coming from these communities where people learn and are sharing it with one another to make a name for themselves, but also to help other founders. That isn’t something that existed. In 2005, the only two bloggers that I knew that were talking anything about this were Paul Graham and Joel Spolsky.

I started blogging about it in 2005, 2006. The only other people that I can remember the next few years with were Peldi Guilizzoni from Balsamiq and Patrick McKenzie. There was a business that software forums run. Anyway, there wasn’t very much. Now you couldn’t name them all.

I could name everything that was available at that time in less than 60 seconds. Today, we have this embarrassment of riches that I think is beneficial. I think these communities are great for not only the information, but it’s for the accountability, for the ability to say, oh, I see other people can do this. If they can do it, I can as well.

The last pro I will throw out today is there’s just more tooling. There’s just better tooling today to build SaaS companies or to build startups. There’s Rails, Django, and a bunch of new platforms that I’m forgetting. There’s Hotjar, Mixpanel, AWS, no-code, and there’s low code. You can do a lot faster today than you could 10 or 15 years ago.

Let’s look at a few cons. Ad networks are more expensive. Google ads 10 years ago were cheaper. The advice I would say here in terms of ad networks is if you look for newer ad networks, they usually start off with cheaper clicks, and then over time, they become more expensive. That’d be the thinking that I would have there.

The second con is this is more competition across the board. There are more SaaS being launched. It’s an amazing business model. It’s amazingly lucrative and a lot of folks want to do it. There is more competition and more niches. That means there’s more competition in SEO and the marketing approaches and more competition for the same customers. That does make that specific piece harder.

The third thing is that things are moving so quickly, they change so quickly. I’m not 100% sure on this, but I feel like you could have an autopilot business more realistically 10 or 15 years ago than you could today. I think given all that competition, so much is happening. So much has been developed so fast, new features, and all of that.

I think that there’s a lot more happening in a shorter period of time. I think that means that you have to stay moving or else you get caught. I think most people listening to this podcast are probably not looking to autopilot their business. But I do think that with things moving faster, it’s kind of more churn and just more competition.

Lastly, there’s a lot more distraction today, whether it’s social media or just a lot of people claiming to be successful entrepreneurs. At least, maybe they’re not even claiming. They’re just commenting on how you should start a company when they’ve kind of never done it or they’re commenting on things that they haven’t themselves done. I think it is easy to follow a path of too many voices and too many people saying too many things, trying to be experts.

That wasn’t necessarily the case. There was a lot less valuable information back in the day. But the couple sources of it, at least, you could probably trust that they were valid and that they were giving you good advice, versus today where you really have to separate the wheat from the chaff.

I want to leave you with the idea that it doesn’t matter if it was harder or if it was easier 10 years ago or 15 years ago. The bottom line is it just doesn’t actually matter that much. Because if you do want to start a business and want to be an entrepreneur, then you don’t have a choice. You don’t have a time machine. You can’t go back 10 years. It doesn’t really matter if it was easier or harder.

I would say, seize the day. This is why I’ve done 600+ episodes of this show. It’s because I love seeing new entrepreneurs get started. I love seeing existing entrepreneurs start new companies. I love seeing folks able to find their freedom, find that amazing purpose, and have these healthy relationships.

That’s what, to me, bootstrapping is about. It’s about this great equalizer that allows all of us, not just those who can seek venture capital or who can use to be moved to the Bay Area, frankly, to raise a venture, but it allows any of us to start a business that provides for us and provides for those closest to us. All the while, being ambitious with our business but also balancing that with our life, our family, and our lifestyle.

Those were my four topics for today. The benefits of working a day job, bad habits I learned as a solopreneur, the college dropout narrative, how I just don’t love it, and what would I do if I were starting over today? Thanks for joining me again this week. Signing off from episode 610. I’ll be back in your ears next Tuesday morning.

Rob: Welcome back. It’s Startups For the Rest of Us. I’m Rob Walling. Thanks so much for joining me this week. If you haven’t checked us out on Twitter, @startupspod, you get to see every week, a little 60th-92nd snippet of the episodes and their video snippets.

You’ll get to see my cool background with my Millennium Falcon kind of blueprint-ish thing, my Beatles gold record up behind me and of course, The Startups For the Rest of Us episode one album cover, What is a Micropreneur? Thanks to producer Xander for having that LP pressed for our first episode.

This week, I’m diving into listener questions, as always, video and audio questions that go to the top of the stack. You can ask questions by emailing questions at startupsfortherestofus.com or head into the website and click on Ask a Question. First question is from Josh Duffy, a longtime listener. He is asking about whether it’s worth having multiple LLCs.

Josh: Hey, Rob. My name is Josh. I’m the founder and CEO of a SaaS product that I’ve been working on since 2013. We’re currently doing 25,000 MRR and it’s under an LLC. I also have one other super small SaaS product that only does about 1000 ARR. It’s an early side project back in the day that still earned some revenue.

My question is about accounting and bookkeeping. I know you recommend different SaaS projects to have different accounts and everything set up so it’s super clean, so you could potentially sell one of your projects later. I recently spun off a module of my larger SaaS project last year into its own standalone SaaS.

It’s starting to take off. We’ve got five customers so far. I’m curious, just with all the effort involved, if you’d recommend making this transition at 1000, 5000, 10,000 MRR, or maybe once you have some product/market fit and when it lines up with a fiscal year.

A follow up question, would you recommend having separate LLCs? I’m a solo founder, so separate LLCs that are just owned by one holding company for tax simplicity. I’d love to hear your thoughts. Thanks for everything you do. I love listening to the show. Hope you have a good one. Thanks.

Rob: Thanks for the question, Josh. That’s a good one. I should start by saying I’m not a lawyer, not legal advice—all the usual caveats. I will say if I was in your shoes and I only had one SaaS app, so I did not have the 25,000 MRR app, but I just had one doing 1000 ARR, I personally don’t even think I would have an LLC.

In California, the fee for an LLC is $800 a year and other states vary. But just the headache of having to set up the legal structure and maintain it, personally, it wouldn’t be worth it at that point. I would just let it flow in the US. It flows to your Schedule C, I believe it is, on your taxes, so that revenue just almost comes in like 1099-type revenue.

Given that you have a business that is already under an LLC on its own, I would consider just having this side business just go to the Schedule C. Obviously, you’d want a separate bank account for it and I’m assuming a separate Stripe account. The cost, the headache, the hours of filling out LLC filings, and all this stuff—I act like it’s perhaps more than it is. I’ve had several LLCs running at once, and it winds up being a pretty big headache.

Personally, unless there was a compelling reason or I felt like there was extra exposure, because LLCs are supposed to offer you this exposure or this firewall between personal and business stuff such that if the business gets sold, they can’t pierce it. Single member LLCs, I’ve heard they often get pierced and in certain states, they just are viewed as it’s a personal thing. It’s a shield for shield’s sake, so they pierce it pretty easily.

I don’t know. I would either just have it on my schedule C and own it personally. I guess you could attach it under the other LLC, which is fine. I guess I don’t see much reason to do that if you don’t need to, because it does muddy the waters if you ever want to sell that 25,000 MRR app.

It’s all clean right now. Adding another product in there, if it’s not affiliated with it or you don’t have to sell them both at once is all doable. It’s not that big of a deal. But personally, I’d probably just have it as a side thing, much like I owned half a dozen websites back in the early 2000s.

They were throwing off hundreds or low thousands of dollars a month. At the time, I didn’t have an LLC. I had a consulting LLC that I was using. Even that I did consulting work for four or five years before I started the LLC, and I was doing six figures. It was just going to me personally.

It’s great. If you can get an LLC in place and get all that stuff in place, it’s fine. I do think some people will kind of pre-optimize some of these things, where if the business never does anything, then you have to shut down the LLC, and that’s even more paperwork and time that you have to spend doing it. Thanks for the question, Josh. I hope that was helpful. 

Our next question is a video question from Ruth Maine.

Ruth: Hi, Rob. My name is Ruth. I’m actually calling in with a question for my husband as even a little bit of a surprise for him. I don’t know if he’ll end up on the show or not, but he runs his own business, a software that helps run livestock shows. His name is Josh. He’s been listening for a long time. He got me hooked, even though I’m not a software person at all.

He’s just really in the grind right now. He’s a few years in. The business is going really well, but he’s just sort of constantly inundated with little fixes and support issues, even though he has a few people helping him part-time. That is just a constant stress that never allows him to have the freedom at the time to work on improvements and updates that would alleviate some of those problems. It feels like he’s in a cycle of just constantly trying to keep up and keep his head above water versus being the head.

If you just had any tips or encouragement for how to make the time to make those needed updates when it feels like you don’t have time. I know you’ve talked about this a lot, so it’s not really a new question. Just looking for a way for him to have that time and to encourage him in that direction. Again, his name is Josh. He runs an app for livestock shifts. Thanks.

Rob: I love this question. Thanks, Ruth, for sending it in. Hi, Josh. I hope this is a nice surprise for you. What a nice gesture for Ruth to send that in. I love it, Ruth. You said he’s got you hooked, even though you’re not a software person. That’s the cool part. Startups For the Rest of Us can be just about entrepreneurship for a lot of people.

I know many non-software founders who’ve never planned to launch software companies who can apply the lessons that we cover on this show to their business. Yeah, this is tough. Honestly, I feel for Josh. I think the idea here that I have is, if he already has some folks helping him part-time, are they task-level, project-level, or owner-level thinkers? Because back in the day, I had eight or nine task level thinkers.

It was great. They were inexpensive. I was doing the four-hour work week thing. The problem was I was the only one that was thinking about projects, and certainly the only one thinking at an owner level. Anything that wasn’t within this really well-defined process bubbled up to me.

That got really old, and it wasn’t fun. My four-hour workweek, which was actually 8-12 hours a week at the time, was filled with a bunch of crap that I didn’t want to do. It wasn’t interesting work. It was answering questions that frankly, a project-level thinker could have answered.

Eventually, I had the budget to then hire someone who was more of a project-level thinker who could manage and deal with a lot of the task-level thinkers. I’m wondering if that’s perhaps an avenue that Josh could go down. I think a lot of us make the mistake of hiring too many junior people, because they’re less expensive, and you meet a person who has this great attitude, and maybe they’re your friend or maybe there’s someone you get along with, and you’re like, well, I can teach them to do this.

You’re right, you can. The problem is it slows you down. Then you essentially become more than just their supervisor, their boss. You become almost a mentor, and they turn to you for a lot of things that a senior person may not do. I wonder if there are these bug fixes and support issues that are coming to you. Is there a way to hire someone who is more of a mid-level or a senior developer who can handle these things?

Really, there are two ways that I’ve heard about it. One is the way that I structured it at Drip, which was that we had a junior developer. They were assigned all the customer-facing stuff. They were level two support. Level one, tier one support was our support person answering email.

If there was a technical issue, they couldn’t troubleshoot, and then they would escalate it to this junior developer who would then dig into the code, figure out how to fix it. If they needed to rely on a senior dev to get input, then they would. But if not, they would push that pull request, push it for a review, and then we push it and the bug will get fixed without a senior dev ever having to get involved. That’s how I’m thinking about Josh being the senior dev in this case, where he can consult or he can offer advice, but really, someone who is more junior might be driving that fix.

The other way that I’ve heard support and bug fixes handled by dev teams is that it rotates. Every week or every two weeks, one developer is basically assigned all the tickets that are coming in. The support person or team knows who is on call, in essence, and those are funneled to that person. It’s good practice to continue to be in the code base and answering support tickets.

It’s not something that a senior developer wants to do 40 hours a week. They’re there to write code and build things, so there’s this balance. My gut is that Josh, you’re hanging on to too much stuff. I know you’ve heard me say it, but you have to figure out how to not just delegate tasks, but actually start to delegate ownership, and delegate project-level thinking and initiative.

Whether that means not having a few people and just consolidating to one person who’s helping you or that means rotating these responsibilities through your team to where support tickets don’t always go to you, you can’t just be the frontline and take the bullets all the time. You can grind it out, and you know how to do it, but it’s going to lead you to burnout. It makes it hard to lead a normal life. It makes it hard to relax in the evening when you’re hanging out with your friends or when you go on vacation with your family. You’re constantly thinking about your business because it relies so much on you.

I’m guessing you’re in a relatively early stage. I don’t know the stage of your business. I don’t want to act like you can just hire five people and hand it off to them. I realized that’s not a realistic approach for so many bootstrappers. It’s the approach that I had to take. I had to be the backstop.

Over the years, I learned that the more I was able to delegate, the more advanced project and owner-level thinkers I was able to hire. The more senior people, the better off I wound up doing. Thanks again, both Josh and Ruth. I love having you too as listeners. It’s a good question. I hope that was helpful.

This week’s sponsor is Kelsus. Kelsus provides engineering teams for startup success. They stick with their clients for the long-term. Kelsus has worked with clients through nine acquisitions. Every time, their work has passed due diligence and security audits by big audit firms and public companies.

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Matt: Hey, Rob. This is Matt Lasker. Thank you so much for letting me ask you a question. Really, I want to say I appreciate everything you do for founders like me out there trying to help us find our way through this process.

We are really wanting to know or get some advice about the MVP process development, in particular. We are trying to build an app that helps coaches, help their players, engage with their playbook. Right now these coaching apps are nice and beautiful, but they’re really made for the coaches. There’s really little engagement from the player’s side. We want to create a game, a mobile app that players can play, but it’s based on their coach’s playbook, basically.

We’ve talked to a lot of developers. We keep getting the same amount of cost right around $80,000-$100,000, which is not realistic for us to make our MVP. We are definitely of the mind that we want to make this MVP with a few core items, so we can get it out in front of players and coaches and let them tell us how to make it better. $80,000 is just not really realistic for us on that.

We did find one company that specializes in rapid prototyping that can do it for even less than half the cost. It’s great, but they are very adamant that this is not a long-term product that we can sell. It would take some additional development or just scrapping it, and then finding money to build the whole new real application afterwards.

I’m just having a hard time balancing that in my head—$40,000 for a prototype, we want to prove it. It seems like a lot, especially if you layer on the fact that we probably won’t see any value after that. Obviously, proving the concept is invaluable. I get that. I’m having a hard time quantifying that, so I’d love your opinion.

Rob: Thanks for the question, Matt. Yeah, this one’s really interesting, especially a tough question, because it’s a lot of money to put at risk. Given how startups are so unpredictable, and that the odds are that they probably won’t work out, you’re going to be selling to schools, I’m guessing. I can’t imagine.

Maybe the coaches themselves or I don’t know if the school is going to have to approve it, but it’s tough to get money out of schools often. I guess I don’t want to go down the road of thinking through the business case for this. I really do want to just answer your question about getting the MVP out.

It pains me to think of you spending $40,000 or $80,000 of your own money to prove an MVP. I think that’s what you’re getting at as you have that same feeling. Typically, in this case, what I see is that either the person, the founder, or you, learns how to code well enough to build something that people can use.

I would say I’ll build prototypes and show them how it’s going to work, but I get it. It’s coaches and kids or coaches and players. I don’t know if you’re talking major leagues, college, or whatever it is, but they’re going to have to see it in this case.

I’m wondering, as a founder, a lot of folks are able to put these out because they do learn to code just well enough or they bring on a co-founder who can build it, which is a whole other podcast topic to go down. It’s like how you would find that founder and how do you know they’re good.

I would say that there are folks in MicroConf Connect. There are more than 3000 mostly bootstrap founders. Some folks in there, there are a lot of developers. There are probably 80%+ developers, and some folks are looking to come on with a non technical co-founder and team up. I don’t know if it’s the hiring channel.

Honestly, if there’s a co-founder channel, I’m not in it at this minute, but that’s an interesting thought. You have to bring something too, which I think you’re already doing. You have to bring some validation and the leads, and that you’re going to sell, and all this stuff  in order to ask a developer to spend X amount of months, $80,000 worth of months to build up the app.

The other thing I was thinking about is, there’s a bunch of no-code app builders. I’m not an expert on these. While I wish I could recommend one to you, I went to Google and typed in no-code iOS app builder. Of course, there are these lists of the top 22 iOS app builders. Each of these is going to have a limited feature set. It can do one, two, or three things, and that’s it.

It’s not going to be completely custom. But I would ask myself, is there a way where I could build enough of an MVP with one of these app builders to use that as the MVP, or is there a way I could hire someone on Upwork or find them in MicroConf Connect, who is a no-code builder, and pay them for a few hours of of consulting to say, is this even possible? What could we build with no-code, given your knowledge of these tools?

I had Helen Ryles on this podcast. It’s probably 12, 18 months ago. She’s a perfect example of someone who knows no-code really well. Someone like her or someone you find in the no-code space, it’s a great community in general, I think could be beneficial to give you an idea of if you spend a few $100 to get a yes or no, because then that idea may be harebrained or it may be the solution to all your problems, so to speak.

The only other option I can think of is, is there a way that you don’t build it as an app, but that you build it as a mobile responsive web app. Then you don’t have to go through the App Store. It’s just a URL that the coaches would hit to log in and do things, it is a URL that the players would hit to see the playbooks or whatever? This may be reaching.

I’m really just spitballing here. The reason I throw that out is because I think that building a mobile responsive web app is going to be easier, and you’re going to get more functionality than if you try to build an actual iOS, and God forbid, also an Android app if you need something to be compatible with both. I know a lot of the app builders do both. I just know that once you get into the mobile app world, they are more complex and more challenging. I think there are fewer people with that expertise than there are who could no-code build a web app.

When I hear $80,000 to $100,000 to build a working prototype, that sounds insane to me, like so expensive. I think, what if it was a web app? Could it be done for a 10th or a quarter of the cost? In my experience, probably finding a good freelancer through recommendation. Again, I keep saying MicroConf Connect, because that’s where there are 3000 SaaS founders hanging out who were bootstrap and mostly bootstrap, who listen to this podcast, and who are helping each other out with this kind of stuff.

Whether you found a freelancer there or you found a recommendation to one, that’s one way to go. You could also go to Upwork. You can go to Indie Hackers, go to the Dynamite Circle. There are a bunch of communities where folks are going to be able to help guide you. I’m glad you wrote in with this, because I’m sure there are other people out there with this exact question.

I think my reaction is, oh, my gosh, these numbers just sound expensive. Of course, hiring a full service agency that’s going to deliver everything, yeah, I get it. I ran a micro-agency back in the day, so I know what the margins aren’t and how that works. But paying this much for an MVP, unless it’s really complex, feels like the funded approach to doing things. It’s not the bootstrap, mostly bootstrap capital efficient way.

Hopefully, that’s why you’re asking me, because I’m trying to think of how I would have done this years ago when I didn’t have that kind of money to drop on a prototype. There’s a lot to think about here, Matt, but I appreciate your question. I’m glad you wrote in. I hope some of those ideas were helpful.

My next question is from a longtime listener named Scott. He’s asking about transactional and marketing emails, whether they should be on the same domain. He says, “We’re a startup. We’re getting ready to start sending more marketing emails very soon. Should we be using the same domain name or dot-com for corporate emails—that’s your internal emails you would use in Gmail, Google Apps, Suite, Outlook, whatever you’re using, marketing emails—you all know what those are, Drip, MailChimp, et cetera, transactional emails—these are emails that are sent if you’re a SaaS app, you’re sending billing receipts, or you’re sending onboarding emails, or you’re sending notification, hey, someone just signed up for this or that.”

“The question is, should we be using the same domain name or dot-com for all three of these? If not, what is the best strategy? We’re already using the dot-com for corporate emails. Should we create emails as a subdomain for transactional marketing or both? I thought maybe some of your Drip experience might come into play here.”

Of those three, the biggest risk is marketing emails. Honestly, usually, I would send all of them from the same domain. I’m just not that worried about it. The place where I would tend to break them into a separate domain is if you’re sending a cold email, because that is where you’re going to get the spam complaints, and that can impact your sending strategy.

If you don’t maintain and might be mindful of the health of your marketing list, it can as well. The most dangerous one is marketing. If you want to separate that out, you can. But I’ll admit, it’s not something we did with Drip. It’s not something we do with MicroConf. It’s not something we do with TinySeed.

To be honest, corporate and transactional emails winding up in spam is pretty low, because they’re so targeted. It’s an it-depends, risk tolerance, blah, blah, blah. But most companies that I see have their corporate marketing and transactional emails all on the same domain, and then they start thinking about it when they’re sending cold emails. They start thinking about breaking it apart. Thanks for that question, Scott. Hope that was helpful.

My final question of the day comes from Philippe, who’s asking about planning for a very large project. He says, “Hey, Rob. When starting up a project, do you have any tools you like for organizing the steps of the code? I’ve always just cranked out hours and hours of code, but I’m wondering if there are tools that you like to perhaps tying to Gmail or just how to plan for a project started from scratch? Do you lay out in a calendar, which features need to be built by which date? Do you have something that allows the UX team to run parallel to the dev team? I tried Trello, but didn’t really like their UX. The ideal solution, I think, would be some sort of to-do list that ties into a Google Calendar. Thanks for your help.” Interesting question.

I have never had anything that tied into a calendar. Back in the day, I used to use an Excel spreadsheet, and then moved to Google Sheets, where I would have each feature, and then my estimate, and then how many hours I put into it, and how many hours I thought were remaining.

There was a count date feature. It would add up all the hours. It was a workday, I think it was. It would add up all the hours and tell me what day based on these estimates if they were accurate when it would be finished. It wasn’t individual. I didn’t calculate it for each individual feature, I guess you could. That’s a pretty simple way to do it.

In fact, Joel Spolsky has an article on his spreadsheet. I just took it and edited it. I loved that when I was consulting, because it would give a pretty good idea. I would do my estimates, and then I would submit them to the client. Hey, this is going to cost $40,000, and here’s why because here’s the hours we’re throwing at it. Then I could see if we were on track ahead or behind. It was a very simple way to do it. I really enjoyed it.

These days, there are other tools. Bottomline and GitHub Issues is one that is really good. In fact, it’s what we ultimately wound up using at Drip. We had an engineering team of 18, 20 people by the time we left. We had a UX team and we had all types of people working in tandem. GitHub Issues was what we rolled that on, so I think you should definitely look at that.

What I don’t remember is if there were calendars tied to it, because we worked in sprints. I forget if it’s two or three weeks. We didn’t say this feature was done on this day. It was kind of like once it was done, then it was QA’d, and then it went through a code review, and then if it was complex, we put it on staging. Otherwise, we push it to production.

There was this process that we had, but we didn’t try to pinpoint it down to exact days when exact features were going to be complete because we just didn’t need to. We pushed it to production as many times a day as we needed as features were complete. There was no reason to plan to that level of specificity.

Other tools people use include Jira from Atlassian. That’s a bit of an older tool. I know that a FogBugz back in the day, also an older tool, is what we had used before GitHub Issues. In fact, we actually used codetree.com, which is a tool Derrick built on the side while we were building Drip. He later sold that.

I interviewed him about that very process on this podcast years ago. He sold CodeTree, so there are new owners now.  It’s basically built on top of GitHub Issues, and it adds some extra functionality. That’s an interesting play.

I’ve heard some folks use Trello as well, and then Wrike is another one of those. Boy, there’s Asana and Basecamp too. Some people use them. Basically, I could probably rattle off 100 different tools that are focused on this niche, because there’s not much of a niche.

It’s a very horizontal play, there are a lot of software developers in the world, there are a lot of software projects, and there are a lot of tools. I don’t want to overwhelm you, but there are many, many tools that are built almost exactly for this use case that you’re describing. I’ve tossed out a few of them here today. I hope that was helpful. Thanks for the question.

That wraps up our episode for today. Thanks so much for joining me this week and every week. This is Rob Walling signing off from episode 609.

Rob: Welcome back to Startups for the Rest of Us, episode 608. I have quite a story for you today about Adrian Rosebrock, who bootstrapped and exited a seven-figure info product called PyImageSearch. 

No, it’s not about finding pumpkin and apple on, when is it? March 14? Yeah, March 14. It is about visual image detection and image classification in Python. This is really an incredible story of how Adrian graduated with a PhD in computer science with an emphasis on digital image processing and recognition and how he didn’t like his day job. 

He started a blog and he just stairstepped his way up. We’ll talk about stair stepping. We’ll talk about how Adrian discovered this podcast back in the 2010, 2011 time frame and how that led him down this path of bootstrapped entrepreneurship. 

It’s a pretty incredible story in the sense that he had built this info product up into the lowest seven-figures with essentially—I think his team was three people. It was just minting money into his personal bank account. 

Then in 2020, 2021, he had that epiphany that maybe he wasn’t learning new things anymore. I asked him that straight up. A lot of folks listening to this podcast would love to have an app or an info product doing seven figures a year and throwing off, I conjecture 80%, 90% net profit. But he wasn’t learning anything. Like startup founders, we have to know when to say when and when to move on. 

With that, I hope you enjoy my conversation with Adrian. Adrian Rosebrock, thanks for joining me on the show. It’s been a long time coming, sir. 

Adrian: Thank you, Rob. It’s just an amazing pleasure to be on this podcast. 

Rob: Yeah. Correct me if I’m wrong, but I believe we became acquainted, maybe, it would have been 2009 or 2010?

Adrian: Something like that. It’s been over 10 years at this point. 

Rob: Yeah. We can talk a little bit about it as we get into the interview. You were one of the very early folks who kind of stumbled upon what I was doing with my blog and then the Micropreneur Academy at the time. It was basically an online course or a series of online courses about how to be a developer and launch products. 

These days I focused on SaaS. Back then, there were info product folks in there. There were mobile app developers. There certainly was SAS, I think we were starting to call it then. There was downloadable software, there was all kinds of stuff. 

I’m curious how you found that. How did you find me and kind of this bootstrapper in this community? 

Adrian: Yes. I wish it was a more interesting answer, but it’s not. I was on the entrepreneur subreddit and somebody posted a Top 10 List of Podcasts and Startups for the Rest of Us was on that. I downloaded a few episodes and it clicked. You feel like you develop a rapport with someone quickly, and then it just really resonates with you. That’s exactly what happened with you and Mike.

When I was just getting started, I’m like, wow, I can relate to these guys. I really understand where they are. I didn’t feel like you guys were bragging or anything about your accomplishments. You get some of these entrepreneur podcasts and people just want to just show off and really highlight themselves and their accomplishments. 

With you and Mike, so humble, so relatable, and that really resonated with me. It was just two guys having a conversation and you were learning from it the entire time. 

Rob: That’s cool. Especially, kind of the info marketer or the information marketer space in the 1990s was the sales letters they would mail out. Then in the 2000s, they kind of moved online, and it was always the guru. It was always that person who was selling who was the guru.

I was always kind of annoyed by that because I thought, can’t you just be a normal person, be successful, and teach? 

It’s cool to hear that resonated with you because that was the point. I’ll admit, if I go back and listen to the first 10 episodes, I’m a little bit guru-ing. A little more than probably I should have because I just didn’t know any other model. But we quickly became ourselves.

We’ll talk later about Info Product Mastery, which is your podcast that launched a couple of weeks ago. Is that something that has impacted your approach to teaching? We’re going to dig in today at PyImageSearch, which is a company built to seven figures in revenue and had a life changing exit last year. 

I have to imagine that perhaps your take on teaching was influenced by—whether it’s Startups for the Rest of Us or other folks—who you relate to. 

Adrian: Absolutely. I have a PhD in Computer Science. I studied computer vision and machine learning in school. That’s writing software that can understand what’s in an image, such as face recognition.

I studied this in school. You have to understand that just because you have a PhD in computer vision, it doesn’t mean you understand the entirety of computer vision. You likely only understand a certain very small facet. 

But by teaching it, you’re getting all these questions and you honestly may not know the answer to. Now, the difference between someone who’s a PhD is that they can likely read a paper or two and get up to speed very quickly. 

That’s the situation I was in. But I certainly had to be humble with myself, lower my ego, and say at times, I don’t know the answer to that question, but I’m going to add it to my queue of blog posts and I’ll see if I can cover it in the future.

It became a tremendous learning experience for me. In school, I learned the theoretical, I learned the mathematics, I was writing papers, I was reading papers, but I wasn’t necessarily learning a lot of practical implementation side of stuff. 

As I was running the blog, I was able to actually write the code to figure it out, then hand it off to people, and be like, this is the code that you can use to solve this specific problem. Here is a line by line explanation of what that code is doing, and you can integrate it into your own projects. 

That taught me just as much as it taught the people who are reading the blog. It made me that much better. That wouldn’t have been possible if I didn’t lower my ego to really accept that there are a lot of blind spots that I didn’t know. 

Rob: Right. I think a listener who doesn’t have a PhD, maybe like myself, we always joke that I’m usually the least educated person. I went to public school and got a bachelor’s, least educated person in most rooms I’m in. 

You got a PhD and I think people might say, well, that’s it. You’re kind of set, right? You have the doctorate and you’re going to go do your thing and make a cajillion dollars. But, what didn’t match up there? Why did that script not play out in your life?

Adrian: It was weird. I’m always drawn to doing really challenging things, whether that’s building a business, getting an education, or getting a PhD. I felt like I was constantly being pulled in two different directions. 

Throughout my undergraduate years, I was working in a small business. I work for a company that was acquired. I was there for five years, started as a junior developer and ended up as a senior developer. That exit actually paid for my college education, which was an amazing blessing that I had while in school. 

At the same time, I was just drawn to this idea of getting a PhD. To me, it was almost like playing the market. It’s almost like a stop-loss. You put your investment in, but you immediately know what that stop-loss is. You can exit. 

That PhD was kind of my stop-loss because I knew it was security, that if anything bad happened in my life, I could always go back and teach. I could go back to a public university or a community college, teach, and still be able to make a living. That was my safety net. 

It was also extremely challenging. That kept me on board, going for it, and fighting for it. 

To be honest, by the time I was midway through my PhD program, I was well aware that I wasn’t suited for academia. I wasn’t suited for research. The double-blind peer review papers system, it works and it’s also extremely broken at the same time.

I didn’t like that I would write content that could help others, but it would sometimes take years to publish and tons and tons of revisions. It didn’t sit well with me. I knew that I needed to be in an industry where we can iterate faster. We could release products and help others along the way.

Rob: That’s also an issue Sherry had with academia. Most people listening to this know she got a PhD in Psychology and she interned at Yale. Then she was like, “This isn’t what I thought it was going to be and wind up doing a postdoc in the Boston VA.” 

Then I was like, “Well, the research stuff, the publishing is just a grind. It’s not as rewarding as I hope.” Like you said, it takes way longer than I wanted to. 

Then she became a professor, and even that then had its own thing. She loved the kids. She hated the meetings, the committees, and the politics. Unfortunately, it’s politics. It’s a big, old institution. She eventually comes out and becomes an entrepreneur as well. 

I think that spirit lives in a lot of people, only some of us are able or willing to listen to that call. The willingness to take that risk is a big thing, and the ability. Sometimes you’re married, you have four kids. You just can’t. I don’t want to play it out like if you don’t do it, you’re too scared or whatever. But I do think that some of us have the luxury. 

I know that I held myself back, psychologically, where I was so unwilling to take on any risks. Realistically, the fallback—like your idea of a stop-loss—my stop-loss was I was a senior developer making low six figures. I could go anywhere and do that. The stop-loss is I could go get a job, which is what I had that day. So, why not go out? Go out and try it. 

That’s what you did. You came out of grad school with a PhD. You got a job and you were telling me offline that it was maybe not your favorite day-to-day experience we often talk about on this podcast. What sucked so bad about your day job?

Adrian: I love the guys that I was working with. They were so smart. Two of them are pretty high up in NSA and we got to work with some pretty amazing data sets. At the same time, I just wasn’t feeling happy and I wasn’t feeling fulfilled. That’s because there’s a deep-seated need in me to not only create something, but sell something—to be able to create something of value that people will trade their hard earned dollars for. 

There’s just something immensely satisfying to me as a person by doing that. No matter how much money I was making with these guys, which honestly was pretty amazing. I graduated from college with my PhD. I had a base salary of $120,000 a year. Then we had bonuses up to $80,000. On top of that, just a ton of money back in the 2000s. I just graduated in 2011. A young kid who’s like 23-24 years old, you just feel like you’re rolling in money. That felt good.

I bought a bunch of stuff. I fell into the consumerism habit of more, more, and more. At the end of the day, I just wasn’t happy at all. I knew I needed to do something on my own. That’s where I started exploring, developing my own apps, and my own products. 

In college, I developed a few mobile apps just for fun to try and get them off the ground. What really held me back was the lack of marketing skills. That’s really what drove me towards starting PyImageSearch. 

Rob: Got it. Like you said, you stumbled upon Startups for the Rest of Us. It sounds like The Stair Step Approach resonated with you. Is that right? Talk us through your thinking there and where you started with PyImageSearch. 

Adrian: With PyImageSearch, I wanted to go back to square one. I really needed to ground myself in the basics and develop a small little product that you can create, ideally in 30-60 days. Just get it online and just work your butt off at selling it. Just get that marketing down. Learn how to email markets, learn how to advertise, and learn how to communicate with your customers.

Honestly, that’s what I was missing with my two previous ventures back in college. Those were two either scientifically focused or they were going after markets like health care spaces that someone in their 20s without the proper connections is just not going to be able to do. 

I needed to get these your consumers or your prosumers—people who were willing to trade a bit of money to get some knowledge that will help them professionally. That was my idea. Just go straight back to basics, learn them really well, and then that’ll serve you throughout your lifetime. It was truly an investment in my entrepreneur spirit and my own journey. 

Rob: Got it. You started by starting a blog. You started writing. How did that play out? This is 2013-2014.  

You start writing on this topic, which is a nice way to dip your toe in the water or something. If I’m going to write about an A, do I enjoy writing about it? How hard is it for me to do it? Do I get any traction? 

If any of these are a no, then it’s like, well, I probably shouldn’t do this. You’re writing about Python. It’s PyImageSearch. I want to explain to people it’s pyimagesearch.com. Py for Python. Python is used so much in the image recognition space. 

I got to be honest. I don’t know if we’ve ever talked about it, but my two favorite classes in college were image recognition and digital image processing. Maybe I was an undergrad and I was taking grad level courses. The professor was like, this is going to be really hard. I was like, I’m sure it is, but I loved it. 

I actually considered for a while, I was a double electrical engineering, computer engineering major. It was kind of an elective-ish thing. I considered focusing on image recognition because it was so fascinating to me, but I never learned Python. 

You dove into blogging about this. Did these things go up on Hacker News, on Reddit, or was it just an SEO play at first? How did you start seeing early traction? How did you get that signal that this is working?

Adrian: In the beginning, when you’re starting a brand new blog, you’re just not going to have that SEO traction. It’s just not really possible. You have to rely a little bit on social media. You have to join discussions like LinkedIn groups, Reddit threads, Hacker News threads, and that’s exactly what I did. 

I wrote the first blog post in 2014. The general idea and the theme was to explain these extremely technical, complicated computer vision, artificial intelligence concepts with code rather than theory. I would build these small working projects, and explain them line by line. Then, people could take that code and apply it to their own projects. I knew there was a practical aspect to that. 

Reddit was super important and so was Hacker news. Those are two groups that want to see that practical aspect. They want to see the demos. They want to see, hey, does this work for me? What’s the outcome? How can I integrate this into my own project? 

In some ways, you’re almost sparking their imagination by showing them both the code and output result. 

Rob: That is crazy. I would have thought that in 2014 there would have been plenty of books and resources available. You mentioned O’Reilly when we’ve talked about this, and that’s who I would have gone to in 2014. 

I want to learn about what’s called OpenCV with Python. You want to explain to people what OpenCV is?

Adrian: Yeah. OpenCV stands for Open Computer Vision. It’s an open source library for the Python programming language. Also, there’s C++ bindings and Java bindings. It’s the largest computer vision library available online. 

Back in 2014, most code samples were in C and C++. There was very little in Python, but Python was quickly gaining traction as the go-to language for not only computer vision, but machine learning, artificial intelligence, and data science. Pretty much all of that nowadays is done in Python, at least in a research and prototyping capacity.

Any books you would find online really utilize C or C++. There were three or four books on O’Reilly’s impact. Back then, there were no Udemy courses on OpenCV. 

Man, I’ve seen a few grad students start blogs on how to help other grad students do the more practical experiments of their PhD, like writing the code to process the data sets and get these results back out. 

I was thinking to myself, wow, maybe this is where I get involved. This is where I can show my expertise and just get back to the community, but also learn how to market and sell at the same time. I’m going to attack this thing using the Python programming language, where I know there’s a few blogs, there’s not necessarily anything for sale in Python. But, I know Python is the future of data science. It’s the future of machine learning. 

Let’s go in on this and I can always pivot back to C or C++ if I need to, but I believe Python is the way to go. It turns out that was definitely the right decision in the long-run. 

Rob: Yeah. I mean, you included it in the company name and the domain name—the Py. That would have been a tough pivot later.

Do you think you needed a PhD in computer vision in order to do this? Or, do you think you could have learned it from the books and from an undergrad education or whatever and still be executed by this company?

Adrian: I don’t even think you need a computer science degree or mathematics degree or advanced degree like physics or something that you would traditionally think of a person transitioning into these advanced computer science concepts. That’s just not true anymore. Maybe it was 10-15 years years ago, but now. No, not at all. 

You have so many resources on Udemy, on YouTube, and so many blogs. If you just learn the basics of programming, it’s remarkable how fast you can get up to speed in these advanced topics. 

Rob: Yeah, that’s been my experience as well. I grew up in the 1980s. I Speak BASIC to my Apple was the first book we had. We would literally read through it and type the basic programming into the Apple IIe. You’ll type that thing—there was no copy paste. You type it in and you’d have the typos. That was the way that I learned it. These days, it’s obviously so much easier.

Not to say that I walked uphill both ways. It was a really good way for me to learn it as a kid. But the advancement of these topics, whether PyImageSearch, O’Reilly, and Udemy, allows us to build so much more complex things, so much more quickly. 

You launched the blog. You’re getting some traction on Reddit and Hacker News. Are you learning marketing at this point? Were you starting to collect email addresses or were you just learning copywriting at this point? Like, hey, it’s content marketing. 

What was the tool belt? How is the tool belt expanding? 

Adrian: First put the site online. Put a few opt-ins up there. Back then, it was using Mailchimp. We had a resource guide PDF. We had a weekly newsletter. Those are the two primary ways people are getting on our email list. 

What really, really changed for us is when I realized, man, why am I not putting these code samples behind opt-ins? That was the game changer. 

I think people listening to this episode, especially developers, would be like, why wouldn’t you just throw it on GitHub? For me, I was creating a zip file or a tar file of this code, uploading it to my server, and the only way you could get it is if you entered in your email address. 

Yeah, it bothered some people, but we were getting a 3-5 increase in our opt-in overnight just by putting that code opt-in. That was fantastic. 

I think that’s true regardless of what info product you’re doing. You could be teaching people how to play guitar and you have a guitar tab or some chords that you review for a certain song in a video or a blog post. Put that PDF of that tab behind an opt-in and do it on a per post basis because it’s so hyper specific to that post. That was a true game changer. 

Once we started getting these multiple opt-ins and essentially an opt-in for every single post, we have 500 plus tutorials now. We switched over to Drip pretty quickly. That was back in the early days of Drip, actually, before even automations or the rule system were available. We were loving Drip. That helped us out tremendously. 

Otherwise, I was working on a product in the background. I was offering a book. For me, at that point, I’m learning how to write email, send that, broadcasting, and getting confident in that when I send an email, I’m not going to get hate mail in response. People aren’t going to mark me as spam. 

Initially, you have to build that confidence. It does take time. You can’t shortcut that unless you already have experience sending out email from some other business that you’re involved in.

Rob: Yeah, it’s a learning curve. It’s that terror of the first time you publish a blog post. Is everyone going to tear me down or are they going to rag on me? The first time you send an email and the first time you do a sales call, if that’s your business, I think these are all scary things. 

At this point, you have a blog which isn’t making any money. You have an email list which isn’t making any money. I presume you’re still working the day job. What was your daylight? This is the night and weekend story. 

A lot of people need to hear that some of us had to grind it out. I know that you did it as a side project. What did that look like as you were building this up?

Adrian: It was a grunt. There is no doubt about that. I want to make that explicitly clear that there is no shortcut. If you want to do it, you have to do the work and you have to be brutally honest with yourself of, are you going to do this or not? It is a true commitment. 

For me, I would wake up at 05:00 AM. From 5:00 AM-8:00 AM, I would work on PyImageSearch, working nine-to-five literally for this day job. Then, about 6:00 PM-8:00 PM on PyImageSearch. That was during the weekdays.

On weekends, both Saturday and Sunday, I was working 06:00 AM-01:00 PM on the business. I was working a ton. I was really exhausting myself, really at times pushing burnout, but at that point I could recognize it and pull back on a little bit. That became harder and harder as the years went on and as the business grew.

In the beginning, but it was also exciting. That’s the part that has to keep you going. You need that passion in the beginning. If you’re not passionate about it, or whatever it is you’re doing, whether you’re building a SaaS app or an info product business, honestly, you’re not going to make it. You’re not waking up excited to work on it. 

For me, I was working for freedom. I knew I did not like working at this job. I knew that I needed to own my own time. I needed my independence to feel happy and content as a human being. Money aside, yes, I wanted to make money. I wanted to be happy with my money, but I needed to be independent. That’s what I was fighting for and that was my motivation that kept me going through those early days, through that really rough grind. 

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A strong and diverse network is critical to a startup’s success. Microsoft for Startups Founders Hub is making this historically inaccessible resource open to all by providing members access to a mentor network as well as technical advisors. Members can book time with mentors to get expert feedback and advice on their product roadmap, business plan, fundraising approach, marketing plan, and more. 

The program is open to everyone, no matter your startup stage. Unlike other programs, there are no funding requirements, and the sign up process takes less than five minutes. 

Learn more about Microsoft for Startups Founders Hub at aka.ms/startupsfortherestofus. That’s aka.ms/startupsfortherestofus. 

Relatively quickly, you authored your first ebook. It was March 2014, Practical Python and OpenCV. Did you start selling that directly to your list or did you do a Kickstarter first?

Adrian: The very first book was sold directly to my list. I wrote it in about a 10-day period visiting my girlfriend, now wife, at the time. I was at her parents house while she was at work. Literally, for 8 hours a day sitting at their kitchen table, I would write this book, put on my headphones, just consume coffee, and just grind and grind and grind on it. 

Around five o’clock, I go in the fridge, get a beer, and start working on the parts that didn’t require so much creative energy. What I call the more procedural task, but you got to slog through. 

I had this book and it is done. I’m just thinking in my head, is anyone going to actually buy this? At that point, there’s probably 100-200 people on my email list. I built my first sales page. I went to the Boston Marketplace. It’s ThemeForest. They have their little templates. I picked an info product page, opened up Photoshop, created some graphics, and put a sales page up. 

I just slapped a $19 price tag on it. I have no idea if people are going to buy this. You see ebooks on Amazon for $3 or $4 and you also see these technical courses for $500 plus. I have no idea what the price of this thing is, but I put it on there, and I heightened it a little bit. I teased a little bit, and the email listed my own. 

It was actually my very first sales campaign. I sent out emails saying, I’m about to release a book. Here’s the table of contents. This is what it’s going to cover and I’m going to release it on this day. I did it and I made two or three sales that very first day. 

Honestly, some of my favorite money I’ve ever made in my entire life. It felt so good to be able to send out an email and have money come in.

Rob: Yeah, with a list of 100-200 people. It’s really small. That’s the validation. You talked earlier about having passion for what you’re doing to keep you going. I also think another factor is validation that something’s working. 

If you toil for a year on a blog and you build up an email list, but you never sell anything—I guess the email count could be a validation, but it’s weaker validation. Then, the moment that you make $60 in a day or a couple of $100 in a month. 

Suddenly it’s like, well, why couldn’t I just add a zero to that if I just keep doing this? If the list gets 10 times bigger can I make $600 in a day? Holy crap, $600 that could make our car payments or however it works. Then, you see $600 and you think, I’m not too far off $10,000 a month or whatever that goal is to quit the day job. 

Adrian: That’s exactly what happened. I had this $19 product. I thought, okay, what’s the next step? Do I create a new product? I was just thinking about that for a couple of days.

I think it was Ryan Delk from Gumroad back then. He was talking about tiered pricing, how well it worked, and his little formula of how to create three tiers, which is your base price, your next price is 2X of the base price, and the third tier is 2.2X of the middle price. 

You create these different tiers, like man, how can I create tiers to this book? The first book was called Practical Python and OpenCV. What can I do about this? 

I thought back to my early grad school days and I realized one of the hardest parts of getting started with OpenCV was actually installing the library. Back then, it was not an easy command. You just open up a terminal and type in a command. Then it’s done. It took days to track down, compile errors, and install dependencies. 

I said, what if I created a virtual machine that has OpenCD pre-installed. They can just download it to their system, import it, and run. Man, that is a good thing. That could be a middle-tier. Now, I have this original book. I have the book plus the virtual machine. 

Then for the third tier, I did some research and found CreateSpace, which was an Amazon company that doesn’t technically exist anymore, but they could print books on demand. I know people love physical print editions. Maybe that could be the final tier. 

I ended up creating this $47 tier at the base, $94 tier, and then $197 tier that included the physical printed editions. I put that online. As you said, you’re thinking, how can I add a zero to what I’m charging, how much money I’m making? That was a game changer immediately, made more sales, and proved that we were going in the right direction. 

Rob: We tend to underprice our work. It’s like I’m giving these blog posts away for free and this book is a collection of these blog posts, $19—that feels. Most books, you go to Amazon, like you said, $3 for an ebook, $25 for printed books. Shouldn’t we be charging in that realm? 

You’re mentioning Ryan Delk’s talk, which was called Lifting the Veil: The Data Behind Successful Product Launches he gave at MicroConf in 2014. Folks can go to YouTube and we’ll try to link it up in the show notes as well. 

But hearing an outside perspective, similarly to you, hearing Mike and I on the Startups for the Rest of Us, it makes you think, oh, this is possible. I can justify this to myself because someone else is making it work. Me, being an entrepreneur, is possible. Just being a solo entrepreneur sitting at a kitchen table as a bootstrapper is possible. 

Then you hear from another person, Ryan Delk, who says at the time he was Head of Growth for Gumroad. He had all this data of how info products were being sold. When he says whatever the formula ends up being, it rattles your frame. 

Each of us have these mental cages of, well, certainly I couldn’t charge more than $20 or $30 for a book. Suddenly it’s like, no, I’m going to charge $200. I’m going to include a virtual machine and print it on demand. 

I mean, really? The print on demand. The book is $5 to print, probably $3. It’s not actually that much more expensive.

Having these—sometimes I call them virtual mentors who don’t even know me and other times it’s just influences of seeing a talk or hearing a podcast that clicks something in me that changes the trajectory of my business or of my career. It sounds like you’ve had a few of those along the way. 

Adrian: Oh, yeah, absolutely. Practical Python and OpenCV was the first one. Then the second one happened towards the end of 2014. Basically my original job, my nine-to-five job, I was working at a startup, but our contract with the state of Maryland to overhaul this old mainframe system was costing taxpayers hundreds of months. 

Well, there was an election, the governor switched, and the next day we got a call that said, hey, you’re out of a job. The new governor doesn’t want to continue this project. I was in an interesting position because at that point, PyImageSearch had been around for 7-8 months, probably making $6000 a month from Practical Python and OpenCV, which was honestly amazing to see it grow that quickly. 

But it wasn’t replacing my full time income that I had with my nine-to-five job. It was doubly complicated because I had just moved from Maryland, Connecticut, moved in with my longtime girlfriend again, who became my wife. I wanted to take the risk to continue PyImageSearch. It felt like the right move to make, but I also felt like it could really damage the relationship if it didn’t go well. It could hurt her trust in me to be a good boyfriend, to eventually be a good husband, and to be a good provider. 

That was one of the most scary decisions that I had to make. But I said, you know what? I’m young, I’m 24-25 years old. Let’s just do this. So, I decided to create this Kickstarter campaign. It was the first crowdfunding campaign that I ever created, and I called it the PyImageSearch Gurus Course, which was honestly a horrific name for a course, but I was still learning back then. 

I planned it all out. I planned out the launch sequence—how I was going to spread it, how I was going to get the word out, sent out a bunch of emails to my list to get people hyped and excited about it. I purposely set my funding level low. It was probably only $3000 or $4000. 

The idea there was that when you run a crowdfunding campaign, you want to get that thing funded within minutes of getting it online, from your original list, from your audience, whether that’s social media or your email list. Get that funded, because that is social proof. Anyone else who stumbles along that page who is remotely interested, they’re going to see this project that’s funded by 2000%. 

Now you want to talk about social proof, that’s exactly what that was. Put that Kickstarter campaign online. Within the first day, it raised $6,000, it well exceeded the initial goal. I went on to raise $34,000 by the time the 30 day period ended. 

That was absolutely incredible. I felt like I had really reached some validation of, yes, this is where you need to be going. You need to focus on this business because it has legs and it could really grow.

Rob: $34,000 for what essentially has zero COGS or maybe some printing of some books. A lot of Kickstarters, you’ll hear people say, don’t do Kickstarter to make money, just do it to build an audience. 

If you do a 3D printer, the cost to design, build it, ship it, to manufacture, and all that. I had a friend who did like a half a million dollar Kickstarter for a piece of hardware and he’s like, yeah, in the end we made almost no money. We made less than minimum wage, but it built an audience, it built a brand, and now they had a bunch of [inaudible 00:32:51]. They did overproduce so that they had these pieces to move versus PyImageSearch Gurus, the cost of goods sold are almost zero. It was your time. 

Adrian: Yeah, it was my time to create it. That was just an online course behind a WordPress login. There wasn’t even any print cost associated with it. The feeling of raising $34,000 for something that just flat out doesn’t exist yet, that feels good because you know people are putting trust in you, and then you built an audience that you’re resonating with them. 

That feeling again, that’s that motivation that gets you out of bed, that allows you to keep grinding on the business. 

Rob: Right, it reignites. You talked about starting with this passion to do it. Then, I talked about having this reinforcement that it’s working. The reinforcement comes back and it can reignite that passion because otherwise you burn out. Right. You go six months with no reinforcement, it’s like, well, is this even going to work? Whether it’s you in your own head, whether it’s your spouse or future spouse, significant others as you were experiencing, I think we need that along the way. 

That was 2014, and you made $38,000 that year. In 2015, you made almost $250,000. In 2016, still just you, solo, which, Adrian, if I had known this, I would have been busting your chops so hard to hire somebody. You made $600,000 in 2016 and you still were working on this thing solo. Why did you not hire someone? 

Email support. Just email support. This is what I tell founders. Just hire that way earlier than you think you need. Dude, you’re making more than half a million dollars and you’re just cranking away answering emails as people have questions. 

Adrian: Yeah. Honestly, it really comes down to ignorance. It was the first business that I had run at that scale. I was truly afraid to hire someone initially. I thought by myself being in the inbox and responding to people, they felt like they were getting access to the owner, access to the expert, and that would increase sales just by virtue of having my name and the signature. 

That turned out to be a very poor assumption on my part. It was totally incorrect. Back then, that’s how I felt.  

I was doing way too much by myself. I was typesetting a blog post in WordPress. I was creating all the content. I was writing all the email campaigns, doing all the email support. If someone had an issue accessing their downloads, I was the one who had to go in, create that link, and send it to them. 

Those early years, I ran completely wrong simply because I was ignorant, because I had never, ever been in that situation before. Honestly, I wish I had someone who just would hit me over the head and be like, just get on Upwork, hire someone, and try them for a week. If it doesn’t work out, revert to what you were doing. It’s probably going to work out and you’re going to feel a lot better. I wish I had someone like that. 

I’m saying now, if you’re making over $600,000 a year in your business, and you’re the only one working and doing everything, probably time to hire. You should have been hired a long time ago. 

Rob: By the time you hit $20,000 a month and as long as you’re not straight-stagnant, you’re growing at all, there are some low hanging fruit and email support is usually the one. 

I know exactly what you’re saying because I used to do all of it on my own. People would have trouble accessing my book when I was selling it as packages. It’s like, well, they heard from Rob Walling. This is great, right? But it’s like, yeah, maybe a little bit. It’s like, oh, cool, Rob Walling responded, except for I’m chewing through time. It’s not worth it. It’s not worth the time and the potential burnout for me to be doing these day-to-day tasks. 

In 2017, over the next three years, you call this kind of your small businesses or your big growth phase. You started hiring more. You grew the revenue to seven figures and your email list into the hundreds of thousands, which was just more of the same.

It was more blocking and tackling. You finally started delegating some of your content, which I remember when you did that because I was sitting watching Relentless Execution. I was watching you do this for years and years and just grinding. I’m like, this guy puts out so much written content, it’s crazy. 

The first time you told me that you had hired someone to write content for you, I was thinking to myself, I wonder how he’s doing with that. It’s every word that had been written, whether it was an email, whether it was a support email, whether it was a sales copy, whether it was the actual blog content, or whether it was books—every word had been written by you for years and years. 

What was that transition like for you to hire someone and suddenly have their voice, their words coming out of your mouth, in essence, or of your company’s mouth?

Adrian: It was scary as hell. Founders talk all the time about how scary it is adjusting their prices—increasing prices, going up market. They don’t want to alienate current customers. They don’t want to kill off their growth. That’s how I was feeling, but orders of magnitude higher.

As you said, every word, every piece of content was created by me. I knew at that point, I was so stressed. I was so anxious. I was working way too hard. It was time to start handing over the reins, so I hired Dave. He was a customer I had developed a really good relationship with, and he helped me with content creation. 

Originally, he was effectively a ghostwriter for me on the blog post. I would write the intro to the post, the conclusion. I would fill in any challenging technical content. Maybe it’s a really tricky piece of code that needs me to explain it, or there was some theoretical component that I had to describe. He would go in and fill in the rest. He did a fantastic job. 

I remember when we started publishing posts with him ghostwriting, no one knew at all. I paid really close attention to the emails, to the blog post comments—no one knew at all. That’s when I started to release the brains a little bit and we wrote a book Raspberry Pi for Computer Vision. He effectively wrote all of that book and he rightly got credit for it. He was listed as the first author on it. 

He was the first really important hire to the business outside of our email support person. He went on to help with project management, with email support, and with troubleshooting. He was really a Jack of all trades and really helped during those mid-growth years.

Rob: The mid-growth turned into 2020 and 2021 where you’re still doing seven figures. You have this amazing business with what? 3-4 employees? 

Adrian: Yeah, about five employees. 

Rob: That is so incredibly profitable—throwing off loads of cash—and you decided to sell it. What was that decision like? As someone who has gone through this decision before, someone on the outside might say you work for all these years and you build up this thing that you had been building for, at this point, 6-7 years. 

I’m just going to say, you don’t have to deny or confirm, but it’s throwing off $1 million a year or more into your personal bank account. Why would you consider selling that? 

Adrian: Yeah. I’ll also point out that each year I ran the business, we increased revenue every single year. When you’re looking at a chart of growth, you’re not thinking about running it over the top yet because you haven’t had a decline here. 

But 2020 came around. Of course, we had COVID and we couldn’t go anywhere. My wife found this little cabin out in Western Pennsylvania. We went out there and I spent a tremendous amount of time journaling. Just really considering what I wanted over the next few years. 

I kept talking about selling the business. The reason I did that was while I enjoyed running the business, I wasn’t creating anything new. I had fired myself from a lot of duties in the business at that point. 

At that point, I was really just refining my craft. I wasn’t creating something new and novel. Believe it or not, writing email campaigns and making seven figures off of those campaigns, it actually does get boring after a while. 

If you have a growth mindset, you eventually get almost numb to it, which is sad, but it’s also affirmative of the fact that you need to keep growing. You need to keep doing what you’re doing and doubling down on what interests you. 

Sometimes what interests you is something totally different than what you’ve been doing for 70 years of your life. 

Early 2021 came around, I realized I was serious about selling. It was time to take my chips off the table. I didn’t want to worry about running over the top. 

I talk to you and talk to Sherry about different brokers that came across quietly. I just want to give a huge shout out to Walker [Doyle 00:41:07]. Just an amazing, amazing broker really helped tremendously with that sale of the business at that point. The rest is history. 

We had three very serious offers within five days of listing it. Seven months later, the business was sold. First buyer didn’t work out, but the second one worked out fantastic. They’re taking tremendous care of the business. I’m so happy for them and so proud of what they’re doing. 

Rob: Yeah, that’s good to feel that way. Seven months to sell? That makes the hair stand up on the back of my neck. Just saying it out loud. How was that mentally for you to make the decision? 

What I found is a lot of entrepreneurs, once we decide something, we want that to happen now. There’s a reason that we don’t work in academia anymore. When we decide to publish a paper, 18 months later it’s published and that’s too long for us. 

When I decide I want to sell a business, I want it to close tomorrow. When I hear 210 days, that’s freaking painful. What was that like for you as someone, who I would describe, gets stuff done really quickly because they can and you execute on things? This timeline was out of your control. 

Adrian: Oh, it was brutal. My Type A personality kicked into high gear, and I decided to sell. I got everything to quiet within a matter of days. Literally next week, everything was listed. 

I made it my priority. I hopped on calls. When Walker told me to hop on calls, I got potential buyer’s information when they wanted it. Super quick turnaround. I was really excited about the first buyer. We got 3-4 months, I realized there’s just a lot of red flags and the deal fell apart. 

It was challenging for me at that point. I kept the sale of the business pretty close to just myself, my wife, and my dad. I talk to them about it, talk to them about the stress of it. After the first deal fell through, I shut down completely. 

I told my wife, don’t ask me questions about it. If I volunteer information, feel free to engage, but don’t talk to me about it. I was losing sleep. I was super stressed out and anxious. Honestly, it was just playing out worst case scenarios in my head. 

If you’re a business owner, it’s just going to happen. You’re going to think about the worst case scenarios. It’s going to bother you, it’s going to be upsetting. 

One of the best things that I did, and this is something I would never do under normal working conditions or something like that for productivity reasons, I just found a mindless game to play on my iPhone for an hour or two a day while the business was running. I was done getting information to the broker, to potential buyers. I played this stupid little baseball game on my iPhone for a couple of hours just to give myself a break to let the brain shut down and occupy my time. 

That honestly, probably, just saved me from having a huge breakdown during the sale of the business. 

Rob: Yeah, that’s underrated. I know that myself and a lot of entrepreneurs get a little too hung up on constant self-improvement. Whether it’s physically or whether it’s listening to the newest audiobook of The Theory of this Future Thing. That’s nonfiction, for sure. I’m listening to these podcasts about how to improve my business. 

I do that and I get it. But, there are times where your life is so tumultuous, whether it’s your personal or your professional life. In this case, it was professional where I think you have to give yourself space and you have to give your mind some space to chill out. Doing that with a video game, I do it with Tabletop Dungeons & Dragons. I do it with a podcast about the advent of role playing. 

It’s stupid that no one else will get and no one else will care about, but I can put it on and I can feel for this 30 minutes I’m not thinking about business. I don’t know how else to numb myself out to that other than like drinking alcohol. One day is fine, but that can lead down a pretty tough path. 

You eventually closed and you sold this business after seven months. It was late 2021. What was that feeling like? I think a lot of founders find it bittersweet. The sweet part is, holy crap, I have millions of more dollars in my bank account today. The bitterness is I’ve been working on something for a long time and I have to let it go. 

There’s varying degrees of those two things in different founders. What was your perspective on it a day later or maybe a week later? A month later? How did that evolve? 

Adrian: This is the brutal, honest truth. For me, it was anticlimactic. I sold the business, the money got transferred to my account. I had a really quick handoff period. It was only three months that was required to be around to help transition the business.

The day the business sold and the money landed in my account, my wife and I went out to dinner at a nice restaurant. I remember feeling so tired and so exhausted. I enjoyed the food, I had a few drinks, and there was this really nice cigar lounge down the street that we like going to. Obviously, you just sold the business. It’s the perfect time to go have a nice Scotch and smoke a cigar. 

But I looked at her and it’s only 08:00 PM. I said genuinely, I’m so tired, I can’t keep my eyes open. I just want to go back to the house, lay on the couch, watch some stupid reality TV show, and just go to sleep. That’s all I want right now. 

To me, it was a confirmation of how I had been feeling over the past few months, that this was one of the hardest things that I had been doing. At the same time, I have been pushing myself so hard physically. I’m a super hard, hardcore fitness nut. I love pushing myself in the gym just as much as I love pushing myself in business. 

In 2020 and 2021, I was working out 11 times per week. A part of that was due to my fitness goals, but also because that was my stress outlet for the really severe hard stuff during the acquisition. Just going into the gym, throwing around some weights. 

The problem is, by the time that business sold and I got that relief of knowing that, okay, this is done. Then everything that I had suppressed just started coming out and I started to shut down a little bit. 

I had trouble recovering from my workouts. I felt tired, I felt bloated. I have never had any problems with gluten in my life, but literally developed a gluten intolerance for about three or four months due to the stress of selling that business. It was one of the hardest points of my life. 

If you sell your business, be realistic. Understand it’s going to be stressful and that you may not get that huge celebration at the end of it, when that money hits your account. 

For me, it took me six months later to get to that point. My wife and I went to Italy a few weeks ago. While we’re there, it finally hit me and I could finally feel all of it. I could look at the accomplishment of selling the business, of building that business, and of all that I put into it. I can separate it from all the grind of the pain and long hours put into it. I can see them both together and be proud of that. 

That takes a while to get to it, especially if you have a hard acquisition process. 

Rob: Yeah. That’s well said, man. That’s a good note to leave it on.

This is basically a summary—a compression of your story. There’s obviously a lot more to it. If folks want to hear more about your story, also hear more about your theory of info products, and building that freedom the way you did, you launched a podcast a couple of weeks ago. It’s called Info Product Mastery. Obviously, available in all the podcatchers people could find.

It’s infoproductmastery.com, if folks want to get on your email list and get some exclusive updates that you’re not going to release publicly and all that stuff. Thank you so much.

Adrian: Absolutely. The goal of the podcast is I just want to help developers, educators, and entrepreneurs launch and grow their online education businesses. As developers, we have such niche-specific knowledge that if you’ve been in the field for five years or more, you probably have enough expertise to write a book, to create a course, to start a blog. 

I wanted to instill all the lessons that I’ve learned from PyImageSearch and help you educate others, build a following, create your first ebook or course, learn how to market, sell it, and build a successful business. 

We dropped three episodes already. We’re doing weekly episodes. If you’re interested, go to infoproductmastery.com, enter your email address, and you’ll be notified when new episodes go live. 

Rob: Circling back to the early part of this conversation, I talked about how in the early days, this very podcast, Startups for the Rest of Us didn’t focus on SaaS. We had SaaS, we had info products, we had mobile apps, and a bunch of other stuff. 

Over the years, SaaS became my thing and we kind of narrowed to it. We have gotten emails over the years a lot. Andrew Connell has emailed several times and said, “Where’s the info product equivalent of Startups for the Rest of Us?”

I feel like I’ve always said I don’t know because so much of the info product and course creation advice comes from sources that I would not recommend, basically. My hope and my expectation is that info product mastery will be that. 

Folks, as you said, if they’re developers, educators, and entrepreneurs thinking about launching their own course, you should check him out. Thank you so much, man. Thanks for coming on the show.

Adrian: Thanks, Rob. It was truly a pleasure and an honor to be on this podcast. You and Mike have helped me so much over the years. I might as well share it. I’m just truly happy to be here. 

Rob: It’s great to have you, man. 

Relentless execution is how I would describe Adrian, and I hope you enjoyed that story. I hope today brings you a little bit of motivation. Maybe some ideas of how to improve or grow your own business. That’s the purpose of this podcast. Whether you’ve been listening for six or 600 episodes, it’s a pleasure to have you here every week. I appreciate you coming back. 

Signing off from episode 608. I’ll be back in your ears again next Tuesday morning.

Rob: It was the best of times, it was the worst of times. It was the age of wisdom, it was the age of foolishness. You’re listening to episode 607 of Startups for the Rest of Us. Thanks so much for joining me again today. I am talking with Asia Orangio and we answer listener questions about overcoming plateaus, stealth launches, founder-driven sales, and all types of tasty goodness. 

Of course, we cover all these topics from that mindset of not needing to build a unicorn company in order to have an incredible life-changing the outcome and from the idea that we’re seeking freedom, purpose, and relationships, and looking to better our lives and the lives of those around us rather than simply looking to go big or go home. 

We can build real businesses and solve real problems for real customers who pay us real money. That’s what Startups for the Rest of Us are all about. With that, let’s bring Asia to the show and dive into our first listener question. 

Asia Orangio, thanks for coming back on the show. 

Asia: Yes, thank you so much for having me. I’m super excited to be back. 

Rob: I am excited to dig into some listener questions today. Our first one is a video question from Tom Cusack on customers onboarding videos. 

Tom: Hey, Rob. A long time listener. Keep up the good work with the podcast. My question to you is the location of onboarding videos. I have an ecommerce marketplace that I’ve built in WordPress using WooCommerce and I’m looking for vendors to come on board. 

My question to you is where’s the best location to put the onboarding videos? Should I put them right on the front, at the top where the menu is? Right underneath where it says home page, shopping, and all the rest of the basic information up there? Or should I put them in the footer someplace and have them click on them there? 

My idea is to build an individual page for customer onboarding, keep it simple, a vendor registration, help them walk through the onboarding system that is already built-in, and also the vendor adding a product page. That can be daunting for some people that are not technically capable of doing things. They are challenged, let’s say. 

I’m just looking for where would be the best place to do this. Again, keep up the good work and I look forward to hearing more on Startups for the Rest of Us. 

Rob: Interesting question. Asia, do you have thoughts on that?

Asia: Yes. When it comes to any kind of onboarding, usually the most successful kind of onboarding pop-up, videos, or what have you, usually the two things I see that work absolutely best either have a complete overlap where there is some kind of takeover of the screen and has two, three, maybe four to five steps and that’s it or you just have the pop up with the video and any extra contexts. 

If you have any extra steps for them to do after that, maybe you include that. I definitely wouldn’t recommend putting it in the bottom right corner or anything like that. I wouldn’t recommend hiding it. 

I would recommend offering it as something that people can consume right there whether you do the full page takeover or just the pop-up and giving people the option to skip it just in case they just want to get to it. 

If you do give the option to have the people skip it, then that would be a used case for tucking it away somewhere and just reminding people hey, if you ever want to come back, here’s where you can find it. I wouldn’t hide it right off the bat. 

Rob: Yeah, I agree with that. I feel like if someone skips it, as much as animations can be really cheesy, and you’re able to shrink it into a little question mark on the upper right, then it’s like oh, I now know it’s behind that question mark. I can always click there to get back to it. 

I remember when we were originally designing Drip and designing an onboarding, Derek really had a good approach to it where when you first came to a page, let’s say for your campaigns which are autoresponder sequences, it’s a blank late because there’s nothing there. What we had was a view of the fully populated page, but it was blurred out and was in the background. You can see what the page will look like if you had a bunch of campaigns. 

Then there was an overlay just like you said—an overlay that had to create your first campaign or the video was right there. I think it was embedded next to it or at least it was next to an icon that was like watching a help video or watching a tutorial. There’s a better word for it, but it’s like how to do this, learn about this or something. 

If you click that, then it plays a video and once you had a single campaign, then you didn’t really need that. It was still embedded, there was a question mark in the upper right or lower right. It was like a nice elegant balance the first time, not even the first time you went there. It was until you created it. You always had it front and center. There is no better need for that real estate, we felt. I think that’s an interesting approach too. 

Asia: The length of a video is also interesting as well. We find that anything longer than a minute or longer than a minute and 30 seconds feels very long. I’m curious if you have any perspective or strong opinions. 

Rob: I feel the same way. They’re like a marketing video honestly. If I’m in an app and I click play, then I’m loading in one screen, and it’s a five and half minute video, I’m like, ain’t nobody got time for that. Ninety seconds, maybe. Two minutes is really pushing it. 

Asia: I completely agree. 

Rob: I think that’s a good rule of thumb. Awesome. Thanks for the question, Tom. I hope that was helpful. 

The next question is from Nick See. He says, “Thanks so much for the podcast. It inspired me to actually try to start a business instead of just thinking about it. Now I’m in the mid-stages of building an MVP. My question is when bootstrapping, how do you scale a content business? That is a business that relies on human generated content for scale.”

It sounds like he’s building almost like an agency of sorts. I guess content marketing and SEO businesses are good examples of these. If you scale up your number of customers, then the amount of content you need to produce increases. 

“How do you do this when bootstrapping? What if the resource—” probably the writer and the content producer, “—you need isn’t full time? It’s more ad hoc and part-time. Where and how do you find that resource? My business is in a different space but relies on scaling human generated content in a similar way.” 

“In the early days, I can fill these requirements myself, but what would you advise when it needs to be me plus n people to fill that demand?”

Asia, you run DemandMaven, which is an agency. While it is not necessarily content production, I know that humans are a big part of what makes your business successful. What do you think about this question?

Asia: This is going to tap into all of your operational skills. If you have a mind for ops and a mind for delivery, whether that’s software delivery or service delivery, it doesn’t really matter. This is going to be for you. 

When we think about scale, things that don’t scale, and things that do ultimately scale, we know for a fact that things that scale are ultimately going to be processes. Within processes, very clear requirements, very clear roles and responsibilities. This is the human element of who do you need, what do they need to be doing, and what are the processes upon which they actually follow to do the thing. 

This is actually true for any team, but when we think about scaling, let’s say content marketing specifically, usually it starts with you doing it yourself. At some point, you have a sense for what are the units that you are trying to deliver. If that’s literary content articles or content pieces in some kind of way, you can kind of reverse engineer how long does that take and what are the requirements for you to actually do that work. 

Once you have a rough model of how long it takes you to do. Keep in mind too that if you are an expert, if you’re super advanced, you’re going to take less time than maybe someone who is less expert and less advanced. If you’re not, maybe you’re more average I would say, then you’d have a pretty accurate picture for how long it takes you to deliver x units. 

Again, units can be whatever, but in this case, let’s say articles. If it’s you doing it up first, at some point, you’ll probably hire someone who can either add extra units to how much you’re producing together or take on your units that you are producing. Then your job is probably to go then hire someone else to go do the same thing. 

This dips into hiring very quickly, but when you are hiring people, it’s going to be pretty tough, probably for them to accurately tell you how long it takes or how many units, so to speak, can you produce in so much time. 

For content marketing, most writers on average are going to be producing one to two articles every two to three weeks. Some writers are a lot faster. Depending on their bandwidth and availability, they may be able to take on more volume. 

At some point though, once you get to about the 3-4 writer mark, that’s when you can start thinking about potentially hiring a delivery success manager or someone basically to manage the writers. 

This could be a content marketing specialist. This could be more of a project manager. It just really depends on the nature of the content, the nature of your market, and also how you’re thinking about delivery and operations. It could also just be you for a while. 

When I think about how we have grown on the DemandMaven side. We have specialists who produce some desired outcome, some desired output. As we increase the amount of specialists that we have on the team, we also start to add in a management layer. 

That could be a client success manager, could also be more like a marketing success manager. It just kind of depends on the project and how the team has grown so far. That person is basically responsible for managing those specialists. 

One person can manage about five specialists or so depending on the workload. The tough part is actually hiring the second manager. That 4-5 specialists per manager, whoever, whatever that is, that’s kind of where it gets tough, stepping into that extra place. 

This is actually where you probably, from a business perspective, start looking at capital in some kind of way. Capital can of course, just be getting a loan. It could also be a line of credit, something that enables you to stretch without necessarily impacting your cash flow too much. 

This is also technically true though, for software, like SaaS. We think about management in the more basic sense. The CEO is probably going to be able to manage so many direct reports before they need to add in a management layer. We see this often with flat organizations and then transforming those into more of a hierarchy from a leadership perspective. We kind of see the same thing, actually, in software companies. That’s how I would think about it. 

The hardest chasms to cross are always going to be when you hire that first management layer and then when you stretch into the second and third management layer. Then you have a team of, let’s say, 15 specialists, writers, what have you. Maybe not even that much, depending on how big you want to grow this business. That’s when you start adding in managers and leadership. 

Then your job really just becomes about making sure that people know what they’re supposed to be doing. Also, that you are making sure that you’re delivering high quality work and of course all the other SEO stuff—marketing, closing deals, that kind of thing.

Rob: That was a masterclass basically on how to build an agency if anyone didn’t notice. You touched on so many good points there that came to mind when he asked this question. 

A lot of folks don’t know that after you have about five or six direct reports, that’s it, you don’t want any more. This is another case of that where your strategist, or project manager, or client manager—whatever title they have—can only have so much bandwidth. 

That’s where from the start, you have to price this business. Keep that in mind as you build your client base. If I can write an article, then hire someone to write a piece for $250 and I’m selling them for $500 apiece, and deliver however many over the course of a month, I’m not building enough margin for managers. 

There’s going to be too many points of downtime where oh, I need to pay this person’s salary, or we don’t have a client, or I’m going to bring a manager in and hire a good manager who actually takes it off your plate. They’re going to be expensive and so you need margin. 

That’s why agencies are often maybe more expensive than people think they should be. An agency is more expensive than a freelancer and there’s a reason. There’s all these systems that have to be in place and there’s a lot more humans involved than you might think. 

The other thing, what you just described is amazing, if you’re an operator, and that was the first sentence you said. This is all about operations. If you’re that integrator person, this is your business. 

If you are like me and you don’t want to do it personally, don’t build an agency. That doesn’t sound fun. It’s not in my zone of genius—building these processes and getting all the humans involved.

Asia: It’s a different flavor for sure. I completely agree.

Rob: This week’s sponsor is Kelsus. Kelsus provides engineering teams for startup success and they stick with their clients for the long term. Kelsus has worked with clients through nine acquisitions and every time their work has passed and due diligence and security audits by big audit firms and public companies. Working with Kelsus starts with a half hour walkthrough call where you tell them about your startup. After that, they usually begin a three week fixed bid discovery project. Go to kelsus.com/startup to schedule your walkthrough call. 

One thing you mentioned that I wanted to get into is, you said a writer might be able to do one or two pieces every couple of weeks but is that really long form stuff? I’ve worked with writers and they could do a couple pieces a week of maybe 2000 words. 

Asia: This is yes and also quality. However, I know some writers that just whip them out. I think it really just depends on the writer. There’s probably some average or standard and it’s just a matter of finding people who fit that average or standard that you’re looking to create or deliver against. I’ve seen everything from one piece take three weeks to if the writer has more bandwidth, obviously they can produce a lot faster. 

I think right now, what we’re seeing on average is about two articles a month from one person given their bandwidth. If you have someone who has more bandwidth and or is a faster writer, especially if they have to source the content, if they are operating off of repackaging content, you can typically see a much faster turnaround.

But, if this is net new, high quality, maybe more intensely researched and created, then it might be closer to the two per month. There are some content marketers out there who would pale at that rate so it just depends.

Rob: Yeah, and Nick, thanks for asking the question. I would also recommend a course that Brian Casel put together. Brian has done a couple of productized services and then scaled them up into tens of thousands of revenue. He built a course on how he did this at productizeandscale.com. A lot of what he talks about in there is about exactly this problem.

There’s the marketing aspect of it and there’s the designing the offering, but then there is how do you fulfill it if it’s going to be human powered? I think there’s some really good info in that course. 

Brian actually sold the productized course a few months back, but I know that the material is still good. Thanks for the question, Nick. I hope that was helpful. 

Next question is from David in MicroConf Connect a few weeks back. I liked the question so much. It’s pretty broad, but I like it because a lot of people encounter this. His question was, “What is the best thing to do if revenue has plateaued? Am I doomed?”

First thing I said is don’t be so pessimistic. You’re never doomed. Asia, what do you think about revenue plateaus? What’s your framework to get through them?

Asia: My first reaction to the am I doomed was definitely, of course not. If you are running a software company, you are probably running one of the most agile, reliable, and resistant kinds of companies that there are. The only other thing I can think of that’s more adaptable is going to be being a freelancer. 

What to do when revenue plateaus? When we think about the why, the outcome, the thing that we ultimately have to do is take a few steps back—take a step back and look at the overall larger picture. 

The first thing we’re going to look at is the business performing? That is just from top to bottom business performance of, are we getting the traffic or leads that we need? Are those converting into trials/demos or whatever the model is? Then is that converting into paying customers? Then are we ultimately retaining those customers? 

If you’ve ever heard of pirate metrics, acquisition, activation, retention, then revenue, and referral, that’s kind of what we’re going to look at first. Are we performing? If we are performing, then it really becomes a question of okay, if the business is performing, then why are we not seeing the ultimate outcome of growth. 

My guess is, if growth has stalled, then there’s probably something that’s missing. We’re probably not adding enough net new customers on top of the funnel or we’re turning as much as we’re gaining, which means that nothing is ultimately moving. The trickiest part is really identifying where to focus next. 

In any strategic process, we now have to dig deep. If we’re not getting enough net new, why is that? If we’re not retaining enough, why is that? If we were returning a lot, where’s that coming from? 

The next step is usually whenever we see slow growth or like just a very marginal 1% month over month, or even less than that, usually, it’s because there’s some disconnect with the product and the market. 

I know it might scare you a little bit to be thinking oh, my gosh, do I have product-market fit? Usually, there’s some disconnect. It’s either that we’re not attracting the right kinds of customers for our product or there’s something missing from our product that our ideal customer really needs and wants. Now, we need to address that. 

At the end of the day, people turn because they’re not getting value but it could also be that we’re just attracting the wrong kinds of people. This is as we start to identify where that’s coming from. Usually some kind of customer research, some kind of structured customer investigation is necessary, in addition to some kind of market investigation. 

It could very well be that another competitor is eating your lunch and you just have no idea about them. You have to go find out what’s going on. It could also be that there’s things, product-wise, that’s missing. 

Then of course, there’s also other flags as well. Maybe we’re attracting the right customer but we’re not converting them as efficiently. This is kind of where we have to do some pretty intense deep diving. 

A lot of times we find that a lot of businesses aren’t really tracking the right things from the get-go or aren’t reliably measuring anything to start with. I would say if you’ve got a pretty good handle on analytics, attribution, et cetera, amazing dive into that data. If not, then that might actually be the first place to start.

Rob: All right. I was jotting down notes before this call and you pretty much touched on most of the things that I was going to say. I think the one thing I’ll add and you touched on it a bit, but I want to call it out is if you’re plateauing early, if you’re at $2000 MRR, $4000 MRR, it’s what you said, you probably just don’t have product-market fit. You haven’t built something people really want and are willing to pay for. That’s usually the case under about, I would say, almost $10,000 MRR. 

If you’re plateauing at $50,000 MRR or $100,000 MRR, there’s a couple questions to ask. Is the market so small that we have literally tapped the whole thing out? Usually no, but if you’re catering to a very, very small niche, that’s a possibility. Then you have to think, do we add additional product lines to this to be able to charge more? Or do we expand into other verticals or something. 

The other plateaus that I see in that later stage are folks that churn can be an issue. If it’s a 80% churn business, you just can’t outrun that. You need a massive funnel to grow beyond a few million because you just constantly churn them out or have a price that’s too low is often what I see. You’ll never get to a $5 million business, not never right, but almost never. If it’s like my average revenue per county is $10, it’s too many people, and the churn is going to be too high. 

Then lastly, I think I’m surprised at how many folks don’t understand how much traffic you need to drive in order to test an idea or in order to get that escape velocity. I will have folks say hey, I’m at $1000, $2000 MRR and I plateaued. I’ll say, how many uniques do you get to your site in a month? They’re a low touch funnel so it’s all about traffic. It’s like, oh, about 800 uniques a month. It’s so cool, but you’re not going to grow. It’s just too small. 

Get to 10,000 and then look at the rest of your funnel and see are you converting? It goes back to what you said, you just have to look up and down the funnel. Look at the rules of thumb, trial to paid conversion rate with a credit card upfront should be between 40% and 60%. It’s all this stuff that we talk about at MicroConf and on the podcast. 

If you’re outside of those bounds, usually I can look at like six numbers and I’m sure you can do it’s like the traffic, conversion to trial, the trial to paid, the churn, this, and that. You just look at these numbers and be like, yeah, that’s your worst one. You just feel it because you’ve been around it long enough. 

That’s why I like that question because I feel like, (a) a lot of people run into it and, (b) the answer is it depends on the stage but it is just kind of a framework. We know the SaaS metrics. I recorded a YouTube video a couple weeks ago, it’s like the six SaaS KPIs you should pay attention to and it’s everything we just said—the LTV, the churn, and this and that. 

Thanks for that question, David. Hope that was helpful. 

Next question is from Marcel Albrecht about stealth launches. He says, “Hey, Rob. I’ve heard you mentioned the concept of a stealth launch a few times. I’m curious, under what circumstances would you recommend a stealth launch?” 

I have a note here before I toss it to you. I’m not sure I’ve ever mentioned stealth launches on the podcast so I think he’s confusing me with someone else, but I figured, hey, it’s a question. It’s here, let’s dig in. What are your thoughts on stealth launches, Asia?

Asia: Stealth launches are so interesting because I’ve only ever encountered a few of them in my work at DemandMaven. There’s only been twice where I’ve ever worked with a founder. This is out of dozens and dozens and dozens of projects at this point, in addition to just meeting hundreds of founders. 

There’s only been two companies I’ve ever worked with before where they were in stealth mode. The reasons why they decided stealth mode was they were banking on a very big idea. They were on the path to raise […], which totally could be your vibe, not knocking that vibe at all. I think it’s a great vibe, if that’s for you. 

The third thing was, it’s not that they were worried about competitors copying their idea as much as they knew that they were on the brink of something. It’s a very innovative thing and they knew that they were going to have to dot their I’s, cross their T’s, get all their ducks in a row before they really went out and asked for the big […] dollar. It was really like, we want to make sure we are very, very, very clear that this is going to work or it is not, at least to the best of our ability. I did not work with this company, by the way.

Superhuman actually comes to mind as a company that spent a long time in stealth mode. People did not really know about Superhuman until they had already been building the product for 2-3 years. On top of that, had hundreds if not thousands of users, beta testers, come through the product, try it out, give feedback, and make it really clear where they needed to best innovate while also providing a ton of value. 

Some of the companies that I’ve worked with, those were the three main triggers. The tough part is I would say nine times out of ten, most companies don’t need to be in stealth mode. That’s my opinion. Every now and again, there is an idea that just feels so wild and out there. I wish I could actually talk about these two companies, but they are still technically in stealth mode so I can’t. They are just so wild and out there and on top of that, the opportunity is so big that they would do their due diligence to be in stealth for a while. 

I want to be clear when I say stealth mode, they are not publicly going to market. They probably don’t even have a website to be honest. They are likely taking on design partners or companies that can help them co-build the product.

They need customers, so to speak. They almost want these design partners to help give them enough feedback to help them build an even better product. Also, to just kind of prove that this is going to be something that’s going to be worth something. The long tail vision though is 10 years out. It’s not two years. It’s 10, that’s how big the vision is. Anyway, I digress. I’m curious Rob, what are your thoughts?

Rob: I mean, my thoughts probably kind of summarized yours, which is if you’re going to raise […] then maybe consider stealth mode. If you’re Superhuman and you have tons of funding and can go build in a basement for 2 ½ or 3 years, and you know what you’re doing because a founder had already reported and exited for a great exit to LinkedIn. If you’re in that case, maybe think about it. 

Otherwise, I would say that you have way bigger problems than stealth mode or someone stealing your idea. The problem is no one’s going to give a crap when you launch. That is 99 out of 100. I don’t know a B2B SaaS aside from Superhuman, but I don’t know anybody else where stealth mode would make sense. 

I started clamoring that we were going to launch because we’re not doing things that are that innovative. If you’re launching something that needs stealth mode, this is probably the wrong podcast for you because this is about more boring businesses. This is about, I’m going to build an ESP that’s better than the other ones on the market. It’s not like it was some huge innovative thing. 

Guess what I did the moment we decided to do it? I went out telling everybody we’re going to build this ESP. Here’s my landing page and our email. We can build the launch. I would go the exact opposite of stealth mode in almost every case unless you have some very unique circumstances, you’re very experienced, and you have a lot of funding. There’s some exceptions. 

Asia: You can work full-time on it and also maybe afford other people working full time on it, which is actually true for all of the companies that I worked with that were in stealth mode. Yeah, I completely agree.

Rob: Almost never, I think is the phrase I would use. With that, let’s dive into our last question of the day. I don’t remember who asked this question, but it’s in the Trello Board so we are going to answer it. 

“Is it possible for a SaaS product to penetrate the enterprise without a dedicated sales force? I will go so far as to say maybe not a full sales force, but what if the sales force is in the early days as the founder or founders?”

Asia: I love that question because it is spicy. Okay, do you have to have a fully scaled out sales team in the early days? Probably not. I will say you are going to have to have some killer sales skills. You’re going to have to have some really powerful sales and negotiation skills. On top of that, you’re going to have to be able to actually deliver against what you promised. 

The diligence process of bringing on enterprise is a giant pain in the early days, but you get to a place where you grow enough where it’s less painful, but still annoying for certain types of industries and verticals. 

Again, early days, probably not. At some point, you will look far more credible. Also, at the same exact time, you will see better performance and results if you build out an experienced sales team course within reason and also within budget. 

I honestly would argue that if you can’t afford relatively great talent here, then it might make sense to just wait until you can. If it’s only enterprise in theory, maybe a couple of deals, and now you’ve got a team. Early days, not necessarily, but you are going to have to be the best salesperson you can be.

Rob: I want to be clear here too. There are some SaaS apps where they have their $50 price point and then their enterprise plan is $500 a month. That’s not an enterprise actually. Enterprise, I think it was $30,000 grand a year up, $100,000 a year up. I mean that’s true for enterprise. You’re talking $5000–$30,000 of annual contract value. To me, that’s more mid-market. You can sometimes get through that without the enormously painful procurement. 

I’m in agreement with you as well. It’s not that you need a sales force from day one, but you need a person who is a great salesperson, if you’re going to sell into this space and you need to charge enough. That’s the big mistake I see. 

If my product is $50 a month and CVS comes in and wants to use it in their […], BestBuy, or Target, Fortune 5000 company, they shouldn’t be paying $300 a month. They should be paying $3,000 a month. 

They’re going to put you through the wringer procurement, negotiations, the security audit, the custom redline terms of service, and the invoices with POS with net 30. All this stuff is such a headache, you have to get compensated for it.

I usually say the moment I’m doing enterprise sales, the minimum ACV I want is at least—and this is bottom and scrapey—is about $25,000. Einar, who is my TinySeed co-founder, he’s like yeah, that’s too low. I think it should be $30,000 or $35,000. 

We have absolutely seen TinySeed companies closing deals with these big companies that are $60,000–$100,000 a year and these are SaaS companies that have $50 a month plans. The bottom line is the enterprise gets more value out of it and just selling to them is so cumbersome that you do need to price it appropriately.

Asia: Yeah, completely agree. In my mind, I was like a minimum of $10,000 a month. I think it kind of sounds like it could actually even be a little bit less than that and still be considered like an enterprise sale, which I think is great.

Rob: I don’t know. 

Asia: Who knows. 

Rob: That’s my interpretation, but for you and in your world, enterprise maybe $120,000 a year. That’s a perfectly reasonable amount because maybe mid-market is $10,000, or it’s $20,000 up $120,000, then enterprise is $120,000. It’s just how we define it. I don’t know if there’s any system. 

Asia: No hard rule. 

Rob: Bottom line is, if you’re going to deal with larger customers like this whether it’s $20,000 a year or whether it’s $120,000 a year, you are going to have to do high touch sales and you are going to have to be good at it. 

In fact, that is why all the SaaS companies I launched, none of them required high touch sales. Because that’s not my gift. My zone of genius is not in sales, it’s in product, it’s in marketing, it’s in whatever a little bit of branding. It’s whatever else got Drip, HitTail, and frankly, MicroConf, TinySeed.

Those things don’t require enterprise sales although TinySeed does because we have investors. Guess what I did? I have a business partner. Einar is the sales guy. I talk to investors, I hang out with them, but I don’t close the deals because it just isn’t where I am the best fit.

Whoever asked this question or if you’re thinking about this yourself, especially in the early days if you’re bootstrapping and maybe you don’t have other founders, you do need to think about, I should build a business that at least leans into my giftings and there are many ways to do it. You can build super low touch businesses, if you’re more in the marketing, left brain thinking through funnels. If you are better at sales than go after a business that requires that.

Asia: Yes, 100% Totally agree.

Rob: Awesome. Well, Asia, this is super fun today. If folks want to keep up with what you’re doing so demandmaven.io, which is your growth marketing consultancy for SaaS. Actually, your h1 is it’s time to stop throwing growth tactics at the wall. I like that. 

You are @AsiaOrangio on Twitter. Asia, you have a podcast called In Demand that has been on hiatus for six or eight months and you’re bringing it back. Tell us about it.

Asia: Yes, I am bringing it back. Actually, it was because of attending MicroConf and also a few other conferences. People mentioned it and they were like, hey, when is that coming back? I was like oh, I didn’t realize that was the thing people liked. 

Yes, I am bringing it back this season. We are on season three. We will be focusing on how to be a better CEO. Also, how to work with marketing leadership and how to think about building your marketing team. We’ve got a bunch of very big topics that we’re going to break down. These are just solo hosted by me. I’m kind of bringing together all of the research and insights and sharing them with all of you. I’m super pumped to bring it back. It’s a good time.

Rob: I’m excited to listen. I have listened to the first season, 18 episodes in your prior couple seasons, and the h1 on that is how to grow your SaaS to 100,000 MRR. I like that value prop. You can search In Demand podcast, obviously, in any pod catcher you use, but the canonical URL is in-demand.castoos.com Thanks again for joining me, Asia. 

Asia: Awesome. Thanks again for having me. 

Rob: Thanks for joining me again this week. If you haven’t checked out youtube.com/microconf. In addition to conference talks that we’ve been putting out, I’ve been putting out some 5–10 minute videos covering SaaS specific topics and its content that I’m not releasing on this podcast feed. It’s things like Bootstrapping VS Venture capital, what’s the right call, how I made $30,000 a month with SaaS, top five activities of a great SaaS Customer Success Manager, SAS metrics: the best guide to software as a service, KPIs.

That kind of stuff is pretty topical and tactical. There’s also some strategic thinking but it’s all around bootstrapping and mostly bootstrapping SaaS companies. So youtube.com/microconf if you haven’t already checked it out and you can subscribe. It’ll show up in your YouTube feed as these videos are released.

I’m trying to do one a week at this point so if you’re looking for kind of what feels like a little more Startups for the Rest of Us, even though it’s me solo, but you get to hear more of my thoughts on this topic and further your education and SaaS all the while having an actual video. We have editors that are making these things pop and making them interesting. I’d encourage you to check out youtube.com/microconf and I’ll be back in your ears again next Tuesday morning.

Rob: Today, we have another great episode of Startups For the Rest of Us. I’m your host, Rob Walling. This is episode 606, where I sit down with the founder of Castos, Craig Hewitt. He and I talk through podcasting. We talk about all the acquisitions that have been happening, podcast analytics, Apple versus Spotify. Then we switched it up and we talked about staying up to speed when you’re no longer doing a task day-to-day as your company scales.

We talk about keeping everyone on the same page as you grow. Castos now has 13 team members. Obviously, the challenges you face as a single founder are very different from what you face when you’re one of 13 people, and you’re just trying to keep the ship heading in the right direction.

Before we dive into that, our next round of MicroConf local events are scheduled for this summer. We have MicroConf Local in Chicago on June 21st and MicroConf Local in Denver on June 23rd. If you want to meet local bootstrappers in your hometown or want to make a short trip to join us, head over to microconf.com/locals to pick up your ticket. Remember that the MicroConf Locals are inexpensive. It’s just a few hours in the afternoon, so it’s a great way to dip your toe into the waters of MicroConf.

Currently, I plan to be at both the Chicago and the Denver event. If you can make it, it’ll be great to see you there. With that, let’s dive into my conversation. It’s not an interview. It really is just a back and forth conversation about a bunch of topics.

I always enjoy getting Craig Hewitt back on the podcast. With that, let’s dive into my conversation. Craig Hewitt, thanks for coming back on the show.

Craig: Hey, Rob. Thanks for having me. It’s been a while.

Rob: I know. Just three, four months? I think you came on for where they are now, TinySeed Tails season one episode.

Craig: Sounds about right. Yup.

Rob: Yeah, that was a fun one. Folks remember you, obviously, from TinySeed Tales. You’re the founder of Castos, which is public and private podcast hosting. In fact, it’s what this very podcast is hosted on, as well as our MicroConf podcast and TinySeed Tales itself.

I was pleasantly surprised earlier today. I wanted to install Chartable’s listener tracking. I guess it is download tracking, technical. I have the Castos stats. I think podcast stats are completely broken across most of the world, because I’ll look at one provider we used to use.

It had tens of thousands. I go to a different one and it’s a third of that number. I’m like, how can it be 10%, 20%? I was like, you know what, it’d be great to have a second provider. I already use Chartable for some other stuff. I was thinking, this is going to be kind of a mess.

There’s a prefix and I’m thinking, am I going to have to hire a WordPress developer to hack some HTML or RSS? You know where I’m headed. I just went to Google. I typed in Castos and Chartable. It was like, grab this little URL from them and paste it in your Seriously Simple Podcasting thing. It just worked, man. It was so cool.

Craig: Yeah. Both Chartable and Podtrac, the formerly independent podcast analytics platforms both acquired by Spotify a few months ago.

Rob: Both of them? Oh, I didn’t know that.

Craig: Yeah, both of them. That is one of the hottest topics in our industry lately. It’s like, hey, these independent third-party platforms are not independent and third-party anymore. What does that mean? Yeah, drama.

Rob: What does that mean? I know there are purists who say things like there shouldn’t be billionaires in the world or people who are really religious indie software companies only. As you get big and get bought, you sell out.

There’s, I think, folks who maybe think too black and white about it. But beyond that, maybe the zealots take on whether these folks should be independent or not, what are the pros and cons of both of them being acquired by Spotify?

Craig: I think the downside that I hear a lot is, obviously, Spotify will take that data and do things with it that they wouldn’t have had access to otherwise about your podcast and your audience. How bad is that? I don’t really know. I think a lot of the decentralized, DeFi crypto folks are up in arms about it. Spotify itself is very much the closed garden kind of provider in our ecosystem as opposed to Apple, Amazon Music, and all these that operate open RSS.

I don’t have a super strong opinion. I think that it provides an opportunity for another player to come in and do the same thing that they did before, open source maybe and things like that. I think that could be pretty cool. Yeah, podcast analytics are super tough just by the nature of the distributed system. Spotify has a different way that they approach it, because they’re not an open system.

Rob: Yeah, I think that makes sense. It’s funny. I’m not an open purist like, oh, that open source software should be everything or that crypto and DeFi. Obviously, I own some crypto, but I’m not necessarily in that camp. It’s just like, okay, cool. Whatever works, let’s have a competitive space.

If the open source software is free and the best, like WordPress, for example, which I use on Startups For the Rest of Us and robwalling.com, or if Squarespace, Wix, and these other are better, if you’re willing to pay $15 a month, not have to deal with the conflicts, and constantly upgrading, I think I have 20 plugin updates that I need to run on these sites, which is the free puppy aspect of them, I like to see it competed out and for there to be more choice. 

However, one big hang up I have is with Spotify buying these podcasts, like all the Gimlet stuff now, I just don’t listen to it anymore. Anything that is Spotify exclusive. We have a five-account family plan. I have Spotify in my car, it has an app. I have it on my phone with me. I listen to it constantly. I was just listening to it right before this. And yet, the moment that they walled off the podcast, somehow, for me was almost offensive.

I don’t know if it’s just because I’m what I’m used to. Podcasts should be open. They’re like email and HTTP. Or because I’m a podcaster, or if it’s just annoying that something that was once free, it’s still free, in essence, I guess with my account. But something that was once open is no longer.

Craig: Yeah, personally, we operate a lot in the open podcast ecosystem and in the WordPress ecosystem via our plugin there. I’m just a big believer in it. I didn’t come from a technical background, but open source is amazing.

Open source is amazing for the community, the developers, and the end users, but it’s also a really good business model. WordPress Automatic is an amazing business. There are a lot of different examples of it in different industries, where you have this open source tool that you can use however you want, and then there’s the hosted version or the managed version, Ghost, another popular example, like Fantastic CMS. It’s free. You can go install it on your DigitalOcean droplet or you can pay them $10 or $15 bucks a month. Those are for you. I think it’s great.

It creates a lot of community-based accountability, which I think is the most positive thing. It can be painful to make a lot of decisions, I think. If you get into the politics of open source, it gets messy pretty quick. But I think overall, it’s a really good thing for these bigger projects.

Rob: I didn’t plan to ask you this when we started recording, but I’m realizing we just touched on podcast analytics. You said they’re difficult because of the distributed nature of something. Why are they so hard? If I log into three different analytics platforms, we used to use Blubrry.

We use Castos now. I’m looking at putting Chartable on because it’s free and I already have it. I bet I’ll see a swing of 50%-100% in terms of download numbers. I know estimating subscribers, I’m not even going to go there because that’s just an estimate. I know that just raw file downloads are what you can track and see.

As a former developer, it seems like if it’s a partial download, at a certain point, you just don’t count it if it’s only 10%, 20%, 30%. But at a certain point, you do. If it’s 60% or 70% downloaded, I don’t know. There’s probably a number, and then everything else, you just look at the number of downloads. Why isn’t it just that simple?

Craig: I think there are two things. One is it should be relatively that simple. There are a lot of subjective decisions that we make when engineering around multiple downloads from the same IP address, how many do you count is one listen, and things like that. There are some subjective decisions we make, but there’s some guidance in the industry around how we should handle that.

We do benchmark our analytics versus Podtrac, and it should be the same with Chartable. It’s 10%, 15% off. If you see a bigger difference than that when you install it, I’d be pretty surprised. Yeah, it is all that kind of bots, crawlers, and artificial traffic that hit your RSS feed, especially depending if it’s on WordPress or on Castos, different traffic patterns in those two places. I think we have a unique challenge to solve in that respect.

I think the bigger challenge, if you look at podcast analytics versus web analytics, and Google Analytics or Fathom or whatever, we only have visibility to the file until it’s downloaded. If people want to know like, hey, can I get demographic information about my listeners? Can I see when they listened, for how long, and things like that? The answer is mostly no, because the file leaves our platform, and it’s just gone.

It’s on Pocket Casts on your phone and you don’t know. We don’t know when you listen to it. That’s the closed loop that a lot of people are looking for. Going back to Spotify, that’s where they really rock. They control the whole stack from the creator and advertising—they’re the advertiser. They have a closed relationship with the listener.

Rob: Okay, that’s good to know about that 10% difference, because I will take a peek at that and see Castos versus Chartable once I have enough data. With Spotify, do their downloads of Startups For the Rest of Us, would they show up in Chartable or in Castos? Because Startups For the Rest of Us is on Spotify. It’s also available everywhere else. Do they basically just download it once, and then they now distribute it? If there are 1000 people listening on Spotify and 20,000, listening everywhere else, it’s only going to show 20,001 downloads?

Craig: From our platform, yes. It’s because Spotify is the only platform that does exactly what we said. It takes the file from Castos, stores that on there and re-encodes it differently, and then distributes it from their system to their listeners. We have the option to not do that and have it be a pass-through kind of relationship like every other platform, but it would require us to re-encode the file that you upload to our system a certain way. We don’t want to do that, because we think that the file you upload is the one that your audience should hear.

Spotify says, hey, if you’re going to have a pass-through relationship with us, the file has to be this way, this way, and this way. We say we don’t want to have to do that for our customers that spend so much time creating this audio. We want you to be able to deliver that file to your audience.

Yeah, Podtrac and Chartable  should basically not track Spotify listens. That’s why you log into your Castos. You can if you directly submitted through us or if you just submit it through the Spotify podcast portal. They have a lot of analytics there. Just like Apple, a lot more in depth analytics than we have access to.

Rob: Right. Probably, I have not logged in. I probably need to, because I haven’t been counting those download numbers. Now I’m realizing I need to add them together. I know in Castos, you have a tab where if you connect it through your Castos account, you can then flip between the two tabs. It’s the Castos downloads and the Spotify numbers, where I assume you’re pulling it in from an API or something.

Craig: Yeah. Depending on your audience and where you’re located geographically, 20%-40% of your total audience is on Spotify.

Rob: Is that much?

Craig: Yeah, it depends. Internationally, it’s more younger generation, something like that, industry-wide.

Rob: Before TinySeed, after I left Drip, I had this idea that I wanted to make podcast analytics better, not do it on the server side, but basically go and acquire all of the client side apps that I could, like raise a fund and buy up anybody that would sell. Then you’d have real data if you combined Downcast with Overcast with Pocket Casts. Obviously, you’re not going to get Apple Podcasts. But if you bought five of them, 10 of them, or whatever, and had hundreds of thousands of users, at least you could kind of extrapolate.

It was right around that time that Apple launched their crappy analytics, where you can log in as it’s the podcast dashboard, and they started giving that information. I find that information not very accurate. It’s just way different than the Castos numbers, for example, or and the Blubrry numbers that we had.

Have you found those Apple numbers? They actually tried to give you like, how far people listen in and how many people there are, because they do have that client. Used to be iTunes now, it’s Apple Podcasts. What’s the consensus or is there a consensus around Apple’s numbers?

Craig: I think the consensus really broadly is a helpful indicator. It’s a directionality kind of level thing. But basing a bunch of your content decisions on that, it’s probably not helpful. It’s what I hear. I think that your idea and your hypothesis of that is right. Being able to access the end listener kind of behavior would be really helpful, especially for advertising, because they want to know about impressions, and that’s what it is.

I know that a lot of podcasting apps are quite privacy focused. I think, unless you bought them, you would have a hard time getting that data back from them. I think the hypothesis is good. The interesting thing about Apple versus Spotify in this respect is Apple is not incentivized at all to give you any of that data. Spotify, more so, because they’re monetizing that traffic. I think that’s the big difference.

Rob: Yeah, it’s such a trip. It’s still early in podcasting, I think. I guess you have a whole company based on it, so you probably share that. It just feels like it’s going to be built into all the cars, all the places.

Craig: Airplanes, yeah.

Rob: Yup, there’s a lot to be done there. 

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Let’s switch it up and talk about a topic that you actually brought up before we recorded, how do you stay fresh with the latest hotness when you’re not so close to the action anymore? This could be someone like myself who’s no longer a founder of a SaaS company. I’m still a founder of some other things. Or it could be you who used to, nuts and bolts, get in, do the blocking and tackling, and now you have 20 people working for you?

Craig: Yeah, we’re 13.

Rob: Thirteen, sorry. Why do I think you had 20? Approaching 20. I think I live in the future. I know that you’re probably still writing nitpicky marketing copy or ad copy somewhere, because at 13, that’s just not the right thing for you to be doing.

What are your thoughts here? How do you stay close enough to the metal that you feel like you’re able to strategize and that you’re not missing things because you’re not in it?

Craig: Yeah. I think that where we are is particularly challenging in this respect. I think that’s why I wanted to talk about it, because I’m sure you can relate, as we’re at the size where I don’t do a lot of real implementer level stuff. But we’re not 20 people, to where we have real directors, owner-level folks in every group of the company, to where I don’t have to really get into the weeds there. I do find myself, especially like sales and marketing, on sales calls and writing some marketing copy. Not as much certainly as I used to, but I do some of those things and answer support tickets every once in a while.

I find it challenging both in the context of what I asked or wanting to talk about in the question. How do you stay up with the latest marketing trends or sales, pricing models, and how to freaking run HubSpot, and stuff like that. The other side of that is, how do you not do a lot of that, and be able to take a step back and above, and think strategically about the business, and kind of be a CEO?

I think what I found, and this is interesting coming from a person that runs a podcasting company, is I read and listen to a lot more books now instead of podcasts, because I find that the temporal nature of podcasts makes them more trendy. To me, a book is more kind of evergreen. I can take the lessons away, and abstract the lessons away from a book, and implement them how I want and where and when in the business. Whereas, podcasts seem to be really super specific, and sometimes just very timely or not timely. That’s one thing.

I think the other part is just working with the people in our company that are doing the sales, or doing the marketing, or doing the support. Doing the product stuff, and just learning from them, and trying to stay up to speed with what’s going on and what they think are the best examples, and then pointing out UI patterns that we want to emulate and stuff like that.

I think at the end of the day, when I put my good founder hat on, it goes all the way back to hiring the best people who are able to bring me along in that journey through this valley of half pregnancy, because half the time, I’m a real CEO and half the time I’m in the weeds. For some period of time, I’m in the weeds and half I’m a real CEO. The folks on our team are able to help me stay fresh with what’s going on and help them make good decisions. The other part is just really being a leader.

Rob: Yeah, as you were talking, the thing that resonated most was about hiring the right people who can bring you along. I even think at a certain level, imagine if you had 100 employees or 500 employees, you cannot stay up on sales, design patterns, code, and any of the other stuff. That’s where you were saying, having directors or VPS who can stay up to speed on things.

It’s mostly a temporary thing, because when you hit a certain size, you being Castos, again, 20, 30, 40 people, I do think that you will stop wanting or needing to be up to speed. You just need good people who are up to speed. You need your implementers, your individual contributors, your designers to know design really well, and for them to hire those people who are inspired and think about it in their spare time.

When I was a developer, I used to bring books about software development to the beach. It was the nerdiest thing ever, but I was that person. It made me pretty good at my job, because I was thinking about it a lot, and I enjoyed it. I worked with people at Drip, some of whom are cool. They clocked in 48 hours a week, and then went home, and didn’t think about it. That was fine.

They were good folks who delivered. Then there were just those people who went the extra mile. They thought about product management over the weekend. It’s just different. I’m not saying better or worse, but you do need some of those people, because then they bring it back to the rest of the team. That’s what I would see.

They were the ones listening to the podcast reading the books. Then they’d bring back a new idea and be like, hey, so there’s this new innovation. It’s called flat web design. It’s called drop shadow or whatever, and then we’d get to debate it. But at least someone was bringing that into the team. I think that’s maybe what you mean by those folks who bring you along.

Craig: Yeah, at the end of the day, those are the folks who are going to bring these ideas to us and say we should do flat design, or we should do integration marketing, or we should do whatever. It’s my job to trust them that they have our best interests at heart.

I’ve communicated the vision of where we want to go. The idea they have is they think it’s going to get us there, and then just gut check that with what I know of things. Is that how it is for you? I’m curious about you. With TinySeed, it’s just at a different level.

Rob: Yeah, but it’s the same thing. I’ll give you an example with this podcast. I hired an assistant producer a couple years ago. He worked a bunch of good work for us over the past few years, and then he moved on. We brought in a full time person now who helps with all aspects of it. But he used to bring suggestions, because he would watch other shows and listen to other podcasts.

He was the one who said, you’re not really even sharing a tweet of the episodes, and so we started. I was like, that’s fine. It’s pretty low lift, a light lift to do that. Then he said, well, what if we started doing audiograms? I’m like, what are those? This was a few years ago, so you get out of touch with stuff. But he was my guy who was thinking about that stuff.

Then he said, can you record the video? I want to start doing short video clips and put them on social. I was like, it’s a hassle. Recording video, then we’re going to have to edit it, and then we have to tweet it.

Here’s how we made the decision. I said, let’s experiment for one month, so you’re going to do four of these. Then let’s see the time difference between that and an audiogram. Let’s see the views or the engagement difference. As it turns out, it was 2x-3x more engagement with a video. That’s how I view it.

Tracy brings stuff to us all the time like, oh, I want to try this new thing with the blog. It’s like, cool, let’s do an experiment over a short period of time, a month or a quarter. Let’s track how much mentally do I ballpark. Do I think this is going to cost us in time or money?

What are the odds that it’ll succeed? Is it even recent? If it’s a 2% chance of succeeding, that’s a no.  If I gauge it, deem it at 2% or we agree it’s a low. But if it’s probably got a 25%-50% chance, to me, that’s a pretty good bet to get another 1000 eyeballs or another 2000 views.

Craig: Yeah. I think podcasting with Andy Baldacci for our show, the thing I know he would add is you have to consider the outcome of that too, because it’s not binary. It’s not just, will this work or not? If it works, will the outcome be so much more that it’s worth the risk? I would just add that. I know that’s the thing he would say right now, because he always beat me over the head about it.

I’m sure that our team has a drinking game for me around this, but this is where we’ve implemented OKRs in our business in the last six months. This is where this really just puts all of that stuff in a good lens that is visible across all groups in the company and for me. We’re able to really sit down, make those strategic decisions, and then the implementation of it. Like you’re saying, it’s their ideas that come and we figure out how we’re going to reach these goals. On a quarterly basis, that’s the rotation, so it’s been helpful for us.

Rob: I can imagine. For me, staying fresh, like you already answered it for yourself. But for me, it is a lot of podcasts and books. I view my mental model as books are, like you said, more evergreen. They’re more strategic long term. There are some tactical books, but I actually don’t tend to read those anymore.

I used to literally read ebooks on how to run Facebook ads when I was running, but I just can’t. I’m not going to get in the weeds, because that’s going to change in the next six months. I know that I can go hire somebody who can do it way better than I could learn these days.

I still listen to podcasts. I struggle with interview podcasts. I try to make this show less about interviews and more about conversations. I have heard some pretty interesting conversations around new tactics that are coming up. There was someone talking about TikTok marketing for business the other day. As much as I don’t care about this, in depth, I don’t. I don’t care about the TikTok aspect. I do care that it’s a new thing, and should it be on my radar?

I view podcasts for me as fun, which most of my podcasts consumption is not around work, but the chunk that is around work, the 20%-30% that’s around business. I’m either keeping up with folks like you on the Seeking Scale podcast, or you and Dave on Rogue Startups, or Brian and Jordan on Bootstrapped Web, or I am listening to these shows that are throwing out the tidbits, the, hey, this is how someone’s doing TikTok or Facebook ads are really different, and they’re a lot more expensive, so I can put that in the back of my mind of like, okay, maybe I’m going to check that with a couple people, but is that the way this is moving now? It’s like information gathering for me and just trying to keep aware of the broader picture.

I would also say, for me, it’s a lot of conversations with founders like TinySeed and even MicroConf founders. That’s the other way that I keep up on something. Someone discovers something, posted in the Slack, or they ping me if like, hey, there’s this thing that’s working for us, and now I’m like, mental note A that that’s happening and B, that that person is now a resource. If someone just got LinkedIn ads to work, then you ping me in two weeks, and say, hey, do you know anybody with LinkedIn ads, or do you know how to run LinkedIn ads? I would say, I don’t, but that founder does.

That’s the other thing where I was saying earlier I’m not sure that we have to maintain expertise in these things. You don’t if you have a really strong network. You and I are in some Slack groups where the network is strong. If you had a question like, hey, I do want to run LinkedIn ads, you would just ask. You’d ask in the TinySeed Slack, you’d ask in the other founder Slacks that we share.

That’s probably the first place you’d go and be like, who’s running LinkedIn ads or who’s paying someone to run LinkedIn ads? People would weigh in, and that’s your shortcut. The network is a shortcut to certainly a better answer than googling it. Just a lot of thoughts.

Sorry, I turned that into a solo podcast there. In the early days, I talked about building a product, building a business, and then building a company—three phases. I haven’t gone super in depth into the specifics of exactly when that happens. Building the product is just the early scrappy days. You launch and until you have at least $10,000 a month in revenue, you’re still a product, and you’re just trying to find product market fit.

At a certain point, it becomes a business in the sense of your profit and loss. You just have to start thinking about it as this is something beyond just a hobby project or something beyond some code I threw up on the weekend. Company building, obviously, that’s where you’re at. That’s when you start thinking about hiring managers and you implement things like OKRs or Rocks.

OKRs and Rocks when it was two of you, and you were at $8,000 a month or whatever, it’s way over processed, over engineered. I think that leads me to my question. I’ve heard you talking a lot about Rocks and OKRs on Seeking Scale with Andy. So much, in fact, that I think I need to research it more, because I feel like for me, it doesn’t fit my style of work.

I’m not a process person. Tracy, who runs TinySeed program director. She is very much in the process, and that’s why she’s here, because Einar and I are not. OKRs and Rocks, which for folks who are uninitiated, it’s like setting monthly or quarterly goals, your annual goals, and then they all roll up to something, or they don’t, or whatever.

What has been your inspiration for pursuing these? Is it that it fits with your mental model, or is it that you got to a certain point when you’re like, oh, we need something better than what we’re doing now, because it feels like we’re maybe getting a little out of control?

Craig: Yeah, that’s a good question. An answer to that is we’ve done Rocks and now we’re doing OKRs. They’re very similar. For the size company we are, I think the difference is that OKRs can scale a lot more, because they can go at the company level, group level, and individual level. If you’d want where Rocks are just like a single set that is company and division level maybe, they’re both set quarterly.

The nice thing about them for me, and the reason we really liked them is it makes you. Now, for us, our team leads once a quarter say, what the heck are we doing? What’s important to us from where we are right now to 90 days from now? How does that relate to our annual or two or five-year goal?

It is how we start all of our group meetings each week. We say, hey, let’s open the OKR scorecard that we keep and see how we’re doing. In the Rocks world, those are the issues that come up. Like, hey, we have a roadblock here. We have developments behind here and marketing is slacking on leads. Why is that? Let’s talk about that and see how we can unblock ourselves and work towards achieving these goals.

I think longer term, the vision is that I will, again, move one step up in that goal setting stratosphere, and then the leads of each group will set, run, and report on those OKRs without me. I think that’s where OKRs are really powerful. It is a tool to give them the permission to focus on just a couple of things and a quarter. We’re still in super startup mode. We just want to do a thousand things. If you do a thousand things, you’re going to fail, so we do two or three things in a quarter.

We want to do them really well. We set really ambitious goals. We grade ourselves against those goals every week. If someone comes to me and says, hey, I want to start running LinkedIn ads, and we decided we’re going to only run AdWords, this quarter, we get to say no, unless there’s a really super compelling reason why we have to do it.

That has happened, but the answer is just no. This is our world for the next 90 days. Let’s focus on this and do it really well. I think it just helps everyone focus during that quarter, and then leading up to that quarter when we’re making those Rocks or OKRs in our case.

It’s almost like the little founder retreat. You get to say, hey, what’s important to me, our group, and the company in the next 90 days with a lens of, hey, in two years, we want to get to this point? I think if you’re less than five people, it doesn’t really make sense. Where we are, it makes really good sense. As we grow, it’ll be even more important.

Rob: Yeah, it reminds me of how I think about mission, vision, and values, where at five people, if you’ve come across it organically, great. If not, I wouldn’t force it. Right around that 10–15 mark, if you don’t implement something, it will implement itself. If you don’t create a company culture, one will be created for you, and you may not like it. They may not have the beliefs and be in line with the mission that you actually want to achieve.

I’m guessing the mission of Castos is not to serve podcast files to pod players. It’s like there’s something. There’s a higher level thing to bring audio to everyone or whatever. I don’t know if you’re public about it or if you have a mission that you’ve thought through yet.

Craig: Yeah, we do. It’s right on our website, tempo.castos.com. Everything about us is right there.

Rob: Yeah, this is really well done, man. You have a whole content guide. It says, our mission, “Build the most powerful platform to help creators create great content, and connect with their audience.” That’s pretty cool.

You have, how do we accomplish this and you have our purpose, our vision, or our values. If someone’s evaluating Castos as a potential employer, basically, if you have a job break out, then they can look at these things and link to themselves. Is this what I want to do? Is this fit?

Craig: I think as companies get larger and become more successful, I think that stuff is just so much more important. Everyone wants to work at Stripe because they know what they’re all about. We try really hard to be that darling, especially these days with those competitors. The market is, we are selling ourselves to candidates more than they’re selling to us.

Rob: Man, thanks for taking a few minutes coming back on the pod. It was great chatting.

Craig: It’s awesome. Thank you.

Rob: If folks want to keep up with you, obviously, you’re @TheCraigHewitt on Twitter, where you retweet extensively. I went and looked through your feed and I was like, he has a lot of retweets in it. It’s what I used to do when I was a little busy. When I’m too busy with Twitter, I actually retweet other people.

Of course, castos.com if they want to check out awesome podcast hosting for both private and public podcasts. Thanks again for coming on.

Craig: Thanks, Rob.

Rob: Thanks for listening to yet another episode of Startups For the Rest of Us, where you’d been listening for 6 or 600. It’s great to have you here. Thanks for joining me again this week. I’ll be back in your ears again next Tuesday morning.

Rob: Today on Startups For the Rest of Us, we dig into listener questions. We discuss building a SaaS with little development experience using no code for your MVP productized services, stair-stepping, and bootstrapping a two-sided marketplace. Really, questions ran the gamut.

There are some great questions today that Ruben Gamez and I cover. You know Ruben as the founder of signwell.com and @earthlingworks on Twitter. I really appreciate him joining me today.

Before we dive into those questions, Steve from Skills DB Pro sent in a video ask. He went to startupsfortherestofus.com. He clicked ask-a-question at the top. He didn’t ask a question this time. He said they do a lot of enterprise sales and he wanted to offer some thoughts and ideas that haven’t been covered on the podcast, but that have helped him and his team scale his company. We’ll roll that here.

Steve: Hey, Rob. Steve from Skills DB Pro coming to you from Bozeman, Montana, a long term listener. I appreciate all your help. I started my business by accident and I think I would be totally lost without you. 

I’m going to talk a little bit about selling to the enterprise. It seems to be a big subject on your podcast. It’s something that we do a lot of, so I have a fair amount of experience with it. We have different approaches to it than you’ve mentioned it in your show before, so I thought I’d share them quickly.

First, what we do is when we’re selling to the enterprise, we keep our dollar-a-seat SaaS model. But then what will happen is, for example, we took on a brand new client in one of the states, who I’m not going to mention their name, but it’s a thousand users. It’s only a $1000 month contract, but what we did is that we added an additional $18,000 or an additional $3000 a month of Project Support Services at the beginning.

It’s an amazing sale because they go, oh, it’s so cheap. It’s only $1 ahead. But then they’ll go ahead and pay the $3000 a month because it’s a separate line item for Project Support Services. It’s such an easy sell because all you have to do is say, well, do you really have time to do this? Almost always, they’ll be like, yeah, we can really use that help.

Inevitably, they almost always renew that service. That service is a very, very high margin item for us. I wanted to throw out the Project Support Services. We keep our SaaS prices lower, but we get a lot of that enterprise-level stuff for all the things that are enterprise. I don’t have time to go through it here.

The other thing that will happen a lot of times is they still ask for custom programming. We always charge for that and we call it expedited updates. If they’re not willing to pay $5000 for an expedited update, they really don’t want it. Anyway, I got four seconds left. Hope you find it helpful. If you want to know the information, reach out.

Rob: Thanks for those tips, Steve. I love the naming most of all, Project Support Services and expedited updates. I think it’s a mental shift like when I went from calling things betas to calling them early access. Having that naming is and can be important, so I appreciate you writing in.

If you have a tip for listeners of the show that you feel like have never been covered, feel free to go to startupsfortherestofus.com. Click that ask-a-question and send in a video or audio snippet. We can pass it along to the listener base. With that, let’s dive into listener questions.

Ruben Gamez, thanks for joining me on the show again.

Ruben: Thanks. Thanks for inviting me.

Rob: Yeah, it’s always good to have you. Folks know you as the founder of SignWell and Bidsketch. You’ve been on the show many times talking about plateaus, talking about rules of thumb in terms of trial to paid, funnel metrics, and of course, answering listener questions. Are you ready to dive into our first one?

Ruben: Yup, let’s do it.

Rob: All right. This first one is from Haibert at simplyrem.com. It is a video question. I should mention, if folks send audio or video questions, they can record yourself on your phone, send me a Dropbox link or a Google Drive link questions at startupsfortherestofus.com or you can go directly to Startups For the Rest of Us. There’s an ask-a-question link in the top nav and then you can just record yourself right on the website on your phone or on your computer.

Those go to the top of the stack. If you send in-text questions, we always get to those as well. They just have slightly lower priority, but Haibert sent in-video questions. We will roll that now.

Haibert: Hey, Rob. My question is, what level of expertise would you say the founders of B2B SaaS should have in order to create a successful product? Would you say that they need to be senior developers? Or would you say even if you’re a beginner and as long as you know how to get by, you should start and there’s a chance you might get somewhere? I just want to know what your thoughts are on this.

Rob: I like this question. I think, oftentimes, we get the, do I need to be a developer or not? It’s a very binary way, but Haibert, I think, is asking, how much of a developer do I need to be? I want to be clear, I don’t think he’s asking, do I need to be a developer to start a SaaS or to be a founder? We know a bunch of founders, Craig Hewitt and other non-technical founders we could insert here. Jordan Gall and there are several.

I don’t think we answer, do you need to be a developer in order to start a SaaS? I think specifically, he’s asking how good of a developer do I need to be to code to actually build the SaaS? What are your thoughts?

Ruben: It really depends on the complexity of the app. It’s hard to generalize when it comes to something like this because you could have SaaS products that are relatively simple, more CRUD-like. Even certain parts might be people-powered so that there’s really nothing complicated to build out.

Anyone who’s just starting out with development that has a few months of experience that could do some of the basics would be able to build that out. The problem is, it’s just not going to be good code or probably have to be rewritten at a later time, even the more simple version of it. If it’s the first product that somebody’s building out the first thing, it’s just not going to be very good.

I think it gets tricky when we’re talking about something that’s complex. I think the tough part is that not only potentially could there be some really bad bugs and things like that, but it can drag on for a very long time, way longer than you expect, especially if you don’t have experience like estimating projects and how long something will take to build. Everyone, even very experienced developers think things will take way less time than they actually take. I think there’s real danger there.

Somebody who’s looking to do that should probably consider at least hiring, if they can afford a full time dev or part time dev, it could just be somebody to help mentor them, or coach them on some of the more complicated parts, or outsource the more difficult parts. It doesn’t have to be all one way or the other. That’s what I would say.

Rob: Yeah, I like that take on it. My first thought when I read this was, HitTail, the SaaS app I had before Drip, was kind of just one feature with a bunch of tables. There were some scaling issues because it had a JavaScript tag, so it would send a request back every time you got a search engine hit. But realistically, you could have hacked it together.

In fact, it was hacked together. The codebase was not great. It was classic ASP and it was a spaghetti mess when I acquired it. Then we rewrote it in Ruby on Rails. That complexity, I think he could pull it off. But then to build Drip, which is exactly what you’re saying, is like simple versus not simple.

The cost of building an app, getting some traction, and then running into performance problems that are literally unsolvable without a complete rewrite of at least a section of your code is pretty easy to do. If you don’t have the experience as a developer, as soon as you get into anything that needs to be performed, you just don’t think about queues, being async, and threading. There are just these advanced topics that it’s years in that you really get your head around these.

We have a couple of questions later about no code. I think low code is super interesting these days, where you learn enough JavaScript that you can take Bubble or Airtable and Zapier, and you kind of time together. You can write some JavaScript when you hit the edge of that platform where Airtable or Bubble kind of lets you down and you can drop into the code and do it.

I think that’s super interesting because then, no code and low code don’t scale that well anyway. One of the drawbacks to them is they don’t scale through production SaaS code. If you can find something to build that you can do and no or low code, I think that’s interesting.

Coming back to the stair-step, a step one app, where you build for the HubSpot Salesforce marketplace, you build for the Zendesk or HelpScout marketplace, you build for Heroku, Atlassian, Cloudflare, or DigitalOcean. There’s a whole list of these. We’ll link it up. It’s at rocketgems.com.

Ramy, who runs Rocketgems, is a fan of the stair-step approach. He put together a list of 68 B2B SaaS marketplaces with opportunities for indie hackers. I didn’t even know 68 existed. You have always heard me say my top five. I’m always like, it’s WordPress, Heroku, or Shopify. There are two others that I sometimes read out.

For there to be 68 of them is pretty intriguing. I think building in a marketplace like that is a lot simpler. I don’t think your code has to be nearly as complex because you’re building an add-on to Shopify or an add-on to Freshdesk to allow a piece. It’s not a full-blown SaaS app. Do you agree with that?

Ruben: Yeah. Generally, I would agree with that. It depends. We know really complicated ones. I like that guideline as doing that and looking into something that you can build with no code maybe most of the way and then using code for the rest of the stuff. The other thing that I was thinking about is if they don’t have experience, how likely are they to know that something is complicated to build or not?

Rob: Right. When you and I say complicated versus not, how do you even judge that if you have never built a production app? In a future solo episode, I had this idea or just this thought of working for other companies and working for whether it’s startups or big companies, I think that experience is so valuable not just as a dev, but learning to hire people.

I didn’t learn to hire people when I was running my own startup. By the time I was there, I had already been part of 30 or 40 people’s hiring process, whether I was the manager, a technical interviewer, or you were doing phone interviews. I did like 100 phone interviews, phone screens, more than that, actually, over the course of two years at this one job.

I was like a tech lead there. I liked doing it. It was 15 minutes. I would ask people to try to dig in other stuff. By the time I went to hire my first contract dev as an entrepreneur, I at least had that experience. Similarly, by the time I went to write my first line of production code that I owned, I had been doing it for several years and I think there’s a trade-off.

I wished I didn’t have to do those things because I didn’t like working for other people. But I did come into it with certain skills that I learned during the day job. I think that’s applicable here. Is there an opportunity? I know, Haibert, that you don’t want to go out and get a day job, but it is interesting. The most learning I’ve ever done, the fastest I’ve done it in terms of being a developer is once I started doing it 40 or 50 hours a week for someone else.

Ruben: Yeah, I agree. It is very different. Before I got a job as a developer and I had a job as a dev at one point, I was doing projects on the side for myself, for people. That was okay, but I didn’t learn nearly as much as when I actually got my first development job and had to basically work based off of other people’s real-world business requirements.

Rob: Yeah, and it’s a trip. It’s weird to be on a startup podcast and tell someone to get a day job. Honestly, I’m just presenting it as one option. It’s just an option that I think works for you and I because you and I both did our day jobs and that’s one reason that we could do it. But then we have tons of examples of folks who never did it at a day job and are still really good.

Derrick Reimer is a good example. He never had a job coding. His job coding was when I hired him to do contract work on HitTail and then hired him to do contract work on Drip, but he already had the skill set. He had self-taught. You can totally self-teach this as well.

I do like the idea that you talked about like hiring a more senior dev to mentor you and to look through your code. Even if it’s a few hours a week, whether you pair program or whether they look through your commits and they tell you what sucks about what you’re doing, I think that could be amazing. I think you can make a lot of progress doing that.

Ruben: Huge and not expensive compared to hiring somebody to build it entirely for you.

Rob: That’s right. Awesome. That’s one we haven’t received. We’ve received related questions, but not exactly like that in the past. Thanks for the question, Haibert. I hope that was helpful. Next question is another video question from Jim Huffman.

Jim: Hey, Rob. How are you doing? My name is Jim. I live in Seattle, big fan of the podcast. I have a question for you. I want to launch a SaaS company, but I’m thinking of launching at first as a productized service to test if the value we deliver works and two, if the customers would actually be excited for what we’re offering and have good retention.

For context, we’re a growth marketing agency called GrowthHit. We’re good at driving traffic and growing things. We’re weak in developing software products, so we’d love your advice. Is this a good idea or is this a really dumb idea? Thank you.

Rob: I like this question. What do you think, Ruben?

Ruben: I think there’s a difference between productized service and basically software. What they’re talking about is done for you. Yes, you can kind of test the value that you’re delivering to people, but it’s not the same thing. It’s nowhere near the same thing.

You can get a lot of insights into what you might need to build for a product where somebody signs up themselves and then they use the tool or their team uses the tool to do the work that your team was doing for them, so that they, in the end, get the value that they seek. I’ve known multiple people who’ve taken this approach, then built out SaaS, and had a tough time selling the SaaS.

Generally, often, it’s people who tend to not be as strong building software. It’s almost like, yeah, if we prove this out, then we can build the software almost like an afterthought. In reality, building software involves a lot. If themselves or their team is going to be using this software to try and get this […], there’s a ton there. What do you think?

Rob: I think you’re right. I like the idea of doing a productized service because I think a productized service as a business is very similar to running a SaaS. You just don’t have the software, you don’t have the product. I think the learnings of having the funnel, these folks are already good at it. But the learnings of building the funnel, the customer support, and dealing with essentially feature requests, changes, or whatever, I think there will be something there.

Your point is also very valid that taking that same productized service and trying to spin it into a SaaS. I don’t know. I’m trying to think of a time when I’ve heard that work, actually. I would like it to work.

Ruben: Steli with closed.io, except that we don’t know how many of their existing customers moved on to because it is literally somebody else doing the work for you to, okay, now you have to do the work using this tool. There’s a big difference there.

Rob: That’s the hard part. Yes, Steli, they had built a CRM internally because they didn’t like any of these CRMs. They had an elastic salesforce, basically, where you could add new salespeople. They built their own CRM and then they released that CRM as a product. I think that’s the thing. So much of the value is in the done for you. Here’s a counterexample that is totally theoretical and I’m making it up. I always imagined HitTail.

Again, coming back to HitTail, that was just, tie this thing into your website, it gives the app your keywords that you’re ranking for, then it suggests keywords that you should be targeting, and gives them a 1-5 ranking or something like that. That was an algorithm that could have been run on an Excel spreadsheet.

Ruben: People could have done it, right, exactly.

Rob: People could have done it. I talk a lot about human automation, hiring a VA to do it. That, I think, is interesting because it wasn’t done for you. We didn’t go out and then do the SEO for you. But it’s like, if HitTail could have been launched originally, it’s not software. It could have been built into Airtable or into Bubble to come back to no code. Just the work and the mental grind or whatever, the algorithm is just a human in a spreadsheet.

That’s different from what you’re saying. Most productized services are not that. Productized services tend to be done-for-you. It’s done-for-you podcast editing. It’s done-for-you SEO content. It’s done-for-you cold outreach. The service is the value. The software to do it has much less value.

Ruben: I think it can work if it’s maybe something small in scope, done-for-you keyword research like you were talking about with HitTail. If your software product is really close to the experience that they’re getting with a done-for-you service, I think that’ll work.

Rob: Yup. Here’s the thing. If you’re running an agency now and your revenue is spiky, a productized service will even that out, assuming you have decent churn. You can make it to $30,000 MRR or $40,000 MRR with a productized service in not a long time if you have something that’s a lot of value. There is an advantage to that.

What we’re saying is if it’s truly a done-for-you service, trying to spin that into then build software to do it is really, really hard. We haven’t traditionally seen that work. Versus, if you start with the idea of a service that isn’t done-for-you and it’s just a small lift that you essentially are human automating.

As you said, Ruben, the experience is almost equivalent. You still get those keywords in a spreadsheet. Whether it’s in a web browser or whether it’s a CSV that’s emailed to you, then the value is almost equivalent. Yeah, it’s an interesting distinction.

Ruben: Yeah. I do like the idea of also productized services for revenue early on and maybe fund the building of a tool. But then again, it’s moving over to a tool and all those other challenges.

Rob: Right, that is part of the stair step. I could see someone doing productized like Craig Hewitt did. Productized service with Castos Productions, formerly called PodcastMotor. Then he acquired a WordPress plugin that was podcast hosting and then he built Castos, which is now doing really well.

That’s the thing. If I were doing a productized service, I would start to think about what app can I acquire. Do I then have the revenue to buy something even if it’s nascent? Of course, that’s always my MO. I want to jump to product-market fit if I can, even if I spend tens of thousands of dollars and it saves me 18 months. If I can fund that with another project, that’s worth it to me.

Ruben: Yeah. The Craig example, notice how he didn’t create a product that did what the service was.

Rob: No, and he later merged them in, but they still are two separate products. It’s podcast editing and production, and then it’s podcast hosting. Both public and private podcasting, obviously, castos.com. All right, thanks for the question, Jim. I hope that was helpful.

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Next question is from someone who asked to remain anonymous. He says, “I want to thank you so much for all the value you put out into the world. You and Indie Hackers have taught me so much more than I learned in school studying marketing and entrepreneurship.” That was my experience with trying to look at junior college courses of entrepreneurship.

“Here’s my dilemma/question. I work at a VC-backed startup pre-seed that is blowing it. Making all the mistakes at being bloated with VC money lets you make not talking to customers, building tech because it’s cool, not because it solves a problem, and spending way too much money on stupid stuff like offices or PR for a product that’s not ready for PR yet.”

Ruben, this is when we say, more money in the hands of someone who knows what they’re doing can get you there. It’ll save you years. If you have more money in the hands of someone who doesn’t know what they’re doing, it will just burn money like it’s on fire.

Ruben: We’ve seen a lot of that recently.

Rob: Yeah, big time with Bolt. It’s not both, it’s the other one.

Ruben: Fast.

Rob: Fast, yeah. Not just them, we see it in a lot of stuff.

Ruben: Right, all the time.

Rob: This experience has pushed me into looking at independent startups rather than big venture-backed. I fell down the rabbit hole and I came up with my own business idea. I’m planning to solve my own problem with tech, validate the idea, and talk to as many customers as possible.

The idea is a two-sided marketplace. It’s basically a matching service. I’m going to keep it anonymous because he asked me to. He says, “It solves a problem that I had a few years ago, so I built out an MVP using Bubble.” It’s like they’re sponsoring this episode. I think that’s the fourth mention.

The next question or two is about no code as well. He says, “Here’s the issue though, it’s a two-sided marketplace, which is a red flag. Serving a market is notoriously a pain in the ass to serve. They are price sensitive. This means higher churn and fighting two wars at once.”

Yes, I often say it’s like you’re launching two products at the same time. What could be easier? “The question I’m struggling with internally is, do I ditch the idea and all the work I’ve done to start a B2B business with way lower churn or keep going a little further on this one and see where it takes me?”

At this point, I don’t believe he’s launched still. He’s talked to customers. He said, it’s something they want and I think they will pay for. He says, “My take is I should keep pushing, especially because it’s a problem I’m passionate about. I’ve done the hard work. Now I just need to push through this plateau.”

I’m not sure what the plateau is because I don’t think he’s launched yet. Maybe no one is actually signing up. I’m also concerned that I’m overthinking this, but I’d love your thoughts on this generalized problem of sunk costs and when to pivot or persevere/how selective to be with business ideas when getting started. Thanks for letting me rant on here and thanks again for all you do.

Wow. Yeah, there’s something there. What are your thoughts? Everybody knows my thoughts on bootstrapping two-sided marketplaces. Let’s see what you think about his scenario.

Ruben: I kind of liked the higher level question of when to quit and went to continue. Does he say how long he’s been working on this?

Rob: No, it’s light on details. That’s the thing. I’ve talked to a bunch of customers. I don’t know how many that is. It’s something they definitely want. I don’t know how he definitely knows that, and I think they will pay for it. What does he think they will be? I would almost want to know, what exactly this many people have said. With that in mind, yeah, continue.

Ruben: It’s hard to say because a lot of details are missing from this. Two-sided marketplaces are tough. I think everyone who’s tried them or knows about someone who’s built it feels like they’re tougher. It seems like I would not recommend them for people just getting started. I would not go into it myself, unless I felt like I had a clear advantage in one area or the other.

If I’m just starting from scratch and I have no advantage, I would lean against a two-sided marketplace. Besides that, as far as whether to continue or not, I think it kind of depends on whether how much work—there are a lot of things that I wish we had more details on, but it depends on if you’re the type of person who tends to just work on stuff for too long and not switch. We know a lot of people like that.

I think they would lean more towards switching if they’re having those thoughts because they usually don’t and they just stick with stuff for too long. If you’re the type of person who just has a ton of projects in your history and you’re never finishing these projects, maybe not this one, maybe it’s okay to switch on this one, but I would lean towards the other direction.

I saw, recently, there was a good Twitter conversation about somebody asking. I’ve been working on this for two years. I think it was like $2000–$3000 MRR. Should I keep working on it? That’s all they asked.

It was interesting to me how many people were like, yes, continue and keep going because it can take time and all this stuff? My first thought was that two years is a long time. Opportunity cost is real. That’s a real thing. Another two years and then maybe your double at that mark, there’s a lot of context that’s missing from that as well.

Generally speaking, because of my expectations and based off of what I’ve seen, that’s just too slow. I don’t think it’s a good thing that people spend years—this year is off your life—working on things that are moving this slow. 

Now, that said, it also kind of depends on what the expectations are. If this is just something to help pay for some of the bills and they have a full time job. There’s a lot of context, and then it could be totally fine. It could be okay. That much slower pace could be fine because they have other things that they’re focusing on.

I think, in general, we want to be supportive. It’s really easy for people to just say, keep going, but I think more people should not, more often. If it’s that hard and they’re really, truly working on it, and they’re putting in effort in the right areas like marketing and not skipping those areas, I think people more often should move on to other projects.

Rob: I like the point you made about knowing myself. I said that a lot. If you tend this way, then consider the opposite. And if you tend that way, then consider the opposite too. I think that such a big part of me going from being unsuccessful to successful was getting to know my own tendencies better and then fighting against them. Fighting against the negative tendencies, the anti-patterns that come out in my mind.

Some of the entrepreneurs who I see, most of them who aren’t successful over and over don’t have the self-awareness to realize, man, I’m self-sabotaging here or I’m making the same mistakes over and over. We could go down a whole rabbit hole of how to figure that out.

I think on this topic specifically, it’s not that I’d say never start a two-sided marketplace. Mostly, I say bootstrapping a two-sided marketplace is almost destined to fail. I can think of maybe one or two examples. Usually, that person had some type of edge.

As you said, they already had an advantage. Like Dan and Ian with Dynamite Jobs, that’s a job board. You need two sides. They already have a big audience certainly on the candidate side and then on the hiring side because they’re like a sister podcast of Startups For the Rest of Us where they have entrepreneurs and they have people wanting to be entrepreneurs or wanting to work for entrepreneurs.

They already have a chunk of both sides of that. They bootstrapped it out of their current business. They self-funded it. I would say, yeah, go do that. That’s actually using your competitive advantage because they have a moat. They have 12 years, 13 years of podcasts and an audience in their online community.

If I were in the anonymous question asker’s shoes, I think I would be having done the research and feeling passionate about this problem. I would go ask the people. You’re going to charge one side of it. I would go to those people now and I would say, I’m getting this matching service setup. I’m going to charge $50, $100, $500, or whatever it is and just say, I’m going to do this one-off right now.

It’s not a marketplace yet, but pay me the money or commit to paying me the money, and I will go find that you probably pay me the money. I would actually want to be paid if I’m going to go do the legwork. I’m going to go find you an amazing mentor and see who actually ponies up.

This is different from pre-selling a SaaS app that you’re going to build for six months. This is really a consulting service or a matching service. Ultimately, you want a two-sided marketplace. Again, clarity.fm is a good example of that where you get entrepreneurs, experts, and consultants on there. Then you get people seeking to be matched or even to pick them out on a website. Dan Martell hustled like crazy to get people on there to get the experts.

Ruben: The nice thing about a lot of these is that you can prove them out really fast. You don’t need to build software for them in a lot of these situations. I like that advice. I think that’s right. They’re at the place where they should prove out what are the riskiest parts of this. Can you prove those out quickly? You can without software, 100% do that and see if it’ll work.

Rob: Yup. You’re going to prove out both sides of it. If you’ve talked to 5, 10, 15, 20 people and no one’s willing to pay you, probably no one’s willing to pay you. If suddenly, five people write you a check or charge that card on Stripe, then you go look for mentors, and no mentors want to do it, you’ve just disproven that side of it. Great, it’s done. The hypothesis is canceled and we move on to the next thing. That’s how I would think about it.

He built a prototype in Bubble, which is cool. But I don’t even know why you need to do that. It could literally be an email with a few questions to do some matching of what you’re looking for. I don’t know how complex the matching process is.

We do mastermind matching with MicroConf. That’s at microconfmasterminds.com. We do that, I think, every quarter. We do ask for quite a bit of information. It’s basically like reform.app, Peter Suhm’s. It goes into an Airtable and then we mess people up manually. That’s what the service is.

We didn’t build some incredible algorithm. We could long term build an incredible algorithm based on time zones and this and that. Right now, it’s a manual matching. That’s an interesting one where you could call it a productized service, but it’s more just like human automation behind a web form.

Ruben: It almost goes back to that productized service question, where we talked about, what are the ones that are more likely to work if you create a software product for it? This kind of sounds more like that.

Rob: Thanks for that question, Anonymous. I hope that was helpful. Our next question, the last of the day, is actually two questions from two different people who sent their questions within a few days of each other. These are both about no code.

Eddie Larson writes, “I’m curious about your thoughts on the no code platforms and the solutions being built on them. I’m using bubble.io and love its robust capabilities. Is this something you see as a framework that you could use to build an MVP or something that you could sustainably build an actual startup on, you could grow, and not run into scaling issues? Thanks for always being my go-to podcast and providing great episodes.”

Next one is from Carl. In a similar note, he says, “I was wondering what you think of using no code solutions to build and bootstrap SaaS businesses. What are the downside risks other than platform risk? I’m thinking of using Bubble, a no code platform that seems very promising to build a lifestyle business as a side hustle.

I’m unsure if I would then pay someone to create the app properly,” he means in code, “if it proves successful, or if I could use Bubble forever. I’d love to hear your thoughts and experience.” I love the content. All right, sir, how much thought have you given to no code? What do you think about their questions?

Ruben: Not too much. I liked the idea and I was excited about it at one point. I asked a few people that seem to be digging into no code and what their experience was because I was super curious about how it’s working. Are people actually building real businesses with it and what’s going on? Those cases where I asked people what they were doing with it, the answer was kind of the same.

It was interesting. They were doing small stuff, but it just wasn’t there to where they can build a software startup a SaaS, not in the way that we typically know SaaS products. I think it’s kind of related to what we’ve talked about to where, I like this where you can create more simple products, something kind of early to prove out an idea if you truly need the software.

In many of those situations, I question whether you even need to build something and whether you can just run it with people as a service or just behind a form. People are doing the actual work and things like that. I’m not an expert in this, but based off of what I know about it, those are my thoughts on it.

Rob: Yeah, I think we’re in line. I actually did a full 20-minute talk on this called the SaaS Founders Guide to no code. It was for MicroConf Remote about six months ago. You can find that for free on our YouTube channel. We’ll link it up in the show notes, SaaS Founders Guide to no code.

Basically, I went through that. I did a bunch of research, both through Google and talking to some founders I know who have experience with no code, and tried to wrap my head around the use cases that I could see for this. A lot of it was some basic automation.

no code is great for being quick to build, easy to maintain, and not needing to code. I feel like building an MVP, doing simple CRUD, and some internal tools like a line of business apps. When our entire podcast production is now through no code. It’s through Airtable because it’s just easier than building it out into code. But that’s not a product that we’re going to sell to other people.

In fact, let’s say we did take the Startups For the Rest of Us workflow from Airtable and start selling it to other people, I think we could get five or 10 people paying for it. What’s interesting is it would be very, very hard to automate. That was one example that would be hard to automate with humans. Then I would want to have code written and build it from scratch.

Ruben: It would feel very MVP, right?

Rob: It would, that’s it. The scalability would make me nervous. There’s some brittleness because it’s integrated with Zapier. One out of 100 of those don’t work right or one out of 500. Whatever number it is, it’s too much for my comfort zone.

We can’t customize the UI. It’s great for line of business. It’s great that our producer, Ron, was able to put it together using Airtable in a few weeks and he’s not a developer. But to make a product the way that I think we traditionally think about it, longer term, I do think that you have to usually get code involved, unless you’re going to do something like, again, say mastermind matching where it’s a service that you’re offering. It’s like, fill in a form and then we churn through some stuff in some table. Do you know what I mean? That’s a whole different thing.

We’re not selling the product though. We’re selling the end result. The result is the mastermind. We could literally do that by sending you an email, having you respond to it, and just a human matching it. I think that’s where it is.

I think an MVP is not a bad way to think about it. I don’t want to sound down on no code because I’m not. I love that it exists. I love that more people who are nontechnical are able to build technical-sh things to accomplish these tasks.

Imagine the world before Zapier. You don’t have to imagine, we were both there. Remember, to tie anything together, you were doing a webhook, which wasn’t even webhooks back then. It was like this to an HTTP post with a query string, and then I’m going to parse this. It was a mess.

Ruben: It’s a big difference. It’s much better. Yeah, 100%. I agree. I like the idea, that’s why I was so excited about it for a while and talking to people trying to see what is actually being done. I think it’s promising. It’s there for certain things, just not there for building entire SaaS businesses.

Rob: Yeah, but here’s a question. Do you think it ever will get there or do you think it will continue? Because I think each year, no code does more and more. I don’t think no code will replace developers myself, but I do think that it will allow more and more to be done. If we look five or 10 years out, can you build an entire SaaS on it?

Ruben: Tough to say. It feels too big of a challenge, but maybe. I don’t know. I would hope so. That would be pretty cool. What do you think?

Rob: Back again to that simplicity, imagine Shopify or Heroku having their own no code platform that had their domain objects and their domain model built into it. You’re not trying to use Airtable, which is just a generic database to tie things together. But to build a Shopify add-on or a WordPress plugin, now I’m getting back to the same list to build any of those step one businesses, it’s literally building blocks.

The domain is known. You don’t have to build a generic tool. I think building add-ons is probably where I see it going. I cannot imagine building an ESP out of no code and that working. I can’t imagine in 20 years that being possible.

Ruben: Yeah, there would have to be some pretty big advances made in a few areas. It does go back to how simple is it going to be what you’re trying to build on the software side? How complicated does that need to be?

Rob: Remember, let’s say 1999, just to build a website, everything was all custom code, custom HTML, and then these website builders started coming out. There was the Yahoo Builder. Later on, Squarespace was years later, but there started to be these builders, where you could just get more done. And it was like, okay, sweet. I don’t have to worry about that. Now I can build more complicated things. 

I’m going to start doing stuff with the database, making dynamic this and that, and making it searchable. I’m going to build shopping carts. I don’t know how many shopping carts you built, Ruben. But I’ll tell you what, from 2000 to about 2003, I think I built like 15 shopping carts from scratch each time because it was before Shopify and the other carts that are out there.

Because there became these no code solutions or these prepackaged solutions, it didn’t mean, oh, no, we don’t need developers anymore. What it meant was, good, now I can work on really custom-hard problems. We could move on and we could build Basecamps. We could build Mailchimps, and we could build ever-increasing and more complicated software and leave maybe this more mainstream generic software. I don’t say generic in a bad way, but generalizable and highly horizontal software.

That just happened with SaaS, but the same thing might happen with no code where really, early simple problems, little add-ons, and then, oh, there’s a website builder, and then, oh, I can build a whole cart by drag and drop, or whatever. I don’t know if it’ll be the same things in the same order, but I do think it’s from low complexity to high, that just then frees up development resources to then do more complicated things.

Ruben: If it progresses in that way, then I think it would be generally a good thing for what people are able to put there. They’re still nowadays if you think about how much time, effort, and money is spent on a lot of these things, which really do feel like they should be a lot easier, more simple, and already figured out. It just feels like way too much. If those areas could be taken care of with no code, I think that would be a big deal. That’d be great.

Rob: That was a good question, gents, about no code. Thanks so much for sending those in. Ruben Gamez, you are @earthlingworks on Twitter and you are working on signwell.com, which is an electronic signature.

Folks, if you’re currently using DocuSign or HelloSign, you really should head to SignWell and check out what he’s building because like a true indie SaaS founder, you’re innovating and building a pretty cool product over there. We use it ourselves here at TinySeed and MicroConf. In fact, we liked it so much. TinySeed invested in it. Check it out, signwell.com.

Ruben: Yup. Thanks for the invite. I appreciate it.

Rob: Hope that was helpful. If you have questions for Startups For the Rest of Us, you can email them to us. You know the address. You can go to the website. I really appreciate it when folks send in their questions or comments because it helps us know that this truly is a worldwide global community of ambitious SaaS founders.

We have people at all stages. Folks who are just looking to launch a side project, get a couple $1000 a month in revenue, and prove that they can do it, maybe prove it to themselves, maybe prove it to their family members, prove it to the world. Then we have folks running multi, if not deca-million dollar businesses, who have just a wealth of experience. That’s what makes this audience and this community great.

Thank you so much for joining me every week. It’s really a pleasure to get on the mic here and wrap up episode 605. I’ll be back in your ears again next Tuesday morning.

Rob: You’re traveling to another dimension, a dimension not only of sight and sound but of mind. A journey into a wondrous land called Startups for the Rest of Us. This is episode 604. I’m your host, Rob Walling. Today I talked with Derrick Reimer about a number of topics. This new SquadCast integration, how he makes product decisions, whether he would prefer to fight one horse-sized duck or one hundred duck-sized horses, and things we bought for $100 and $1000 have added much more value to our lives than their price points. 

Derrick and I go way back. I’ve known him for probably 12-ish years and I always love jumping on the mic with him because we know each other well and we can go from topic to topic and just have a fun conversation. Frankly, it’s similar to a conversation he and I would have if we were just hanging out one afternoon going to a happy hour. In this case, you get to listen in. It’s much more of a conversation than an interview.

You may know Derrick as the founder of SavvyCal or as the cohost of The Art of Product podcast. If you haven’t seen his design and development work, he’s a full full stack dev. Head to savvycal.com and check it out because he makes pretty amazing products. That’s one of the reasons I want to dive into his decision-making process which is about features to build in today’s episode. Without further ado, let’s dive into our conversation.

I want to show you something. This is completely impromptu and this is not one of the topics I brought to discuss today, but a delivery from Apple just arrived. I want to show this to you. We can describe it to the listeners. Basically, Sherry has an awesome full standing desk. They make them in Portland. She has the laptop stands where you put the laptop up so it’s at your eye height. She has no external keyboard or mouse. 

I walk in when she’s typing and she’s up on her chair, literally typing on her laptop. This is six inches off the ground. I’m like, what are you doing? This is the worst posture ever. I was like, would you like me to get you an external keyboard and mouse? I went to the Apple website and compared it to Amazon as one does, the prices and deliverability. 

Apple says for the new wireless keyboard and wireless mouse, we can get it to you tomorrow for $8 shipping or we can deliver it by courier for $9 in the next two hours. I guess I’ll take option b. It shows up and in true Apple form, it’s a really nice bag, but the kicker is look at this.

Derrick: A pull tab?

Rob: There’s a pull tab on the top of the bag. All Apple staff have these amazing experiences, the opening experience. Listeners, I realized this is not the best radio but I’m so impressed. They just think about that. It’s the details of packaging. 

Derrick: I have a similar story. My wife just sadly was pulling a towel off the counter and her Apple watch was sitting there and it went with it, hit the tile, and shattered the face of the watch. We priced it out like a new one versus repair. Repair is pretty expensive, but to get a fully tricked-out newer generation will be double the cost. We’re like maybe we’ll just repair this. Let’s see how that experience goes. 

You put a request for this. They send you a box, you open the box, and it’s like a brand new Apple product box that has the little pull tabby thing. You open it up and there’s this little sheet that you pull the cover off and you nestle your watch face inside, then you press it back down, and it holds it suspended in this little plastic capsule. 

They have these little pieces of tape that are the pull tabby thing that Apple provides. They give you pictogram instructions for how to close the box, how to tape it properly, peel the shipping label off so that it’s the return label on it. Everything is just highly curated. It’s so Apple. 

Rob: That is something that is amazing and obviously has world-class industrial designers thinking through that stuff. They have the luxury of being able to do that because they have this amazing product line. I know Steve Jobs from day one always wanted everything to be beautiful, but they didn’t have the money to do it. 

The Apple 1 was wooden. It had a wooden case where you had to build your own really. It was just a wooden board. The Apple 2 was nice for that time, but it was a plastic molded case and Steve Jobs historically spent way too much on it. Once they have a home run, doesn’t the phone and iPad make their own money? 

Derrick: I think so. 

Rob: I think that’s the thing. I think the laptops themselves don’t make much money, but they have the luxury of being able to do whatever they want. Isn’t Apple’s MPS one of the highest in the world? It’s like in the 90s. That’s crazy. 

Derrick: Do you think Apple’s influence on us—because of course we are obviously heavily influenced by putting Steve Jobs on a pedestal and wanting to mimic how they operated—made creators of software pay attention to too many details or do you think it’s had a good impact? 

Rob: That is interesting because one could say, if your software is amazing, people love it. A great product can help sell itself. On the other hand, if you’re bootstrapping especially and you over-engineer the UX, you make everything perfect from day one. It’s detrimental because you don’t launch. 

I think overall engineers and designers who are mostly bootstrapping default to spending too much time on the product. I think just across the board, that’s in general. There are exemptions to it, man, because if you build something, I know you spend a bunch of time. SavvyCal UI, the Drip UI, the Codetree UI, you spend all this time. 

To me, it felt worth it because it was just so elegant and so next level versus I think the majority of people—myself included—probably spent too much time on the code and too much time tweaking the UI, but it wasn’t incremental to the next level. No matter how much time I spent when I was a developer or I was building for front ends, I couldn’t get it to that Apple polish like you can. There’s so only so many. I think overall it’s detrimental, but that doesn’t mean I want them to keep making amazing hardware. 

Derrick: Right. I do think it’s interesting because you can argue that Apple is just part of their DNA that they have these really elegant experiences, but it’s not that important. I’ve heard people say you can’t compete on user experience. It has to be more fundamental than that. On the flip side, I have several friends with Android phones, the green text message crew. 

Rob: That’s savage. Geez. Starting it off right. 

Derrick: From time to time I’ve looked at their phone, and I haven’t interfaced much with an Android phone, but when I try to look ahead and do something on their phone, the interactions are just jerkier. It’s 80% the same but that extra 20% makes all the difference. I don’t think I could get away from the Apple ecosystem because of user experience. 

Rob: It’s subjectively not as good. Not because I’m not used to this placement, it feels cheap too. That’s such a trip. I switched from Windows because obviously I used to be a Windows developer and I switched around 2011, I think, to Mac. The reason I did it was not because of the OS. It didn’t bother me at all. 

In fact, when I got into Mac OS—it wasn’t called that time—I actually found that the windowing was garbage. I always needed utility to properly window in Mac. It’s not as good as Windows. I switched because of the hardware. I wanted that metal, I think I got a Macbook Air. I wanted that metal, I wanted that trackpad. Now when I go back and my son has a Dell that he uses or a Chromebook. It’s hot garbage, man. 

Derrick: I know. 

Rob: The click is plastic. Does no one else know how to make this or is it just too expensive?

Derrick: Yeah, it’s shocking to me. I don’t understand. Companies with literal billions of dollars in their war chest—we know that Apple has many, many billions, their competitors are giant—and yet they can’t nail the trackpad. I don’t get it.

Rob: Yup, the trackpad. Then for me, there’s the aluminum. I just love the metal laptop and I bought a Dell that was kind of doing it, but it was made of plastic, and it wasn’t just that. I returned it and I bought a Mac and I was just like I’m just going to buy the bullet and switch. Switching kind of sucks as you know because it’s like I don’t know what to do, none of my apps work. 

The other thing was the three-finger or four-finger swipe where you have multiple desktops, you needed an add-on to do that on Windows. I think they do it now, but I was just like this is fundamental. Get this in the OS. 

Derrick: Yeah. 

Rob: Folks want to hear about SavvyCal. They want to know what’s going on because it’s been six months. I want to call out one thing. You integrated with SquadCast. Holy moly, that saves me time. SavvyCal obviously is a calendar, scheduling, and booking link that I send to people. What I had before was a SquadCast general room that was just hardcoded. You just have a base room that is your personal meeting room in essence and I would hard code that. 

All recordings went into one room. I have 45 recordings now so it’s kind of hard to manage. You integrated with them and now it forks off a new room every time someone books, which is exactly the behavior I wanted. I’m so stoked. 

Derrick: That was a fun one to build because it wasn’t a crazy amount of effort on our behalf because we have integrations like this already. We have a Zoom integration where we can very typically spend a separate room for each calendar invite. We already had a base on the codebase where that was happening.

It’s cool that the SquadCast team is in the TinySeed ecosystem so we’re already friendly. I can’t remember where this one originated and it might have been just a one-off request. Podcasters are definitely a segment in the market that we’re paying a lot of attention to. We have a lot of exposure there from different marketing partnerships that we’ve worked on. 

It might have been just one of those people requesting it, taking a look, and it’s like, oh, they have a nice API. We can just hit this endpoint. You pay some API key in and spend up a room. I felt like that was one of our leveraging advantages of being small and nimble and being able to just crank out an interrogation like that. 

I will say that the reaction you have, I was just exposed to this group of podcasters going through this little cohort on learning how to podcast and someone brought up SavvyCal and the room just discovered it. Everyone was going wild for it which is just incredible to see. 

Rob: That’s so cool to see. What a trip. Back in the day, when you wanted a SaaS app, let’s say when you were 21 and you were, I want an app that’s going to make $10,000 a month and will support me. I think we would have probably thought a) maybe it’ll never happen but b) I don’t know. Now you’re here. You’re living the dream that you’ve wanted your entire teenage years and your early 20s. How does that feel? Do you ever think about that? 

Derrick: I try to. I try to remember because it’s so easy to just be onto the next thing and be onto the next stress and worry. One thing that I’m very aware of is you get to a certain revenue milestone and then you start growing your team. I was talking to some founders of MicroConf about this. 

Suddenly, you feel very poor again because payroll is expensive. Now I’m graduating from reaching these milestones as a solo operator and it’s amazing and is basically replacing a nice developer salary worth of money. Then the next phase is growing the team and suddenly there are new mountains to conquer there. Now we have to grow in order to sustain continuing to grow the team. 

That’s always a looming stressor in my mind, but I do try to take stock as much as I can with the fact that this is kind of the golden age for my entrepreneurial career and that’s something worth celebrating and feeling proud of.

Rob: Yeah, it absolutely is. So folks have a reference point, the last time you were public about revenue, you said you crossed $20,000 MRR and that was six months ago or a year ago?

Derrick: Yeah, I bet that was around the last time we recorded in November. I think it was around that time. Growth, I will say, has been continuing to plug along nice and consistent like any good bootstrap SaaS app. It’s been a fun journey. I feel like, back to my previous point, trying to take stock of the progress we’ve made and also feeling very aware of the fact that the roadmap is super long, there are so many good ideas, and I obviously want to build them all at the same time but that’s not possible so incremental progress.

Rob: Yeah. Are there any features that you’ve just launched that you’re stoked about or that you’ll be launching? You’ve already talked about maybe launching in the next month or two?

Derrick: I feel like the last couple of months have been investing a bunch into a couple of bigger projects that I’m hoping will have a nice return for the company. We’re really excited about a Close CRM integration that we’re about to release and I think we might be the first scheduling tool to natively integrate with that ecosystem. I feel like the type of customers that would turn to Close are kind of an ideal SavvyCal customer. 

You’re not wanting to go into Salesforce yet and you want a nicer experience that focuses on being a little bit of a better tool to use. I think there’s a lot of alignment there and so I’m excited about seeing what this looks like to kind of copromote with another really great bootstrapped company. 

The other feature that we’re working on is meeting polls to basically allow you to send out a poll similar to what you could do with Doodle, propose some times to a group of people, and have them vote on times that work best for them. This is going to be a free feature. We’re dipping our toes in the freemium waters. 

Rob: Excellent. 

Derrick: I’ve been kind of thinking about freemium since day one with SavvyCal. It’s always a conversation if I look at the playbook of the biggest players in my space, Calendly being the biggest one, they’ve obviously grown a lot off of the viral loop component of having a free version of their product. That’s something that I can’t ignore, but also revenue is nice too for sustainability and profitability. 

I think this feels like to me a good middle ground of building something additive to what the product is today and offering that for free, so I’m not cannibalizing anything that we have already. It feels like a good first entrance into freemium.

Rob: I feel like it’s a great first link of the chain is the term I would use. Engineering as marketing plus, plus. When we think about engineering as marketing, it’s like I’m going to build a website grader, HubSpot SEO website grader and you go get your website graded. Okay, this is not the first link in the chain because the next step is not, oh, there are more features available in the website grader and it’s a paid plan. It’s like it just happened to be built by this company who also runs a CRM marketing software. 

You are giving them functionality that is actually heavily related and I’m guessing that it’s easy to just sign up your account and it’ll be available on that account. It truly is a freemium model and it is a really elegant way to do it.

Derrick: Yeah, and it gets their account kind of set up. You’ll ideally still want to connect your calendar accounts so that when you’re creating a meeting poll, you can see your events there and know what times you’re available. It kind of already sets your account up for success for the full paid experience as well. So yeah, I’m pretty stoked about it.

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This is the part of the show where I ask you a question that I already know the answer to, but I know that folks listening to this who followed the SavvyCal story, they see you, your feature velocity is exceptional and it seems like there are many developers when it was just you for so long. 

Also, it feels like you build the right things. Some mistakes founders make is they work on the wrong things and it’s hard. There’s certainty and uncertainty in certain areas of your business. It’s certain that once I know we should build this meeting feature. It’s certain we can build it. Now it’s uncertain if we’ll build it really well and it’s uncertain if we even should build it. Email support is a certainty. There are these things that are just pretty certain. 

What to build and marketing are usually the two big uncertainties—marketing, execution, what to do next, blah, blah, blah. What is your mental process for looking at that list and saying, here’s what we’re going to build. This is our roadmap. How do you decide on that?

Derrick: It’s tricky. It’s an art form because if you try to get too scientific about it and you’re like I’ll poll my customers and the one that gets the most upvotes, we’ll build that. That’s kind of a recipe for disaster because oftentimes, your customers don’t actually know exactly what they need. You can’t expect them to necessarily be that inventive. 

Also, you’re not necessarily optimizing for exactly what people are demanding. What you’re trying to do is steer the ship in a certain direction that is aligned with your strategy. I think it’s really important to have a vision that is rooted in who am I building this for and learning at a higher level what problems does this group of people experience, and how can I build to address those problems? As opposed to getting really specific with customers and trying to do one of those feature upvote-y things. 

I kind of avoided those because I felt like that would put extra pressure on the masses who are voting for this feature and maybe it aligns with strategy, maybe it doesn’t. It is a careful balance like how much time you spend talking to customers and trying to soak in feature requests versus stepping back and saying this is where I think we can be different from what’s on the market today. This is where I think we can really level up the status quo outside of what people are asking for. 

I think the answer is probably somewhere in between. I think I have this tweet that I tweeted once that is like product development is the art of disappointing customers at a rate they can accept.

Rob: That’s a great thing to say. 

Derrick: People are always going to be mildly disappointed because you can’t build everything, even small features. A lot of small features have to wait on the roadmap for a surprisingly long amount of time just because there are always a million things that you could be building and you just have to pick a few at any given time to be working on. I think it’s like trying to stay in tune with what are the things that people are really, really needing. 

When you start to spot those patterns, we used to see this all the time at Drip, I feel like where it’s just like in the last two weeks, I’ve heard multiple times of people asking for the same thing, maybe in different ways. If it’s something that seems pretty valuable, seems broadly applicable, and is low effort, then I like to build those things quickly. I think there’s a lot of value in providing some quick wins and it really generates a lot of goodwill from customers when you’re able to do that, but you can’t be that reactive all the time. 

I think the probably the latest iteration in our process that has helped is thinking about things in six weeks cycles. What that does is gives you enough room to say, all right, in this time period we know we want to bite off this more ambitious project. If we don’t give ourselves the time to work on bigger projects, then we just end up optimizing for the smaller quick wins because those feel a lot better like quicker dopamine hits, right?

I like thinking of things in the six-week cycle where it’s like what’s the big ambitious thing we want to do here? Then all the rest can be kind of filled in with smaller things that are those quicker wins.

Rob: Very nice. Well said.

Derrick: A bit rambly, but those are my thoughts.

Rob: It’s a complicated topic. As you said, to me, it’s way more art than science. There is some science in it because it’s like how many requests and what percent do I think will use it? Even that’s a guess. It is an art. Then there’s a lot of, as you said, strategy, vision, founder gut, and you’re not going to bet a thousand. 

I don’t know what a good batting average is or what building features that a lot of people use, 60% or 70%? There’s some number in there and I think that sometimes the bigger more ambitious features, they’re more risky. If I’m going to spend three months building something, I need a little more justification than just I think this is going to be a hit.

Derrick: Yeah, and it’s interesting. I’ve started thinking of features more as bets similar to—as Cory and I are talking through—different marketing projects that we can invest in. A lot of that stuff comes down to do you want to add time or money into the equation? If we want to up our SEO game, there are some things we could spend money on that would probably accelerate our results faster. 

Some of these things, the one we’re facing right now is coming with a 12-month commitment, several $1000 a month. Not nothing for a company of our size. It’s like, what’s the ROI on that going to be? I don’t know exactly. It should show results. There are case studies that seem positive, but also don’t necessarily generalize so we can’t know exactly what the results are going to be.

That’s just kind of taking a bet. Similarly, with building products, you’re mostly betting on are you increasing technical debt in something that you’re going to have to maintain moving forward? What’s the initial cost gonna be? How much engineering time are we burning? What’s the opportunity cost? What things are we not building because we built that feature?

Rob: That’s a trade-off especially when you’re small. I know even when we got big, when we were 18 engineers or something when we left Drip, we did have more leeway and I know more bandwidth to push stuff through. When it’s just one or two of you, that’s a lot of weighing. 

The thing I say all the time, mostly being a founder, is making hard decisions with incomplete information and this is the definition of that. The hard decisions where we’re going to bet $20,000, $30,000 over the next year where we’re going to bet a month, two months, three months of time to build a feature.

Derrick: Yeah, and that’s the uncomfortable part. As the numbers get bigger, the bets get bigger. In the early days, you’re betting that you don’t have much to lose, and also the upside is not as big. Whereas now it just increasingly gets bigger.

Rob: Yeah, that’s right. I was talking to a founder, this was probably over a year ago now but he really struggled. He’d been running his business on the side, but not charging for it for a year because he had a fear that no one was going to pay for it. I was like, you need to find that out now, bro. 

He really struggled. He said, I’ve worked jobs my whole life and here I am and I don’t know what to do next. I just want someone to tell me what to do. I felt so bad, but I was like, that’s not what this is. You’ve signed up for something that is the exact opposite of that, for better or worse. It’s amazing because you can do whatever the hell you want, but you can do whatever the hell you want and you have to pick what you’re going to do otherwise, you’re just going to flounder.

Derrick: That is such an interesting thing that you don’t necessarily realize until you maybe have a conversation like that where you’re like, oh, yeah, that adds an extra element of stress to the whole thing because the buck stops with you. Every time you make a decision, there’s not a boss to go cross-check it with. There’s not someone else who’s like, well, ultimately, it’s their responsibility. It’s all you. Getting comfortable with that I guess is just part of the entrepreneurial journey. 

Rob: It’s a learned skill, I think, and I don’t think most of us are taught that because we go to school in the US from kindergarten to 12th grade and you always know what the next thing is. You have these assignments, you’re going to do it, then you’re going to graduate from third grade, fourth grade, and fifth grade. You go through high school, then pretty much you’re either going to trade school, you get a job, or you’re going to college. 

If you go to college, sometimes there’s a Master’s degree, Ph.D. You get out in the world, you’re probably going to get a job within your field, maybe not, then you have a job and then you have a boss who tells you what to do. The first moment when you are literally working on something it’s like, I have to figure this out. I think we’re not trained very well in a standard education system to go off and do our own thing. 

Derrick: Yeah, I would agree. 

Rob: All right, so I’m going to mix it up. I have a fun question for you. Would you rather fight one horse-sized duck or is it a hundred duck-sized horses? That was a question someone asked to Courtland Allen and I and people have just been talking about it. I do want to hear your answer. I don’t know if you heard our answer.

Derrick: No, I did not.

Rob: One horse-sized duck or a thousand duck-sized horses? It’s either a hundred or a thousand, I forgot what the number is. It doesn’t really matter, right?

Derrick: Oh, man. It’s a great question. I’m stalling.

Rob: That’s a terrible question. Can you give me a definition of the word? Can you use the word in a sentence?

Derrick: I guess death by thousand duck bills sounds terrible, so I would rather have one organism to fight.

Rob: Oh my gosh, really? Look at you. Geez. I went with a thousand or a large number of duck-sized horses. 

Derrick: Oh, duck-sized horses. They’re little tiny horses. 

Rob: Duck-sized, little, tiny horses. That doesn’t mean your answer is wrong. I just thought a horse-sized duck, that bill is going to do some damage.

Derrick: Death by a thousand hooves. That doesn’t sound great either. I’m going to take on that giant duck.

Rob: The big guy? Your weapon of choice? Freemium.

Derrick: Exactly.

Rob: I do have another question, a little more serious but still on the fun side, what is something that you’ve bought, let’s say, in the past six months for under $100? It can be right around under $100 that you feel like has given you way more value than that $100? We’ll both answer it and then we’ll do it for $1000 as well. What do you have for $100?

Derrick: This one kind of impacts my daily life so I put it in this category and it’s a coffee roasting kit. 

Rob: Tell me more. 

Derrick: This was about $65 and it’s basically a stovetop popcorn popper. There’s this company called Sweet Maria’s and you can buy green coffee beans from them, unroasted, in small batches. I generally roast coffee once a week using this and it takes about 15 minutes total, so it’s not a huge time commitment. 

In exchange, I get this added element of joy because coffee is a big part of my life. I drink it every day, I have several cups, and usually in a couple of different forms. I have a cappuccino in the morning and maybe a pour over in the afternoon. Getting to play around with different roasting levels and different regions, and every time I have a cup of coffee, it’s just a slightly different experience. I get to take a little joy in that.

I feel like it made that kind of daily ritual just slightly more special. I think that has been a big value add in my life. Also, it helps that it’s way cheaper buying green coffee beans, significantly cheaper. Before that, just buying locally roasted whole bean coffee was $20 a bag or whatever. Now I’m spending $100 on beans every six months or something.

Rob: That’s cool. You’ve always been the artisan with the manual latte cappuccino machine and I know you temp it to exactly 31 psi or whatever. That’s not the right number, but I know you tamp it. Your cappuccinos are second to none. It makes sense that you’re going back further in the chain. Soon you’re going to have a coffee plantation. You’re going to get an acre of land here in Minneapolis.

Derrick: I think that’s where I draw the line. I’ve watched videos on this website. Here’s a video of the place where these beans were made, so hipster, but man, that’s a very manual grueling process just to get these like unroasted little beans, oh my gosh.

Rob: It stops there. Cool. That’s a good one. For me, it’s an Amazon Echo Show in the kitchen, which is $125 but they’re always on sale for around $100. Then I had an old Echo Show that I traded in so I got like $25 off plus 25% off, so literally, we paid $50 for the new model. 

What I like about it is it’s an eight-inch screen and it sits on the counter. It’s got a nice speaker so you can listen. The tunes sound great because it’s got speakers all around it. I set a bunch of timers. I have three four-timers going at once when I’m cooking and you can pull up recipes on it and they’ll be on the screen. You can scroll it, it’s a touchscreen. It’s only eight inches so it’s not huge and it’s kind of widescreen, but it totally does the job. 

For us, our house is big. We live in Minnesota so we have a basement, we have a first floor, we have a second floor, we have a rooftop deck. To get a hold of kids who have headphones on, even listening to anything on an Audiobook quietly, is impossible in this house. The Echo is basically an intercom. I can either drop into any of them, I can drop into all of them, or I can just do an announcement. 

In fact, when I’m traveling, often in the morning when I wake up, I will type in an announcement that goes through all the Echoes and they do it in the Alexa voice. It’s like, hello, this is your father speaking. I miss you today. 

Look, I get it. Some people just do not want Amazon listening in your house and I get it. I don’t care. I use it all the time. In fact, I have the little one on my bedside table, my nightstand, and that’s my alarm. I ask it about the weather. I can use it to turn plugs on and off in the room. None of this is news to most people, but it really is home automation. I don’t want to rewire the house. 

You just buy this $15 plug, you plug it in, you name it in the app, and then you just say, Alexa, turn on the sound machine or turn off the sound machine or whatever and you can set timers. When the Christmas tree was here, I would plug them both into smart ones and I had automatic schedules. It’s just all the things and it works. You want it to be simple, you want it to work, and you don’t want it to be expensive. It’s finally here, the promise they’ve been making since 1985 of all this automation, it’s pretty sweet.

Derrick: That’s cool. I think I’m probably going to need to revisit it. We haven’t had voice-commanded devices in our house for a while, but we did have quite a few smart devices like hue bulbs and the little switch thing you can plug anything in and it’s on an internet-connected thing. We have that for our sound machine and lights in the bedroom so you have to get up. 

I’ve just observed that a lot of this feels like truly a downgrade from the analog iteration before because now if I want to turn this light off, I have to pull up my phone, open the right app, and click the thing. There’s a little bit of latency. Whereas this is more like bringing the technology of the clapper, but a little smarter.

Right now, in my setup, there’s kind of something missing where to me it feels most of the time a downgrade. I actually have a remote that ties in wirelessly to the IoT switch thing, which just feels funny. It’s probably routing through the internet when I click a button instead of just speaking directly to the device.

Rob: Very cool. How about $1000? Something you bought for $1000 that you feel like it has been super cool.

Derrick: This one’s a quirky one, too. Again, along the theme of things that impact daily life, I have this device and I promise it’s G-rated, but it’s called the BedJet.

Rob: Oh, this is going to be good. What does it do?

Derrick: It’s this little thing, I think it was like a Shark Tank product actually. There’s this little device that has a hose and you slip it under your sheets, basically, so it’s on top of your mattress and there’s a remote for it. You can turn on heat or cold at different levels. It’s similar to what you get from an electric blanket, but it’s even more versatile and it just pumps air under your sheets.

Rob: Fascinating. 

Derrick: I live in a newer apartment building and these things are extremely well insulated. Even in the wintertime, there are points where we are like, do we need to run our air conditioner right now? Just because they retain heat so well. I’ve talked to other apartment dwellers and temperature control, especially at night, is just so tricky to get right. This has been a huge upgrade. 

When I started using it, figuring out, and dialing in what the right settings are, I was getting a consistently better night of sleep. I wasn’t waking in the middle of the night or kicking a leg out because it’s hot or whatever. But I always like to sleep with the covers on. I don’t like just sleeping all exposed. This just helped dial in just the right experience.

Rob: Anything that can help you get a better night’s sleep is worth its weight in gold. Whether you use a sound machine. I wear an eye mask because I used to wake up at 5:30 in the morning. As I’ve gotten older, I’m more sensitive to light. I used to be able to sleep in. I used to sleep very deeply and very heavily, and I used to sleep through everything. I don’t anymore. 

I think once we had kids, things started changing too. I now use an eye mask and then usually, in the middle of the night, I wake up and actually put earplugs in, which I didn’t use to do. Temperature control is not a huge issue for me, but I can imagine anyone who has that issue, this can be a big deal, man. 

In true fashion, my $1000 item is another technology product, but for me, it’s this big curved monitor that I have. I got it about maybe a year ago. It’s a 38-inch Dell. It was right around $1000. I think it was a little more, it’s probably like $1200, with tax maybe $1300. There’s a 34-inch. 

One of the reasons I realized it is because in the spirit of Sherry getting that keyboard and the mouse that I talked about at the beginning of the show, she got the 34-inch equivalent of mine. I’m going to be honest, the 38-inch is a little too big. I have it on an arm and I can move it. I never look at the right six inches of the screen. The 34 would have been fine, but it’s curved. When you get that big, it’s hard. Your head has to move so much—first world problems, right?

The reason it’s amazing beyond just it being an awesome monitor with a lot of screen real estate, because I believe you can kind of never have too much, is it is a USB-C hub. As much as I like Apple products, I […] hate that there are only two Thunderbolt, USB-C ports, whatever they call them. There proprietary stupid name for them. 

There are two of them. Why are there not four? There should at least be four. There should be six. I had so many dongles and then the dongle stopped working and you’re carrying it around. Even at my desk, I’m just like plug, plug, plug. Now it’s at the back of this monitor. I plug my hardware, my ethernet cable right in for my mesh. We have a mesh router because we can’t get the service out of the house without a bunch of them. 

I have that ethernet cable plugged in and then I have the mic. I have a camera plugged in. Then there’s just a single USB-C coming out of the Dell monitor and I plug it into my laptop in the morning. It’s my docking station, really, and it is huge. I was kind of iffy about it because you can get the I think the same model without the USB-C hub in it. It’s an extra $100 or $200, I’ll spend that and I did, and it’s like I’m not going back now. When Sherry started eyeballing my setup she’s like, I’m ready to grow up and move to that setup so I just ordered her a monitor today.

Derrick: That’s great. Yeah, I went ultra-wide probably six months ago and it has been nice. It was an adjustment figuring out how to do windowing on it properly because you’re not maximizing anything anymore getting real close to that, so that was tricky. I’m currently maxed out on my ports and it was a serious puzzle to solve.

Unfortunately, my monitor doesn’t have the hub built-in, but I have this old external hub that I actually dug out of an old bin where I had electronic stuff from prior iterations of setups. It has just enough ports and my camera communicates well with it. I have this other simpler Apple dongle thing, but it wouldn’t feed my webcam feed through at the same time as the other. There’s some kind of data rate thing. I don’t know why Apple makes it so difficult, come on.

Rob: It feels like they could do better. When I got the new Air and it had two, I was like I’m going to send this back for the MacBook, then the MacBook Pro. I looked and it only has two ports too. I’m like, how are they doing this? I get that there’s no headphone jack in the iPhone anymore. That still irritates me because their AirPods are so and so. This is a real mess. 

I use windowing software called Magnet, which is in the Mac AppStore, probably $20 where I have keyboard shortcuts and I can just boom, boom, boom, place in a grid, and I can do left third, middle third, right third. I can do top or bottom, I can do quartiles. You can set up custom ones, but frankly, they have 20 presets. Do you use software like that? Because I cannot stand dragging the edges of the window. It’s not going to work for me.

Derrick: I did a little searching around and I was surprised that there didn’t seem to be one like the de facto winner. Where’s the Coda software equivalent? I couldn’t find it, but I did find this one called Rectangle that’s very simple and I think it might even be open source, but it’s actually good.

Rob: Geez, he’s throwing shade. Send emails to Derrick. 

Derrick: The UX, I’m saying. Open source is not known for fantastic UX.

Rob: I know what you’re saying. I use WordPress. I like it, the UX is a bit rough.

Derrick: It doesn’t feel like a developer made it, I’ll say that. I only learned a few of the keyboard shortcuts. I haven’t committed all of them to memory. It’s something that I will gradually probably build up muscle memory on those things. It’s still a little bit frustrating and I hop around a lot too so I’m only at this station for a small fraction of the week and then I’m like hopping around to go sit in the living room for a while, go to a coffee shop. I just love moving around a lot. That means my muscle memory is very slowly building up on it, but that’s about the best I can do.

Rob: You learn what you need. All right, sir. Well, thanks for taking a few minutes to come chat with me today. I got some feedback at MicroConf that some folks were like, when you bring on people that you have a rapport with and that you know already, those are the best shows. The Courtland Allen’s, when Einar and Tracy went and we went off the rails about news stories. It’s good to have you on because it’s just always easy conversation and good radio.

Derrick: Yeah, thanks for having me back. I echo their sentiments. Every time I hear some of the regular guest hosts rotate, it’s always a pleasure. Glad to be part of it. 

Rob: Awesome, man. If folks want to keep up with you, obviously, savvycal.com, if they want to check out what you’re working on, and you are @derrickreimer on Twitter. Thanks again, man. 

Derrick: Thanks. 

Rob: As we wrap up this episode, thank you so much for joining me this week and every week. I hope this episode provides some motivation, maybe some thought process, or some strategies that help you grow your business in the coming weeks and months. I’ll be back in your ears again next Tuesday morning.

Rob: It’s another week and another episode of Startups for the Rest of Us. This is episode 603 and in it, I have the most incredible conversation with David Darmanin. He’s one of the founders of Hotjar and I had not realized that Hotjar had been bootstrapped to $40 million in ARR, 170 employees, a fully distributed team, and that they had exited for an obviously incredible sum. In that ARR, we’re looking at a nine-figure exit. 

What I hadn’t realized was that they had bootstrapped the company and so much of the early marketing was DTC. It was a direct-to-consumer approach with their launch and even with the way they thought about it in the early days. I was honestly blown away by David’s approach to entrepreneurship. 

I’m just surprised he hasn’t been on my radar before as a bootstrap SaaS founder who almost immediately struck me as one of us. Someone who might listen to this podcast or someone who should attend a MicroConf. After we recorded this episode, I actually asked him straight up. I was like, you and I need to meet at some point. Would you come to a MicroConf? There is one near here.

I think that there is a future with David because of the amount of wisdom he has and his posture of learning. If you’ve listened through this interview, just all the books he named, and he just wouldn’t know a subject so he’d go read all the books on this subject. It has books by Seth Godin and a lot of classic books Selling the Invisible. A lot of classic books that we talk about in our circles. It was such a good conversation. I actually let it run long as you’ll notice by the episode length. I honestly didn’t want it to end. 

Before we dive into that, I want to jog your memory for episode 569 of this podcast, which came out last September. It’s called The Life Changing Decision of When to Sell Your Company. It was with Anna Maste who started Boondockers Welcome with her mom. MicroConf played a big role in her deciding not to sell the company and then she later sold it for an incredible sum. 

She has been interviewed on another show. It’s called They Got Acquired. We will link that up in the show notes, but I never tired of hearing Anna’s story because it is so inspiring for someone to have done this on the side while raising kids, as so many of us have done, and to have had such an exciting journey and for it to have ended the way it did. 

Anna actually recently did an attendee talk on MicroConf here in Minneapolis and it was great to finally meet her in person. If you haven’t checked out Anna Maste episode 569, you should. As well as her episode on the new podcast, They Got Acquired. With that, let’s dive in to my conversation with David Darmanin of Hotjar. 

David, thanks so much for joining me on Startups for the Rest of Us.

David: It’s an absolute pleasure to be here, especially having seen your story and how much we have in common.

Rob: I know. I am so happy to have you here. You are quite the success story having built Hotjar, effectively bootstrapped to $40 million ARR, and then you sold it last year. A hundred and seventy employees, 100% distributed, which we did with Drip but a lot of people weren’t doing that. A lot of people were building their companies in an office or with a couple of different offices. 

Before I get into it, if people haven’t heard of Hotjar, your H1 is to “understand how users behave on your site, what they need, and how they feel fast”. It’s behavioral analytics. You can screen records of customers’ heat maps, that type of stuff. We actually used it at Drip. This is the definition for me of mostly bootstrapped. On the show a lot, I say bootstrapped and mostly bootstrapped startups because you brought in $300,000 of your own money and your ex-boss, who you brought in as the entrepreneur in residence, put in $400,000. 

You did have some capital to start, but my understanding is you didn’t raise any capital after that and to build a business on $700,000 of your own money, not outside funding, to $40 million and then to exit, and I know your purchase price isn’t public, but for listeners, it depends on growth and stuff but pretty easily four to eight times ARR. We know this is hundreds of millions of dollars. I’d say it’s a pretty easy couple of hundred million dollars exit. Again, you don’t have to confirm or deny any of that. 

That is really an incredible journey and unlike many others that I’ve heard like MailChimp was this massive, mostly bootstrapped exit. Hotjar has to be in the top 10 that I’ve heard about. It’s pretty incredible. 

I think a big piece of your story is so unique because honestly, we could record two hours here. There are so many interesting story arcs we could tell. An interesting part is that you brought a DTC approach to building a B2B business, a direct-to-consumer approach. Do you want to talk about, is that your CRO background that brought that in? Then maybe explain to folks how you approached building this B2B SaaS company as more of a direct-to-consumer marketer?

David: Yeah, I think that’s a great point. Before I answer that question, I’ll also clarify because I think it’s interesting from a bootstrapping point of view how we finance the business as well, to clarify a little bit of that. The figures that you mentioned actually didn’t even come all at one go. The format was and I think this was something that resonated a lot when I heard your talk, which is that I was working as a consultant. I was making really good money but it wasn’t fun. I wasn’t enjoying it. I wanted to build equity, I wanted to build a product. 

What I did was for the first six months of the business, I continued to work as a consultant and in parallel as CEO but I invoiced all my clients throughout the business. That was actually the first revenue. That’s where my share, the $200,000 came from, which is quite interesting. Then my ex-boss, Johan, put in I think was around $200,000 only in the beginning and that was it. 

Then later on, when I really felt the need to scale things up, we put in another round, which we never really needed or used. We discarded it because then we were profitable immediately. I want to say that also because I don’t want to give the impression that you need that amount of money to do this. It really wasn’t completely needed. A lot of it was we’re very lucky to have had that cash to have saved it up and he was a successful entrepreneur so that definitely helped. 

Coming back to your question about the direct-to-consumer. There are two pieces to that. First off, all the cofounders worked in Johan’s business. Johan employed me and then I employed Jonathan and Mark and then Eric was hired by someone else. I think the person actually hired him and then ended up joining Hotjar […]. 

We were a direct-to-consumer company. We were making software for PCs back when smartphones didn’t exist. This was our bread and butter, what we know. More importantly, none of us had any experience in B2B before. I remember that I think that the key point for me was this light bulb moment was reading the essay by Paul Graham, which was even back then quite old and spoke to the consumerization of the enterprise. 

The principle of this piece was that the way enterprise software is sold doesn’t make any sense and the more human way that we sell consumer products is very likely going to take that over. When I read that, I was like whoa because I felt this, and I had been through it as an executive in that first software company. We’re buying software that is just so horrible and we couldn’t get access to it. We built Hotjar in a way for ourselves five years back, but also building on that vision of what we knew was to come. 

In fact, one of the most important premises that we had for building Hotjar, for our success was not only the go-to-market strategy in the model, but also, it was a very basic premise that we were going to build the best support that we possibly could because we knew that that was such an important piece of selling in the way that we sold.

Rob: Got it and talk to me about that support piece. Did you just have a lot of really good customer support people? Concretely, what was the biggest difference between you and your other competitors?

David: I was reading a lot of books around the time, and to be honest, I think in my previous job, I was speaking to the founders yesterday, Conversion Rate Experts who hired me. It was my first remote job. I remember landing this role and traveling to the UK and I was just so blown away that I had read no books compared to this crowd I was meeting. 

I quickly made the list and started reading. This had a huge, huge impact on me. I think around this time, I’d read Delivering Happiness, which had a really big impact on my mindset. There was another book Selling the Invisible, and it just made so much sense that when you’re building and selling something, which is not really that tangible, with Zappos it was more tangible, but especially in SaaS, the experience, the exchange, and the relationship is digital. 

Ultimately, we decided that we would think about support in a different way. One of the very first things that we wrote, I think came before our values, was what we called our ethos. We wrote an ethos of how we behave with the customer. I think it’s still public. If someone had to Google for it, ethos Hotjar. 

Basically, the principles spoke around things like very basic tactical things. Like say pm, deliver am. Never over-promise. It’s always our fault. I think it culminated in the users are gods. If they didn’t put their trust in us and we didn’t exist. Later, we translate this into a value we call respect. It’s absolute total respect that we’re not business just transacting. There are people at the other end of this and we need to treat them with the right respect. That I think was the fundamental piece here.

Rob: This week’s sponsor is Trustshoring. Trustshoring helps you find reliable pre-vetted developers of software development agencies. Turn to Trustshoring if you need to build an MVP, scale your team or product, or have issues with your current developers or codebase, and need guidance on your SaaS journey. Trustshoring makes software development and remote hiring easy for all kinds of founders, technical and non-technical. Book a free no commitment call with Trustshoring CEO, Victor Purolnik, who I met at many MicroConf. Visit trustshoring.com to book that call. That’s trustshoring.com. 

I have an ebook that I wrote called Start Marketing the Day You Start Coding and the idea is always that especially software developers go and they build in the basement for a year, then they come out and nobody wants the product because they didn’t build a launch list. They didn’t do any pre-marketing. 

These days I would almost call it to start marketing before you start coding. I have a friend who launched this amazing SaaS company. He built the marketing website and started doing SEO 18 months before they were able to launch a product because SEO takes a long time.

I have always been a proponent of even if I’m going to do a lot of customer development, I have a lot of one-on-one conversations. The first thing I do when I have an idea is to get a landing page up. I’ve pre-sold or built launch lists for downloadable software back in the day to 10, 12 years ago for SaaS, we did it for Drip for info products and courses. 

I did it for a book, Start Small, Stay Small. MicroConf was literally a landing page before we had anything. TinySeed was a landing page before we had a fund and all that. A lot of people still don’t do it. You started with a landing page and you started marketing while folks were developing the alpha. In fact, I think at some point, didn’t you have 60,000 emails on a launch list?

David: Yeah, and we were largely inspired by Robinhood who was doing this really, really effectively. I think it was around 2014. I remember years before I saw the Gmail launch with the beta that they did with the invite of five people and everything. I was like oh my God, this is amazing. I want to run a beta one day. I never managed to do that. I had read a lot about betas and how they run and alpha, so that was quite interesting. I love doing research, you’ll notice. 

When we came to launch Hotjar, there were two things that influenced us a lot. One was a failed product that we had done before, which was basically us being smart about what we can build that we can sell. We were doing it completely the wrong way around. We built a SaaS product for the retail and hospitality industry, which was like a loyalty program. It was building in all the marketing things that we had built over the years. 

We learned a lot doing this about what makes people act and how you can drive loyalty as well, but we had no idea how to sell this because we didn’t know the industry at all. That was a big mistake. That was number one that is very inspiring to us about how we do this. 

Number two, the research that I spoke about, the whole beta thing. What did we do? There were a few steps that we did. The first thing that we did, actually, even before we started looking at an alpha was an interesting story. I wanted to make sure I was bringing people together and that we were working on different projects. I wanted to make sure that we could work together. 

Actually, we built this very weird, stupid product which is called Prioritizer. Basically, it was this basic interface where you input ideas, then you vote on them, and it automatically prioritizes something for the group. We built that very quickly and the idea was that we wanted to see whether it was a team fit even before there was anything else. We did team fits very quickly. Again, all of this is born from failures. I wanted to make sure I avoided previous failures. 

Having done that, we did two things in parallel. Jonathan and I, Jonathan is the designer’s front end and I had a background in design, started building the interface of what it would look like and the landing page. I’m drawing on my Conversion Rate CRO experience, and the engineers started building the alpha. Is this actually possible?

By the time they had the answer data-wise because Hotjar processes a huge amount of data. When we knew that it was feasible to do this at scale and offer this to thousands of teams, we immediately pulled the trigger on the landing page, which said, here’s what we’re offering, are you in? 

We did all of this that I mentioned within the span of I think around two months. It’s been two months and it is done. We immediately knew we were onto something because as soon as we shared this with some friends, we started seeing people come in that we didn’t know. Names that we didn’t know. It was spreading. There was word of mouth and it was at this point that we knew that we were scratching an itch that many other people had.

Rob: How did you build up that list? Were you running ads? Was it social?

David: That’s a good point, 60,000. 

Rob: That’s a lot. My biggest launch list ever I think was 4000 or something. I hustled that so I have a lot of respect for 60,000.

David: I missed that important part of the question. Johan and I, back in the previous company, had done a lot of direct marketing so we had a very good understanding of the fundamentals of the acquisition costs of a user or a customer, in this case, it was a customer. Also, we had done so many ads at scale in that software business that we were doing a few years back. 

Having said that, previously, we didn’t have word of mouth. This was more kind of direct marketing selling software kind of thing. What was interesting to us is that we were seeing word of mouth in the initial stages of doing this program that we did so we started to layer in some of the things that we learned from the previously failed product. We had stuff like if you recruit five friends, then you get x months free. If you recruit more friends, you get a t-shirt. Those were fixed rewards. 

Then we also had more competitive rewards. If you’re in the top 20 of the list at the end of this, you get a lifetime account of Hotjar—which was for many agencies and people using software like this—was mind-blowing. Contracts for this type of software were in the $30,000, $40,000, $60,000, and $80,000 so they were like holy […], this is huge. The perceived value was very, very, very high and then we did other competitive kinds of things as we went along. 

We also told people on the list and gave them ideas of what they could do. Send a blast to your email list, write a blog post, and then go promote it here. We were literally like building a team out there that was kind of promoting this for us. 

We started to see that the word of mouth was working really well. In tandem, we also deployed what we knew and paid. I had done a lot of research about how paid works and I’d studied some of the pioneers in this. When we think about books like advertising methods from the ‘50s and ‘60s. I read a lot about this. This was very easy for me to do on the side. 

What did I do? I went to Facebook and I targeted the personas of who we were, the founders of Hotjar because that’s who we were building it for—digital marketers, product designers, product managers—and I started testing loads of different variations of ads. We were very lucky that Facebook had quite recently started offering this so it wasn’t very competitive. It wasn’t expensive. It was very easy to target large groups of people. 

I tested different visuals, different ad copy, and different positioning. Within two to three months, we had found this really, really effective ad proposition. Then what we did was we took that and back then there was already this feeling that email is kind of dead. We knew that was not the case. We went to big publications that had huge email lists, imagine Designer Monthly, for example, or Smashing Magazine and whatnot. 

We went to them and said hey, we’ve got this really valuable, interesting new product, which is in beta. There’s huge value to your readership. How much do we have to pay you to do an email blast of your whole list and then we just started doing this over and over using that high-performing ad from Facebook. This just exploded. We were buying, but we were getting email signups at the cost of $5 or $6. It was very, very effective. 

Then we also worked with platforms like Earlybird and BetaList. We’re also lucky because this was the year I think that Product Hunt launched. We were one of the very first self-hunted Product Hunt. We layered a lot of these things. 

Then what I was also doing was writing a weekly email list to everyone on the list telling them what we’re working on, the internal workings, and the challenges that we’re facing. Rather than doing content, we were leveraging word of mouth, paid marketing, and then sending emails to our group to kind of create this a little bit of a community, which helps again spread the word and what more. This word of mouth, this kind of mobilizing the community was always reducing the overall cost of getting that email, which is the way we saw it more holistically.

Rob: Right, and to do this and pull it off, you need to know your numbers. That’s what so many people who start to get into paid acquisition don’t realize is that just hearing it’s $10 a click for this or it’s $2 a click. If you don’t have an idea of what the rest of the funnel is going to look like then you can’t do this well at scale. 

You must have known in your head if I can buy an email, again you’re not buying the email, but you’re paying to get someone to opt in to an email list for $5, that might sound really expensive to someone. Five dollars just to be able to communicate with someone. But you must have had an idea, well, we’re going to convert X percent, We have the cash in the bank and the lifetime value is this, 

The virality, the viral loop that you added with the word of mouth means if every email turns into three emails, then I’m only paying $5 divided by three. That’s how I would think about it. Is that what you were thinking as you’re doing this?

David: That’s a very good point. Interestingly, I’ve never covered this topic. We’ve been interviewed a lot about this, but no one ever asked about it. But you’re right, we spent a lot of time back then. We literally drew out the funnel and we said, okay, what if we convert at 5%? What if the lifetime value is this?

We modeled out very low prices, but we’ll do an upsell price. Let’s say we can convert 20% of customers to a higher price. We were very lucky, in a way, to know these fundamentals having run a direct-to-consumer business before to understand what that engine would look like. Then definitely takes the guts to also burn €10,000, €20,000 on first failing.

The ads are not going to work. Also, you need to push on some of these ads. You need to put money behind it before you start to see the conversion rate go up as well. So there’s a little bit of that going on as well.

Rob: You had a luxury with five people working on this product that you could focus yourself on all this marketing stuff on sending a weekly email to a launch list. I know a lot of solo founders and they’re trying to build the product. They’re trying to support early users and they’re trying to get marketing going. It’s definitely a challenge.

I can see if you’re working with high performing people. If your founding engineers are really solid, there is an advantage of you being able to focus full time on marketing. It sounds like a lot of work and it sounds complicated, I know it’s not.

I’ve done a lot of stuff. I haven’t done the viral thing you did, which I think is brilliant. But all the other stuff I have, I’ve run ads at a decent scale. I know that it is like a part time job, if not, more just to keep those things running because they burn out and you got to recycle the audience. It’s not set and forget.

You send in an email every week. That’s not 20 minutes of work. That’s half a day, maybe a full day for putting graphics in if you’re doing screenshots, if you’re doing a screencast, whatever it is. That seems like you’re being able to dedicate that time and expertise.

I’ve been talking about it. Success is hard work, luck, and skill. I know you said you got a little lucky, but I think you put in a ton of hard work. I think you had a ton of skills that you had built from these prior experiences as a marketer and a product person.

When it came down to it, I have a number here that after adding a paywall, you get this big list that you wound up closing 5% of the initial launch list to convert it to pay. Is that your recollection?

David: Yeah, it’s complicated. Back then, we didn’t spend a lot. I’m glad that we didn’t. We didn’t spend a lot of time on measuring these things to the absolute detail. There’s a lot of faith in these things would work out.

In later cohorts, we knew we were converting at around 5%–7%. I suspect from that initial group, we probably converted even higher, but I suspect we also churned more of them quicker. We don’t care about that because that was our initial group.

We consider this to be the wave that really created the brand that is Hotjar that then lasted for years, still until today because then there are many other things that we did that I think were very smart. Anyone who was in the beta and became a customer, we put them on our founding list first. We put a page with their names.

When we went live, there were a lot of initiatives and things that we did. I think that initial philosophy of taking care of the user and thinking about them really was effective. A small detail, anyone who made a suggestion or reported a bug, we would personally get back to them and thank them when we either fixed it or actually did it. This was something that we insisted upon. It was just so effective.

Rob: I want to call out to listeners that when we watch these launches, whether it’s Apple doing it, whether it’s Superhuman, the way that they built up their big launch list, Robinhood, like you said, mint.com was similar back in the day, they don’t happen by accident. It’s not luck, it’s a ton of […] work. Just hearing you talk about it, I want people to understand it because there are some folks or audiences, 75% developers, maybe 80%.

I’m a software developer as well. I don’t write much code anymore, but I know that back in the day, I felt like the hard work of doing this was building the product. I would look at people like Robinhood, Mint, or Hotjar get this momentum and I would think, well, I guess they got lucky.

Maybe I’ll kind of try to replicate what they did not realize you were probably putting 40, 60 hours a week in plus I bet our co-founder was working. This is a true months and hundreds and hundreds of person hours to get this kind of result.

David: I think you can top bill those hour numbers. Again, keep in mind, my role was I was kind of—a CEO at that size doesn’t make sense, it was more of like a product team. I was kind of the product owner, although Jonathan was more than the product manager. He took on more because that was complicated.

Then it was running marketing. Johan was doing all the media buying, but he was also helping with the product strategy and all that stuff. Then we were all doing support, all of us. I was also consulting on the site to keep that money coming in.

This was six, nine months of 80-hour weeks, including the weekend, so everyone, all of us. This was the price we knew we had to pay for if we were going to bootstrap this. The good thing I think that we did is we sat down and we said, okay, are we ready to do this together?

We knew that there was a very, very good team spirit at this point of, let’s do this together. The goal is very clear. What we’re trying to do is very clear. Yeah, it worked out very well.

Rob: Yeah, it’s obvious. I’ve had seasons of 60-, 70-hour weeks, but I know they’re a season. Usually, it’s a month or two. You did it for an 80 for 6–9 months. I know that must have been really tough, but you weren’t going to do it for 10 years. You knew that. You knew it was going to be a big push and that you’d be able to back off.

David: Yeah, but I would go as far as saying, back then, it was so easy to work those hours. Compared to last year, that was so easy because none of us had ever experienced anything like this before. When you have 60,000 on the list, we built this little dashboard that updated everything, it was so clear that we had a product-market fit from a concept point of view.

You’re right. Yes, we worked our asses off. But if the luck is not there, there’s been studies about this, timing is the highest, I believe, contributing factor towards success in a startup. The timing for us was just absolutely brilliant. All the incumbents were still selling at very high prices with a sales approach. When you think about it, it’s crazy that in 2014, this industry, there was no product-led approach. Just wait another year and that was out.

There were just so many emails and inbound interest and people emailing us. Agencies were saying, how do we get in? People want to invest. It was just insane. The energy behind this, it was easy. But yeah, we wouldn’t have managed to do this for much longer.

Rob: I want to call out to listeners. Often on this podcast, I talk about how selling a low-priced product, $20, $30 a month, you’re not going to get to millions or tens of millions in ARR. It’s not a hard and fast rule. But it means if you’re going to do it, you need to have massive volume. You prove to the market out in advance.

If you had tens of thousands of people on an email list, 60,000 folks, if you had done all that work and had gotten 3000 people, the business would have been fine. You would have had a few hundred customers. It would have been an okay, I’ll say a mediocre, SaaS business because the pricing is too low. But when you have that wide of a funnel or that large of an audience and you’re as good a marketer as you and your co-founders are, that’s when you can make a low-priced product work.

David: I think fundamentally, that is what led to the successful recipe that is Hotjar, which is I mentioned that previous software that we built for the hospitality and retail industry. It took us months, we’re building this product and building and building. Then we realized, crap, there’s a winner here already in this category in the US.

There’s a ton of money. They’re a massive brand, huge. I think at the same time, I read the book, The Dip by Seth Godin, which speaks about this. The first, second, and third plays in the category are the big winners. And I suddenly realized, we weren’t thinking big enough. It was as simple as that.

We have to think much, much bigger, but play to our strengths. I think that’s where I suddenly realized, I’m using these tools to try and build these new products. But actually, what I should be is disrupting the tools that I know so well and there are hundreds of thousands of people that want to use.

Rob: I love that you keep referencing, I read a book, I read this book, I did this research, I read the Paul Graham essay because I’m exactly the same way. I’m looking at my Audible library. There are 782 titles in my Audible because I am an audio person. Some of them are my kid’s, but I have probably a hundred of them. I have listened to them. If I don’t listen to them, I get rid of them. I’m exactly the same way.

When I wanted to learn Facebook ads back in 2011, 2012, my SaaS was called HitTail back then, I went and I bought every ebook, I bought every course. I read every blog post that you could find in the first five pages of Google about how to run Facebook ads. Then I dove in and did it, and it worked.

I was willing to grind it out for, like you said, willing to risk a few thousand bucks, willing to risk hundreds of hours of my time. I like that. To me, maybe it’s a bootstrapper ethos or maybe it’s just a founder ethos of being willing to dive in and learn things that you don’t know and then execute well. I love it.

You grew to a million ARR six months after your beta launch. Then from 2015 to 2016, you went from $1 million to $3 million ARR. Really fast growth. I think I’m getting these from Built to Sell. My producer listened to your interview on Built to Sell.

Shout out to John Warrillow. He’s actually who connected us. I love what John’s up to. I appreciate the connection because he said, David is an amazing founder and has an amazing story. I was like, what? Any SaaS, right? It’s right in the wheelhouse of this. I appreciate that.

Obviously, the 60,000-person email list got you maybe to that initial million, but then you tripled again in less than a year. What were you doing there? Was it just more of the same? Was it ads, was it virality? What was the playbook?

David: Classic advertising principles, more of the same. We just kept on doing more of the same, making it more sophisticated, and then I introduced this very simple way to run the business. I love simplicity as a true product design person.

What we did was we created a very simple spreadsheet, month by month, which lists income and expenses. Then we had very rudimentary forecasts of our MRR. Then I introduced something which we still use until today, which is we had the profitability goal for the year. We’d say this year, we want to have 90%, 10% EBITA. I’m just inventing that as a number.

The Google Sheets would automatically attribute the 90% to our expenses in terms of budgets, so 90% of the MRRs. Then I split that. I did some research about typically how much is spent on product marketing and SaaS products. I allocated that per department, which didn’t exist back then.

Over time, we tweaked the profitability number, and then automatically, the leaders we were hiring had these numbers already there so we don’t need to approve, discuss budgets, and whatnot. Why was this important? Because this automatically assigns the value, which within marketing would then go to the subgroup which is advertising.

That number automatically grew month on month and we knew we just had to spend this. It had to be done. We didn’t overthink attribution on that because again, going back to the very beginning of where we started from, we know that we would have someone using Hotjar who has a mom-and-pop shop, but their cousin is the CMO in enterprise business. How do you measure that? How do you attribute that?

With this big goal that we had of becoming the winner in the market, we looked at attribution on a more global level, not on a campaign level. Having said that, on a campaign level, we just look at, are the signups coming in or not? We didn’t obsess too much about the quality of the signup. What does that mean? 

If we run a campaign and we’re just getting no interaction at all, no one’s creating a Hotjar account, we know it’s inherently bad. The ads are not working, the channels are not working, it’s the wrong audience. But as long as we’re getting those good numbers on signups, we didn’t care because we wanted to build the foundations of that.

There was also something else that was happening at this time. What we didn’t realize is that initial campaign that we did, where we told people to write a blog post, email people, what had happened was we had an army of people that had written on Quora, blog posts, everywhere with all these backlinks.

Another thing that happened was that we had feedback tools within the product group. Each survey that was running on a website was a backlink again to Hotjar. We started to build so much domain authority, and this was always our strategy that then was quite late for us. We did kind of the opposite of what everyone was saying.

We started content then. We were starting off with a domain, which was the strongest hubspot.com, nearly, which is crazy. We’re still lagging behind on content. That was great from a marketing flywheel point of view where things build upon each other.

Rob: Yeah. There’s so much to your story. If you and I didn’t have a hard stop in 10 minutes, I want to keep going on it. I want to make sure we cover your exit because I think not only do you and I shared some thoughts about it before we started recording, just the agony and the stress of what an exit can feel like, but it’s just such a nice cherry on top of this incredible business that you built.

I think a big question I have is, if you bootstrapped this—5 founders, 170 employees, $40 million in ARR, what made you decide to sell? Why not keep running it?

David: I think we’re going to need another hour with that question. I’m joking.

Rob: I did a whole talk on why I decided to sell Drip.

David: The best way that I can summarize it is because I agonized over this for a very long time, and as you know and you mentioned it, it’s horrible because there’s something you need to keep a secret. It’s something you want to speak, talk to people about, but you cannot. That becomes a very internalized debate.

I think the best way to summarize it is, logically, I knew we had to do this. Everything from a logical standpoint made sense. We can discuss what that looks like, how we built up the logic. But from the heart standpoint, it felt wrong in every way. I think a little bit of it because we built Hotjar with a lot of soul, love, and care, that kind of felt like the whole selling-out piece, which I now realize is absolutely wrong.

If we look back at the beginning of this journey, we shifted away from selling our time to building equity, to building a product, and to building something. I think intrinsically, if something cannot be solved, then it doesn’t have value. I think it always has to be on the table.

We were always honest with the team. We’re not actively looking to sell. We’re not actively looking to go public. This is a private business that would be profitable and sustainable that lives to our vision and cause. But if the right offer, if the right thing comes across, we will definitely consider it. We always said this. This was definitely a case of this was something interesting. Let’s break that apart. 

First off, I think in a personal space, I was in a tough spot. Quite honestly, I wasn’t enjoying being a CEO at 170 people. It wasn’t what I wanted to do. I am a product designer. That is my background with a bit of marketing in there. I’m a creative. I think when we reached that size, I wasn’t enjoying it. It was very clear what had to be done, but I wasn’t enjoying doing that work.

Again, another book I read was The Great CEO Within, which talks about eliminating the things that don’t give you energy and doing more of the things that give you energy. Part of why I felt very tired was also with no investors, there was no board. I’m chairman, company secretary, board member, CEO, shareholder—the whole thing. I start to realize, actually, I can make this more fun if I am the board and the chairman looking at where we take this company.

I read the story of Patagonia, Let My People Go Surfing, another great book. This sounds much more like a good match for my soul. I was very lucky to find the amazing leadership people to join the company, one of which is Mohannad who is our CEO today. We started working on this transition where I would become the chairman, he would become the CEO.

With this pretty much completed but not public yet because as a remote business we have to incorporate in different countries to make this happen so it was crazy, Contentsquare had already spoken to us quite a few times and approached us again. And this time, it was serious. They were planning to raise a big round. This was early in 2020, ’21.

Again, it was an immediate no. There’s so much going on. We have a plan. We’re building this out. We now have a just cause. We took something out of Simon Sinek’s book about just cause. It felt very exciting, it was a good time.

As the months progressed and as the numbers started coming in, actual offers, when we start to look at, okay, there is a similar philosophy, there’s a similar ethos to how they’re building the product and their vision of the future of what this would look like, they’ve agreed to keep the business separate. That wouldn’t impact our team. The team is not going to get screwed over.

Our customers, they don’t want to change anything. If anything, they want to learn from us. It’s not a takeover to take over the data or the product and all that stuff. Those are done. Those were the very big things. But then we also started to crunch the numbers.

We created what was called a loyalty program for the team. We said, although we’re not planning to sell, although we’re not planning to go public, in the event that this happens, a percentage of the company’s price would be distributed to the team in the form of bonuses.

When we put this, we started to think, okay, I would never be the CEO of going public, but maybe Mo would want to, right? We started to visualize all these different outcomes. When you start to look at the price they were giving us and the likelihood of other outcomes happening, this was just a no-brainer.

Everyone would come out as a winner. Then on the back of it, Hotjar was facing some challenges to invest faster in technology, to invest faster in the product. There was a lot still happening, a lot of businesses, forming partnerships, and acquiring each other. It was very clear that the industry is coming towards this consolidation that is happening.

It just made so much sense for us to do it with them. There was the previous relationship, the history, European. They also have the bootstrap history as well, they raised. It just made so much sense, logically.

Rob: Yeah, a lot changes when you look at a piece of paper that has several commas in that number. I remember everything was hypothetical for me until I got a first offer letter. I think it was probably a letter, an LOI. And I was like, wow, that is literally millions of dollars. That could be in my bank account if we sign this thing.

When it goes from theoretical to practical to reality staring in the face, a lot changes. Some soul searching goes on. You know I’ve referenced my MicroConf talk 11 years to overnight success. That’s on YouTube, if folks want to check it out. I talked through my thought process of doing that. It was complicated. It was not a no-brainer to do this stuff. For us, it was 11 months from the first conversation to close. For you, it sounds like, was it a couple of years?

David: No, not really. Actually, it was months from getting serious to actually closing. As I said, there was a relationship that spanned years more of inbound interest that we never took seriously, funnily enough. It was always like, yeah, whatever kind of thing. It was fun, though, because I also developed a relationship with the other CEO and we talked about challenges and things.

I’d say from a money standpoint, Hotjar was incredibly profitable. We even did a dividend. To be quite honest, I already felt quite financially independent. I knew that I was good. But to be honest, there was also a little bit of pressure I was feeling from the co-founders, so I think we’re getting tired of all this. There were many 80-hour weeks being done.

They were kind of starting to question, listen, what’s going to happen here? There were also members of the team thinking, where’s this going? Where’s this taking us? I think the fact that Contentsquare had even more ambitious, bigger plans, I think part of it, to me, was actually more making this less about David as a founder because it was becoming that.

I didn’t like the pressure, the weight on me, and making it more about this movement. To be honest, there was a very big thing that I spoke to them about, which is we showed them our just cause which was quite bold. And I said, this has to be about just cause. We talked about building a just cause together.

We talked about building a B corp or becoming a B corp in the future. What would it take to go public potentially together to make this a long-lasting business? That was another of the objectives that we had that I had listed when I started Hotjar.

Selfishly, to be honest, obviously, there’s the money. When you start looking at this, not only do I never need to worry about this, but my kids and possibly even their kids. That’s huge, and my sister, and all that. I think selfishly, it was less about the money and more about removing that weight from my shoulders, which had come to be a little bit too much for me.

Rob: That sounds like it. David, I think you and I could honestly talk for hours and we should. We need to get together in person here in the next year once the veil of COVID has lifted.

If folks want to keep up with you, you are David Darmanin. It’s just your first and last name on Twitter. Of course, hotjar.com if they want to see what you’re working on. Thanks again, sir. Thanks for joining me.

David: Thank you. Again, an absolute pleasure.

Rob: Hopefully, now that you’ve listened to that, you understand what I was saying at the beginning of the show. Just David’s approach to things, his mental models, just the sheer intelligence and execution just emanating from him is really just so inspiring to me. I want to thank David for coming to the show. I would not be surprised if he were on future episodes of Startups For the Rest of Us. I do hope to be able to meet up with him at some point. 

Thanks for joining me again this week. If you enjoy the show and you want to do me just a small favor, a five-star review in whatever podcatcher you use would be amazing. With that, I’ll be back in your ears again next Tuesday morning.