Josh

Rob: Welcome to this week’s episode of Startups for the Rest of Us. Jordan Gal, founder of CartHook, now working on his next SaaS effort joins me today and we run through listener questions. Jordan’s been on the podcast many times, and he’s done at least one Q&A question in the past.

We run through things about starting an ecommerce SaaS and whether you need compliance to do that or whether there are laws and regulations around it. We talk about managing enterprise perceptions of risk toward bootstrap startups. We answer questions about bootstrapping and enterprise SaaS, about growth, about hiring versus outsourcing. It’s all kinds of tasty goodness, and without further ado, let’s dive into the questions.

Jordan Gal, welcome back to the program man.

Jordan: Rob, it’s great to be here. The last time I was here I spoke so much we had to break it up into two episodes.

Rob: That’s right. No, it wasn’t you. That was one of the all-time best episodes people keep coming back, 499 and 499.5. We walked through the six stages of SaaS growth I believe. You and I were comparing notes, Drip to CarrHook, and people just kept writing in on that like, oh my gosh, do more things like that. It was a fun one.

Jordan: It was a fun one. It was a great chance to look back.

Rob: Indeed.

Jordan: This one’s a little different, what are we doing today?

Rob: Thanks for coming back. We’re answering some questions, man. We always have listener questions coming in from folks. Today, I got about a half dozen picked out, we’ll see how many we were able to work through. All right, man. Let’s dive into our first listener question. It’s from Salman Ahmed, and appropriately enough, it’s about ecommerce compliance. For folks who heard in your intro or who have heard of you in the past, CartHook is an ecommerce SaaS, as well as your prior effort, was actually an ecommerce site that you ran with your family. Have you talked about your current effort, your company about being an ecom or not?

Jordan: Not in detail. It is an ecom for sure, but we haven’t talked about it fully. Soon, the website will be launched next week and then I’ll be much more open about it, but we are enjoying a little bit of stealthiness.

Rob: Yup. In the early days. You have ecom site experience as well as ecom SaaS experience now, two times. Totally appropriate and a cool question for you today.

Question from Salman is, “Hi, Rob. If a solo founder was to create an application like Shopify, would this be possible, or are there certain regulatory requirements that would make this impossible? Example, to accept credit cards and store customer Stripe IDs/merchant credentials in order to make transactions on behalf of their accounts. Would this require a certain level of auditing that a single founder operation could not pass?”

Interesting question. I’m a little confused by it because I think he’s a developer just thinking about building something and wondering if there are regulatory requirements or whatever, but what are your thoughts on this?

Jordan: The word that comes to mind for me is resourcefulness. In the early stages, you need to answer these questions. My general assumption is that the web is now developed enough that there’s a way, that there’s always a way. Many of us who are familiar with Stripe know actually there are no requirements around auditing, and you can offload all of that to the payment providers these days because the credit cards never touch your servers.

At CartHook, we built a business that processed $2 billion and we were never PCI compliant because we didn’t need to be because modern web and payment processing technology allow you to do that.

Now, sure it’s important to know that, but the real thing is to be able to figure that out. To go look, do the research, dig around, and figure out what services do I need to stitch together to make the solution that I have in mind possible. So the question sounds to me more like a mental blocker than an actual blocker because you could figure it out and your job is to figure it out and to build minimally in order to get to the value that you’re trying to accomplish.

Technically, yes you can do it, but the more important thing is regardless of what area you’re in, if it’s ecom or not, your job as the founder is to just explore and figure it out.

Rob: Yeah, and that’s a great summary of it. I think a nice google of this asking Stripe. I mean, other folks have built apps like this in the past, and it feels like if you’re bootstrapping it, you’ve got to think a lot about security, hashing, and storage. My experience with Stripe IDs is that, like you said, you don’t need to be PCI compliant to do it. But I haven’t built an app like this right, so this would be research and conversations with folks whether in MicroConf Connect, on Twitter, or whatever you can.

And then this is one of those things where if you’re storing Stripe IDs and your bootstrap, that’s probably the way to do it, assuming you can. I’m not giving you the advice to do it or not. But this is also the reason that some companies raise money. If you look back at Gumroad’s story, they originally I think were going to use other payment processors, or maybe they even did tie it into other payment processors, but they wanted to become their own payment processor.

I remember talking to someone on the inside, it wasn’t Sahil, it was someone else at Gumroad. I said, you guys raised a lot of money. It raised like $7 million after bootstrapping for a while. He said, yeah, in order to go to banks and get permission to become a payment processor, we needed to raise buckets of money. I think that’s probably true. It lends some credentials of, we have $7 million in the bank and we’re backed by XYZ brand name venture capitalist. Right or wrong, fair or not fair, that lends you a certain amount of credibility and flexibility to then do some things like becoming your own payment processor.

Jordan: The complexity of what has been built in tooling around payments, even that is challenged because now there’s a company called Finix Payments that do all of that for you and allows you to become a payment facilitator by partnering with them. Maybe it still costs a few hundred thousand, but not a few million.

I think, generally, a bias toward this is possible. We’re going to just figure out what services are out there to make it possible in the way we need it to be. As opposed to a bias toward, I guess I can’t do it because I’m so low and I don’t have the resources. I think that’s the general approach for me. It’s developed enough that you can do it.

Rob: I hadn’t heard of Finix. That’s crazy. Everything is becoming productized. Like Stripe with Atlas, it’s like, okay, you want to start an LLC or a C-Corp? You push some buttons, you enter some things, and it’s like I have a bank account, I have a Stripe account, I have the operating agreement, I have an IP Agreement. It’s incredible.

Jordan: Yeah, every little gap.

Rob: Cool. Well, those are our thoughts. I hope those are helpful for you, Salman.

Our next question is about managing enterprise perception of risk towards bootstrappers. A little bit related, I guess, tangentially to the last one. This question is from Noah Stahl.

He says, “Long-time listener, first-time caller. I’ve been working for a year as a solo founder of a private school operations platform, in other words, what schools use to track enrollments, bill parents, et cetera. As a key differentiator, I set out to build an enterprise-capable product in a market where existing solutions focus on small businesses. I’m approaching launch and have started initial demos and talks with my former employer, which is a large school operator where I worked and found this gap and hence the startup idea.

All signs are positive around the product itself. Their main hesitation seems to be the risk of committing to a new platform run by a bootstrap solo founder. My pitch has been that there’s a great opportunity to have them as my first customer, which would allow immediate ability to mature the product in a tight feedback loop where their needs could guide their early roadmap, and I know it’ll be awesome. But their question of risk is valid. With that preamble, the question is, what successful strategies have been used by bootstrap SaaS founders to help mitigate actual or perceived risk when selling to early customers, especially enterprises?”

And then he gives some other thoughts. It’s a longer email, so I’m trying to summarize. But we’ve all dealt with this I think unless you’re running a low touch sales process where you’re charging $40 a month. I mean, even in the early days of Drip, the first customer who’s going to pay us $200 or $250, which is nowhere near enterprise. I know bootstrappers call that enterprise, but enterprise is like Fortune 1000, right? These are big companies versus someone paying you $1000 a month or something. That’s just a bigger customer in mid-market or whatever. But we’ve all experienced this. I know you have two. What are your thoughts on this?

Jordan: This is something that everyone faces early on. If you’re bootstrapping, if you’re a small team, you worry about that credibility gap. This is the conundrum of do you say we are working on it or I’m working on it. It’s even more difficult as the price goes up and as the customer size goes up.

The way I look at this is at CartHook, one of the things we learned was that there were more complicated metrics of fit for customers. We used to look at it as one metric. If you’re doing enough revenue, you’re a good fit. As we got more sophisticated in that, we started to understand that there are multiple types of fit—there’s financial fit, there’s strategic fit, there’s cultural fit, there’s technical fit, all these different types.

I think what the person writing in is referring to is a risk tolerance fit. There are people out there that are down to take that risk. They like being early, they like being a beta customer, and they want to take a chance on you, support you, and be part of that. If you’re talking to a company that is extremely hesitant on that, it’s not that you’re building the wrong thing, it’s not that you can’t do it, it’s not that there’s a mismatch between the type of companies that you’re working, you want to work on, and the size of your team. It might just be that there’s a mismatch between that particular prospect not being one of those people that want to take a risk.

It’s tough to overcome and you can make assurances. You can talk about more collections of money upfront. You could talk about your track record. You could talk about your plans. You could talk about your war chest, whatever you want to do, but you also want to make sure that you’re talking to the right person who wants to be a beta customer.

Rob: Early adopters, right? That’s the name in our industry for folks who are willing to take a chance on a new entrant into a market because the early adopters often see an advantage to using new software, something innovative. Maybe it’ll reduce their training costs. Maybe they’re paying a lot of money and you’re going to be cheaper. Maybe it’ll be more powerful and they’re willing to take those risks.

The early adopters, this is from Geoffrey Moore’s book, Crossing the Chasm. There are five or six of them and the last one is the laggards. These are the people that maybe you’re talking to a laggard and you’re at the opposite end of the spectrum.

I have heard this conversation happen many times, especially in Slack channels that I’m in like MicroConf Connect and some other founder channels. I mean, there’s someone who’s running a four-person, five-person bootstrap SaaS company and they are doing let’s say half-million or a million a year. I mean, large for bootstrap size, but relatively small on the scheme of companies.

He gets this question frequently once a month, twice a month of wow, you seem really small. How big is your team? How much revenue do you do? How many customers? He gets these types of questions and he basically handles it by being pretty honest frankly and saying, well, here’s our team. We’ve been in business for seven years—they’ve been around a long time. We’ve been in business for seven years. We have this many—they have more than a thousand customers or something paying us. We have a lot of long-term contracts. Financially, we’re very viable. The software has been stable. You figure out which of these things you can rely on.

Now, all the things I just said, Noah (who’s asking this question) can’t rely on any of those because he doesn’t even really have anything yet. That hard problem is if you don’t have a product yet, it comes back to what you said, which is just figuring out which things this prospect really wants out of it. If they’re so concerned, if they’re so hung up on their risk of being an early adopter, then they are probably—unfortunately, even though you have a relationship with them—not a good customer for you yet.

Jordan: Yup. I always give the advice to skew toward transparency because then you don’t need to keep up the charade about behaving as a customer support person, then a success person, and using different names. I mean, I’ve heard some crazy things from people. You just don’t need to keep up that charade. You could be honest and then your customer or prospect will just get the real view on things, then they’ll get bought in.

Rob: Yup. It’s interesting, one idea he threw out in the email he says, “One idea to reduce this risk might be to allow significant prepayment upfront as a way for them (meaning the school) to provide capital that makes their commitment safer.” Which I’m almost like, wait a minute, that sounds like… Doesn’t it sound like the opposite because they’re giving you a bunch of money? I mean, certainly, if you can convince them to do that, why wouldn’t you? That’s like customer funding, right? That’s what that’s referred to. I just don’t think that someone who’s risk-averse is going to volunteer to pay you for three years of the software without anything.

Jordan: Yes, but it is also a good indicator of demand. When we had our first really big merchant approach us—really big for our situation—at CartHook, we almost used it as a test. We explained to them exactly who we were, that we were learning, and the things were starting to go well but it wasn’t all good. And then we put the price to them.

Our product at that point was $300 a month plus the transaction fee. We said to them, if you can commit to us for a year at $10,000 a month, then we will make all these changes that are necessary for you and change the infrastructure and all that. They said yes, and that was a really important indicator for us to understand, okay, so now we can think about pricing differently, we think about our value differently, we can build out our infrastructure differently.

It was helpful in that way to find an early adopter that was willing to commit to the money because they knew that that was going to help fund us and help fund the infrastructure. It’s kind of a two-way street.

Rob: Yeah, I like that. I like it a lot, actually. The other thing I would say when I think of Noah’s situation is you have an idea to build an enterprise version of the software that is focused on small businesses, and you are talking to the school that you used to work at. My biggest concern is even if they say yes, you spend six months or a year building this, you sell it to them, what then? What next? Does anyone else care about enterprise software in this space? Is this a thing? What other validation?

I would be doing more validation before I tried to sell one company on it because what you may find is that you’ve built yourself a consulting agreement where you’re not actually getting paid for all of it. You’re getting a monthly fee for a product that you have one customer for and the market size is one.

And he says P.S. love what you and the team are up to at Tiny Seed. I look forward to applying once I get out of the gate with some initial traction. Good luck with that, Noah. I hope you keep us updated.

Hey, this is Rob dropping in from a separate time and space to talk to you about Rewardful. Everyone knows it’s hard to grow an online business, especially in the early days. People are becoming desensitized to content marketing and paid advertisements. Instead, they’re turning to product recommendations from people they trust. So how do you cut through the noise and grow through word of mouth?

This is where Rewardful comes in. Rewardful has everything you need to start referral marketing for your SaaS, membership, or ecommerce business. Reward your advocates whenever they send you paying customers. Rewardful is specifically built to work with Stripe and automatically handles one-time charges, free trials, upgrades, downgrades, cancellations, and refunds. They can even help you find and recruit relevant affiliates for your industry.

Companies like Transistor, Podia, and Baremetrics trust Rewardful to power their affiliate programs and scale with their growth. Spencer Fry from Podia says, “Every other affiliate platform we look at was either insanely expensive or full of bugs – and sometimes both. Rewardful has been rock solid and took less than 15 minutes to install. It’s the perfect affiliate solution for SaaS companies using Stripe.”

So whether you’re looking to start an affiliate program, partner program, customer referral program, or all the above, Rewardful lets you manage everything under one roof with a simple 15-minute integration. Get 30% off your first three months by heading to getrewardful.com/startups. That’s getrewardful.com/startups. Offer expires May 31st.

The next question is related. Bootstrapping in enterprise SaaS is from Declan Sweeney who has written into the podcast many times. He says, “Hey, Rob. Declan here from CampusConnect. We sell to universities and the higher-ed market. Our service helps boost applicant conversion by enabling applicants to connect with peers prior to enrollment, big KPI for recruitment, and enrollment folks in universities.

Our current clients are super happy and we’ve done well in terms of revenue expansion within the current customer base, which is a great testament to the value they receive. Word of mouth and referral has enabled much of the expansion revenue. But as universities are mostly in competition, it doesn’t support referrals to new sites.

My question relates to market penetration in a slow-moving B2B enterprise market. As a totally bootstrapped startup, it’s exceptionally difficult to get in front of the right folks. And it seems those with mega marketing budgets can do so and win.” I would actually question that item, marketing? Anyway, well, I’ll keep reading and then I’ll let you weigh-in, but I question some of the assumptions in this email, for the record.

He said, “Even though they have inferior products when they have so much money for marketing budgets, that they can get inside these big orgs. Are some markets just not feasible for a bootstrapped approach? Thanks for the guidance as always.” What do you think, sir? You’ve sold to big ecom companies. What are your thoughts?

Jordan: I too question some of the assumptions, that referrals would be discouraged by your customers. Oh, man, for me it’s I go to tough love on this question. It’s not fair that your competitors have more money, that they’ve raised more, that you don’t, and nobody cares. You’re dealing with an unfair situation. You can cry about it, or you can work with it. It does sound like a tough situation to sell to universities, and at the same time, maybe that’s your advantage. That does not mean that you have to go out and raise the same money, and it also doesn’t mean that you have to go and die, not at all.

If you have existing customers that are happy and paying, then you have the kernel of truth. That means you can get more of them, and so I would hang on to that and have confidence in that and find others like them. I’d ignore what your competitors are doing as much as you can.

I had some really good advice over Twitter DM once when I saw one of our competitors raise one of those preposterous, makes no sense rounds. How? What? Why? I don’t understand. We’re so much better, that kind of like pity thing. I pinged a VC that I’m familiar with and I know he’s familiar with the deal. What he said to me was hugely impactful for me.

He said look, they have no choice but to raise a ton of money and to get a ton of attention because the only way they win is by winning the market. They have to be the leader or they lose. They will run out of money, it won’t work out for them. You have built a real business, you have paying customers, and you don’t need to win in order to personally succeed, so ignore it.

You guys are playing two different games. You should be happy. You should be proud of what you’ve built, get more customers just like that, and let them go big. Sure, it’s annoying to watch, but you’re playing two different games, you don’t need to beat them. You just need to do your thing and win. That’s the approach I would take.

Rob: I think that’s a great perspective. Every time that I was bootstrapping a SaaS and someone came in and raised a big bucket of money, I used to turn to Derrick and say, well, set the clock for 18 months. I want to acquire their assets when they can’t raise their next round. And it was a little bit of a jerk thing to say, more often than not it wound up they weren’t that good.

You’re right, it’s unfair in certain aspects. But also, unless they know how to execute unless they’re really good at it, money doesn’t do it. Money allows them to hire and move fast, and if they’re really good operators, then yes, you do have a problem. But in most cases, I would say people don’t actually know what they’re doing. That’s the reality of it.

Jordan: Yeah, money can accelerate in the wrong direction also, which is something that we’re seeing at my new company. We have competitors that are raising a ton of money. Some that are good at what they do, and some that the money has twisted up their approach because it’s almost like they’re spending before they really understand the customer. Where does that lead you?

You have this great thing right now where you understand the customer, you have paying customers. Yes, it’s annoying, but I would look at whatever channels are working for you that might just be the word of mouth, your individual networking efforts, or whatever it is, and keep focusing on them. If you have a big market like universities and you figured out how to sell to them, you just keep going and it turns into a longevity thing.

The founders that are bootstrapped, that are successful—the ones that I know that are most successful—have just been persevering. They’ve just been doing it a while, then it compounds, and you get to the place you want.

Rob: Especially in these really, the—I would call them—tough markets where it’s customer pain, where just the sales process alone is a year or more. I can imagine it’s like selling to the government, selling to universities, selling to electrical contractors. I mean, these are just people that are just very slow-moving—selling into legal. There’s just a lot of spaces that are tougher to sell to than bootstrap SaaS founders, designers, or developers, you know what I mean? It’s like you can build interesting things for those people. They’re online, they’re easy to reach, and that’s just not the case. The fact that you’re in a space like universities and trying to sell to them at all means you’re definitely doing that part of it on hard mode.

Now, on the flip side, your contract value should be enormous. This is the mistake I see some folks making is selling into these really hard markets where it’s a 6-month or 12-month sales cycle and you’re charging a tenth of what you should be charging, right? I don’t know what exactly a product is, but these should be $50,000, $100,000 a year contract values, or else it doesn’t support the effort you have to put into sales.

You have a few choices here. You could also go out and raise a bunch of money. I mean, that is a choice, right? I mean, Jordan, you and I, outsiders. I knew zero people with money, I knew zero entrepreneurs, I knew zero venture capitalists when I started bootstrapping stuff 15, 16 years ago. As far as I know, you had a couple of friends from college who are traders on a stock, they’re in finance, but they’re bankers. You didn’t know any venture capitalists.

It’s funny, someone may have heard you five minutes ago say, yeah, I DMd a venture capitalist who I know. Do you know how you know that person? Not because your dad introduced you and you went to Harvard with him, no. You hustled, you went to conferences, you met people, you built your network over the last decade or more, right? That’s what this takes.

I’m not saying that Declan should or should not raise money, but it is a choice. It is a choice. If you really think that’s the way to get there, then do it. If you really want to be bootstrapped, that’s cool. And then it’s back to your comment, Jordan, now you have to figure out what are your advantages as a bootstrapper and how do you combat this unfair situation where someone does just have buckets of money. Those are our thoughts, Declan. Hope they’re helpful.

Our next question is from Russ and it’s about growth. He says, “Love your podcast. I’ve been following it for a couple of years now. Our product was developed in our agency,” so he runs an agency and it’s a time tracking tool, a direct competitor to Hubstaff, Time Doctor, and Clockify.

“We have a good online presence when we get traffic from SEO, and we’re currently at $200,000 dollars of annual recurring revenue. We’re growing but not fast enough. We’re self-serve and do not currently have a sales team. We’ve tried working with several marketing people, but it never worked out for us and we never saw results. Maybe we’re just not good at articulating our needs. Basically, the main metric that we’re looking at is growing MRR.

How do we find a person who has experience growing SaaS companies? It sounds to me like people who know how to do it well are either building their own products or not interested in working with smaller marketing budgets. Also, what kind of comp would you offer if we found such a person?” What do you think, man? This is the perpetual question.

Jordan: This is really hard and I talk about this regularly with my peers. That it feels like B2B marketing is in a pretty weird spot right now, and no one really knows what works. It used to be you build a funnel, you nurture, and then you close. Maybe, in one way or another, that is still what you’re doing, but that funnel is no longer clearly defined. Where you send traffic, you have a lead magnet, you educate, you build trust, and then you make an ask. It’s just not straightforward like that anymore.

This is a question a lot of people are wrestling with. People are having a lot of difficulty making paid marketing work for B2B, and obviously, everything I’m saying is with a caveat. Hopefully, there are people out there that are doing fantastically well with it. But it is a genuine problem. No one really knows what to do right now to ramp up marketing without just doing direct sales, which is what people with money do.

Rob: Like cold outreach and just SDR and BDR it. I will say that it is still working in less competitive markets. But in markets like ecommerce, ESBs, and CRMs where there are 200 players or whatever, I think you’re mostly right that there’s still a funnel but it’s a lot different than it used to be. It is more amorphous.

Jordan: Yeah, and that’s a big market—time tracking. There are a lot of potential customers. That’s good. You do have some leaders that have momentum, money, and name recognition. You just have to deal with that, that’s fine.

I guess in that environment where I would be looking is some type of a unique angle on the product. I know they’re currently self-serve. I don’t know if that’s the ideal. Hiring for marketing, I wouldn’t negotiate against myself off the bat by saying all the good ones are taken and people don’t want to work with small budgets. That’s not necessarily true. Just because you may not find that type of a thing right for you doesn’t mean other people—so anyway, I wouldn’t make any of those assumptions.

You can find people to do the right work in a way that makes them fulfilled and is right for your company. But before doing that, I would try to decide on what the right approach is. Is it content? Content is tough these days. Is it outreach? Is it partnerships? Is it channels? What are you doing before you bring the person on, ideally? If you want to bring on someone to explore, that is a high risk, high reward play.

Rob: Yup. These days, if I was going to do it because finding someone to run experiments and figure out what’s going to work is really hard and really risky. Even as a founder, if today I had a SaaS app, it might take me six months or nine months to find it. It might take you, Jordan, six or nine months and we’ve done this before and we’re pretty good at it at this point.

I would actually be looking if I wanted that role because that is kind of a unicorn I’ll say. You can find them, but I’d be looking more to an agency or contract relationship where I’m looking at an Asia Orangio right who runs DemandMaven and does this kind of stuff for SaaS startups.

Look at Derrick Reimer, founder of SavvyCal. He hired Corey Haines who used to do marketing at Baremetrics, and Corey is a contractor. Corey is really good at certain types of marketing, he has his tool belt, and he could run through those things and figure out which of those work. And then if some of them are sustainable, then now, when you find that employee if you want to hire someone full-time who can then maintain that and augment it and everything.

Jordan: It’s tough because it’s a risky bet no matter what. But if you want to grow faster than you’re currently growing, you probably have to put a few bets down.

Where we are at my new company, we’ve been focused on product and engineering. Now we’re turning towards sales marketing as we get closer to launching into beta, and we’re taking a stab at it. We’re saying our hypothesis is X. If that is what we think will attract merchants, then this is what we need. We need a content creator and someone to do demos or something like that. That’s our guess, and we’re going to put our bet down in hiring toward that guess.

If it doesn’t work out, it’s bad for us and probably bad for the people that we hire, but at least we’re choosing a direction first and then filling roles for that direction. As opposed to hiring a CMO and saying you figure it out, that feels too risky.

Rob: Yeah. That’d be a big risk. You’ll also find that if someone is truly a CMO, then they don’t actually do things. They manage people who do things, and you don’t have the budget to hire a CMO and five individual contributors, right?

Jordan: Yes. If you have the budget to hire that leader in management and thought process, then what you can expect is that they’re going to hire a team below them. It’s a bigger bet.

Rob: We’re talking about strategy versus tactics versus individual contributors who are executing on something. I mean, to be honest, this is why I—as a developer who used to build or acquire products—learned to market. I’m not that good at it, but I’m good enough.

Learning marketing was just a necessity if I wanted to quit the day job. If I wanted to grow a company to seven figures in revenue, I was in this place that rests in like I don’t know how to hire someone to do this and so I’m just going to do it myself. I’m not saying that’s the right way to do it, but that is what I did. I just learned it and then executed on it well enough to be able to make it out. It’s always challenging.

I mean, hang out. Again, I know I’ve mentioned MicroConf Connect I think once or twice already, but that community is over 2000 founders and aspiring founders who are wrestling with this kind of stuff. There are people in there who say, hey, I’m a marketer and I need a technical cofounder, or I’m a technical co-founder and I’d love to have… If they were in-person MicroConfs, I would also say go to a MicroConf and just ask around and try to find out who these people are. It’s working your network. You’ve had co-founders in the past and you met them through an introduction or you met them through, a lot of times, just talking to people.

Jordan: Yeah. $200,000 is a real attraction. It’s starting to get somewhere. You probably don’t need to come up with the most ingenious thing as the next step. To go from $200,000 to a million ARR sounds like finding one or two things that work and then being consistent about it. I like looking for characteristics that are analogous.

Who else is in a big market that has big leaders that you’re not going to go challenge them but you need to find your own spot in this big market? Who else is in that situation, and go talk to them see what works for them.

Rob: I like it. Hopefully, that was helpful for you, Russ.

The next question is about hiring full-time versus outsourcing. This is from Filip Kis of SessionLab, and he says, “I had a question for you. In several episodes now, I can vividly recall only the one with Rand Fishkin. There were either examples of people outsourcing work,” and when he says outsourcing, usually that means hiring contractors, consultants, or agencies. It’s not a non-full-time employee.

He says, “Are other examples of people outsourcing work or hiring full-time employees? And as there are two extremes—hiring full-time versus outsourcing—maybe an episode could be devoted,” in this case we’ll just use it as a single question, “to pitting the two against each other and talking about the pros and cons.”

This is an interesting question because, in traditional, we’ll go to a venture capital because they’ve been doing companies for what 30 years-ish. I mean, it’s been longer because Apple was in the late ‘70s and there were others—Intel and such. But let’s just say like SaaS stuff for maybe the past 15, 20 years. If you were to raise money to do a software company, they would basically say you need an office, you need to be down the road from us. You’re on Sand Hill Road. I know a lot of this, some of this is changing. And you need to hire all full-time employees, basically. Especially for your core competencies, but also even outside of that.

And then I think over time this has evolved where remote work is a little more accepted now. Maybe having some contractors offshore to do some stuff that’s not in your core competency may be more accepted. I think in the bootstrap and mostly bootstrap space, the capital-efficient companies that we’ve run in, it’s been a necessity to have remote work and often to hire a contractor because it’s like I can only afford five hours a week for someone to do support. I can’t hire a full-time W-2, or I need this marketing task done. I can only hire a copywriter for a few hours this month and then I’m done. There are a lot of pros and cons to this, but with that preamble, what are your thoughts on it?

Jordan: I think this is a bit ideological in the way people approach things, but a lot of it is also practical. Look, W-2 is a big hurdle. Health insurance, all the stuff that goes with it—the additional 30% or so on top of the salary and the commitment, right? You’re making a commitment to someone. It’s not like, well, I’ll hire you as a W-2 employee or a full-time player for three months and then turn that off quickly. So, it is complicated and it is dangerous also.

When we started at CartHook, we raised just a little bit of money from friends and family like $250,000. We went full time because we thought, okay, that’s what you’re supposed to do. And then within two months, I just looked at the numbers and said, well, this is nice. We’re all full-time. We’re going to run out of money. So we fired ourselves—all of us—went back to contractor status ourselves with the company, and then only rehired later on like a year later. So it is dangerous, I hear you.

The good thing is that like remote work, there are a lot of options these days. The way we operate right now is we have full-time W-2 employees in the US, and then we have full-time contractors elsewhere, mostly in Europe. We have this hybrid where I think the ideal is full-time. There’s something that happens when someone makes the company that big a part of their life and commits to it for the long term. The dedication, the thought cycle spent on it.

Rob: Camaraderie.

Jordan: Yeah, and the connection overall is really different. In the EU, it’s full-time, but they get benefits from their country. So we hire them as full-time contractors, then they get the benefits from their state, their nation, and then it works out. In the US we do W-2.

The way we look at it is those positions that we absolutely need we’re going to hire full-time. Whether it’s W-2 or contractor, it’s still going to be full-time. And then when we want to augment, that’s when we look elsewhere. That’s our situation, and I think it’s easier when you raise a few million bucks off the bat.

At CartHook, we had to claw and convince people. The way I always presented it to people was you joining makes it much more likely that I can hire you full-time. If you’re buying into what we’re doing, then join in and I’m going to behave as if you’re staying, and you can behave as if you’re staying. Let’s make it work together, and six months from today we can hire you full time. That was my partnership approach.

I know speaking of Sahil at Gumroad, he’s taking a contractor approach. There are no rules anymore. You can do whatever you want, but there are trade-offs all over the place.

Rob: Yup. There’s a lot of factors. If you’ve raised a lot of money, you have more options. If you haven’t or you just have a little bit of profit, you have fewer. That’s the reality of it. Again, not fair, but the reality.

What Rand had talked about specifically was really interesting because I think he’s been public. It’s like tens of thousands a month in MRR with SparkToro. Plenty of money, they could hire people full-time. But they’ve done all contractors and mostly consultants even. I view the difference as usually a contractor, you have to tell them what to do, a consultant tells you what to do, right? The consultant is at a higher level. I don’t know if everyone used that definition, but that’s the one I always have.

They hire a lot of consultants and agencies. What he said is he loves it. It’s probably overall more expensive because agencies are more expensive. They have markup, margin, and all that, but he said he loves it. It’s performance-based, and that if they’re not cutting it, he has no qualms about letting them go, in essence. There’s simplicity, and he doesn’t have to manage anyone. The actual HR, the day-to-day of having a team of 10 versus having 3 or 4 agencies you’re working with to satisfy. There’s a certain nice luxury in that, right?

But he’s not venture-backed. He wants to build a really capital-efficient, profitable, MicroConf, TinySeed, Startup for the Rest of Us-type company. If I were going to raise venture and try to go big, I would probably hire more W-2 because talent is so hard to get anyways, and keeping that knowledge in-house, especially for your core competency. But even beyond that, I think there’s a benefit to it.

Look at TinySeed and MicroConf, right? These are two companies I think about every day. What is our core competency with MicroConf? It’s running events and building community. So I spend time on it, and Zander is full-time. I don’t want to hire a bunch of full-time employees beyond that. We may wind up and that decision will come to it, but I like small teams, personally.

And then if you think about TinySeed, Tracy runs the day-to-day of the Accelerator, and that is a core competency. I would never have a consultant do that. But if we’re going to do marketing, let’s say we’re going to do a bunch of content marketing, let’s say we’re going to do some other thing. Is that a core competency of TinySeed, or is it just something that we can maybe pay for someone to do on a performance basis, right? Back to the point of how hard it is to find marketers who can produce results. Agencies have to or you let him go.

Jordan: It’s pros and cons. This is one of those things that no one can tell you what’s right for you, and you really should ignore what’s out there and make your own rules. What Rand is doing sounds to me like he knows what he’s after and what success looks like. Whether that’s simplicity, low stress, or avoiding some of the scars of his previous experiences, he knows what he wants. It sounds like he’s sticking to that and building it in a certain way knowing what the trade-offs are.  You having the ability to let people go much more easily than if they were full-time also means they can walk away more easily. So as long as you go into it with open eyes, then you can make it work.

My point of view on it is just mine. I want to build a bigger company that people love to work at. So for me, I’m going toward the W-2. This morning we had all-hands, and the feeling I get from having those groups of people at an all-hands and everyone working in the same direction, that’s what I personally want.

You got to ask yourself. Again, there are no rules anymore. You can make this stuff up. We’ve all seen this business software allow us to be possible. Five-person companies are doing millions of dollars a year in revenue, and then there are another 10 or 15 contractors but you keep the core team small. You can do that too. You can do whatever you want, and Rand’s doing his own thing. That doesn’t go by any existing preconception of what a company should be.

Rob: Right. I’ve done both. If we go back nine or ten years, I had HitTail and I had several other apps. Everyone who worked for me was a contractor/consultant because I didn’t want the overhead, not just the financial, but the mental overhead of having employees and managing all that, managing payroll. I think at that point, I wasn’t even on payroll. I think I had an LLC straight pass through and I just pulled the money. It was just easy, it was simple.

As we got Drip going, I realized right away, to your point, it’ll be fun to have a team, to have the buy-in, the camaraderie, and the community. But also, I think this is going to be big and I want to all be in this together. I don’t want one day for the contractors to walk out or I don’t want people to not care. On the weekends, if the site goes down, and it’s like, I’m a contractor, I’m off. There are certain levels of commitment I think that you want with that. We live in crazy times, but it’s cool to have the flexibility. A lot of creativity is available. I hope that was helpful, Filip.

Jordan Gal, thanks for taking the time, man. Come back on the show. You are @JordanGal on Twitter and @CartHook. Is that right, @CartHook on Twitter, isn’t it?

Jordan: Yeah, that’s the company. I’m no longer running that company. We have a great CEO in place, Emily. She’s running it and dealing with all the things that that involves.

It was great to be on. Thanks for having me on. I’ve been real quiet on Twitter, but you’ll hear some more out of me over the next week as we launch the site.

Rob: Awesome. I’m excited to see it, man. They should follow you there so they can hear what the news is. Cool. All right, take it easy. Thanks for coming on.

As a reminder, today’s episode was brought to you by Rewardful. Rewardful is quickly becoming the go-to platform to set up affiliate referral and partner programs for your SaaS membership or subscription business. Rewardful handles all subscription billing scenarios such as free trials, upgrades, downgrades, cancellations, refunds, and prorated charges out of the box with their simple 15-minute setup.

They’re the only platform that has a built-in affiliate finder that crawls the web and surfaces high-quality relevant affiliates for your program. Simply search by keyword, competitor, or alternative names and reach out to the best affiliates in your market to take your program to the next level. Check them out at getrewardful.com/startups. That’s getrewardful.com/startups to get 30% off your first three months. Offer expires May 31st.

Thanks again for joining me this week. It’s always a pleasure to have Jordan on. I hope you enjoyed our conversation. If you have listener questions, send them to questions@startupsfortherestofus.com. I prefer voicemails or videos if you have them. If you can record a video on your phone and send it in, that’s great. If you just want to do a voicemail, that’s great. Those go to the top of the stack, but I’ll still take written questions as well. I believe we have just a one- or two-episode backlog of those right now. We will get to them soon, and I’ll be back in your earbuds again next Tuesday morning.

Rob: I’m back with another episode of Startups For the Rest of Us. This is episode 548. We’re about to hit the 550-episode mark. As you know, the show is about building ambitious startups, bootstrapped and mostly bootstrapped, but without sacrificing our freedom, our purpose, and our relationships to do so.

I have a great conversation today with the co-founder of Aurelius, Zack Naylor. Aurelius is a SaaS app for UX researchers. It’s for them to organize, tag, and search all of their research notes, both audio that gets transcribed as well as text that you enter in. You can imagine doing jobs-to-be-done interviews, or doing any type of UX research and interaction research, needing to filter that, and search through it later.

The two of them are working on it full-time. They’re what I’d consider a mostly bootstrapped company, having bootstrapped it for the last five years and through many versions. You’ll actually hear us tell the harrowing tale of re-versioning and having to re-platform it. It’s a hard story in the sense that they were getting some traction, but not enough to quit their day jobs. They realized there was one section of the app that people really love. They just had to rebuild it with new technology and really focus on this one piece of it. It’s a fascinating story. I hope you enjoy it.

Before we dive into that, if you haven’t downloaded our two exclusive episodes along with the PDF guide, you should head to startupsfortherestofus.com and enter your email address. The first guide is 8 Things You Must Know When Launching Your SaaS. The second is 10 Things You Should Know As You Scale Your SaaS. These are essentially solo podcast episodes where I dug into 8 things and 10 things respectively that I feel like everyone should keep in mind as they’re doing this. These are takeaways from 20 years of entrepreneurship and 16 years of thinking about, talking to, and advising entrepreneurs. Startupsfortherestofus.com, sign up for the email list to get those. With that, let’s dive into our conversation.

Zack Naylor, thank you so much for joining me on the show.

Zack: Definitely. I’m really honored to be on. I’m actually pretty humbled that you asked. I’m happy to be here.

Rob: Yeah. It’s great to have you on, man. We’ve known each other for a few years. You live here in Minneapolis where I do. You and I had some bourbons now and again, you might say. It’s been a while though due to COVID.

Zack: Yeah, unfortunately. You might say and I will say.

Rob: Indeed. I’m fascinated to have you on today to talk about a few elements of your journey with Aurelius. Your H1 is, Your research is solid. But it only matters if you can get from data to insights to influence, faster. Prove what you know with the more powerful research repository and insights platform. It’s aimed at UX researchers. Is that right?

Zack: It’s really anybody who’s doing regular research with their customers. That tends to be, for us, primarily UX research teams. It also then means general UX teams. That could be designers.

If you’re in a company doing UX but you don’t have a dedicated research team yet—maybe because you’re not big enough or they haven’t recognized the need, whatever, you’re still doing that. Maybe you’re in product management. You’re doing customer research all the time either with UX or not. Those are the folks we tend to find the most value out of Aurelius.

Rob: Got it. To give people an idea, UX research is a fairly new thing, at least in my experience. When you first told me about Aurelius—was it three years ago or four years ago when we met—you were explaining it to me and I was like, I’m not sure I really understand what it is or what it does. But these days, you have enough traction that you and your co-founder, Joseph, are full-time on the product. You’ve been accepted into TinySeed batch three. Congratulations. You have traction here.

To give folks an idea of what the product does because again, I almost come at it. Of course, have I done job-to-be-done interviews? Yes. Have I done light UX research myself? Of course. As a founder, I had to do all of this stuff but I am not a professional at it. I’m definitely an amateur who’s trying to do it. To get my head around it, I’m looking down through what the product does from a nuts-and-bolts level, not the benefits, but the literal features.

It looks like you can take all of your research notes, whether you’re doing a job-to-be-done or whether you’re doing just a conversation. You’re taking a bunch of notes. If you have interviews that are audio, you can upload them and you’ll transcribe them. The idea is to get all this stuff into text. Then you tag things so you can highlight this sentence, do #featurerequest, #error, and then, later on, you can filter and you can search by those hashtags. It’s taking these volumes of notes and other textual data and being able to apply a taxonomy to it that’s later, searchable and filterable. Am I explaining that relatively well?

Zack: Yeah, you are. I obviously think about this a lot. I would just add to that or maybe even try to distill it further and say the biggest question you get is what do we know about our customers who need X, Y, and Z? When you think about that, how do you get that today? It’s everywhere. It’s email, spreadsheets, Post-it notes, everywhere. But really, it’s the place that people refer to as a central repository where you can search, share, and reuse that stuff all in one spot. Absolutely.

You’re talking about job-to-be-done interviews. You take all those notes. You’re actually a perfect example. You said you’re not a UX researcher, but you play one on TV kind of thing. You do all these interviews and you go, how do I make sense of all of that?

There is a lot of stuff in Aurelius that helps you do that. We actually do automatic keyword analysis to help you find patterns, themes, and frequency to make you analyze and make sense of this. Then, when you say, what did you learn from all the interviews, that’s when you capture these key insights. You can filter and sort off those themes and tags, and say, these are the things we learned. But then, that becomes one central bank of knowledge where you can get a lot more mileage to that where next time when you’re going to figure out what you learned from research, you don’t have to do new research and waste time on resources which nobody likes. You can actually get a lot more mileage out of the research you did.

Rob: Right. That’s the thing. Again, we go back three or four years. You told me about this idea. I remember thinking isn’t this solved with Google Docs or with Evernote? There are all of these tools to do note-taking. I’m sure there are ways to taxonomize, hashtag, and organize it, but it sounds like there isn’t a tool like this aimed at UX folks or I guess researchers in general.

That’s the thing you were mentioning offline where you’re saying market researchers or something, that they were using some crappy tool or Evernote, that they saw what you had, and were like, wow, we could use this in our field.

Zack: That’s a really good observation. I think because we are in such a nascent area of the industry, the solutions are Google Docs, Confluence, Spreadsheets, and stuff like that because those were just the tools that were given to us. We think that those are free. That’s a whole other conversation. Oh, these tools are free. They’re not. You’re always paying for them in some way, but right, they’re not actually built for the purpose. The things that you want to do with these notes, with being able to capture these insights, with being able to share them with people actually requires stitching together multiple tools. To have it in one place not only use efficiency boost but also a lot of other features that don’t exist in something like Evernote.

Rob: You know the old adage—I love to say this—anytime someone is using a spreadsheet, that’s a SaaS company in the making. Eventually, it can and/or will be replaced by that. I think Anaar may have said that. I’ve heard a few people say it, but it’s a great takeaway.

I don’t want to spend too much time on the product itself but I really wanted folks to understand what it is because it essentially is a verticalized tool. It’s for researchers. If you don’t do much research, as myself coming to it, I was like, why would I need this? Why does this solve a problem that people will be willing to pay for? With that in mind, you started the company six years ago, 2015, with your co-founder. In 2016, you launched an alpha and you started testing it with folks. The product wasn’t very different from what it is today. In fact, you’re telling me on the side, including that alpha version, you’ve literally had four versions of this product.

That’s just painful to hear because I know that each of those times, you had to make a decision to scrap the version and start a new one. That could not have been easy. It probably was a pretty big blow to your ego, but also just a blow to your motivation of, oh […] do we really have to do this again?

Can you talk us through maybe the first one or two of those? Did you scrap the code and started over? Was it just UX? What got you there? There have to be people listening to this podcast right now who are in that space of like, we built something but people don’t want it. They don’t want all of it. What was that process for you as a professional UX researcher and product person? How did you go about going down this path in the early days?

Zack: Okay. Where do we want to start here? In 2015, we officially formed the company. Sometime in 2016—I want to say it was March-ish but don’t hold me to that—we launched the alpha. You weren’t paying for it yet. This was a pure sign-up on our website. Let’s collect the emails. Let’s get you in an alpha or beta program. In fact, I was even doing this manually, personal connections because I worked in the industry. I would like you to come in and check this out. You use this for free, yadda yadda yadda. That version was actually a product strategy platform. It was a classic start mistake. We built too much too soon. We were way too broad.

As I was talking with you a little bit about this, what happened during that point in time was out of 100 people that came to us, 10 were like, I’ve never seen anything like this. I want it. This is the way it worked. We’ve been looking for something like this. The 90 were like, I wish we could work that way. This is really cool, but tell me a little bit more about this research and insights piece you’ve got.

At that time, we were doing research and insights but it was also connecting to product decisions, trying to connect the analytics, and then tracking that back to goals. It was a very ambitious platform, let’s just say, for a couple of pirate bootstrappers. But people just were not ready to work that way, that scale. We had enough interest to where we eventually the actual live version of that and we’re getting some paying customers. Nothing to really write home about. Then, this feedback continued to roll in. It’s just like, yeah, this is really cool but we just really need a way to organize all these insights and research that we’re doing with customers.

It just became apparent to me particularly, as somebody who’s been working in the industry for over 15 years now. I was like, yeah, it’s actually always been about that. The idea was, okay, we’re going to take the research and insights piece, pull that out, build it in its own app, basically inject it with steroids, and integrate the two. Sounds reasonable enough. Sell them to separate products and you can plug and play.

We launched the beta version of just the research and insights app and even our paying customers were using the beta version of that more than the old one. That was a clear signal, sunset the old product. At this point, we’re head-first into the research and insights piece and we’re building that.

Fast forward to—I don’t even remember the exact year—2017, 2018, somewhere around there. The old codebase wasn’t working for us. We want to really put the pedal down on the research and insights piece. Completely redesigned, completely re-platformed, new codebase, and everything. Yes, it was painful but it was necessary. It served us pretty well.

The thing was back then, I think it was mostly Angular and also Riot.js—not easy to find developers, not easy to run people up, slower development time. We go, we’re going to change that. We did that. Okay, fine. Then, we finally go, well, there have been a lot of advances in technology that we had. The initial database was actually a Neo4j because we were doing some things with making recommendations and stuff like that which suited us well for that.

But then it just made sense to move off of that, do the Mongo, and then re-do the front-end and React because way much faster to have time being a team that is bootstrapped. Speed to development is huge. That was version three which actually launched “version three” of using codes of what you see today in Aurelius which launched in September.

Every single one of those times, yeah, it was absolutely painful. Every single one of those times, we had that conversation. I’m sitting here like you already said it. Do we really have to do this again? But we were able to accelerate every time after that. You just basically crawl through glass uphill and then you’re able to go down the other side of the hill.

Rob: Right. I have a saying that I say all the time which is so much of being an entrepreneur is making hard decisions with incomplete information to where you can never get to 100% certainty. There is no data that tells you although there has to be a God element. I say that with product validation when people do customer development, trying to do a lean startup, you put up a landing page, whatever. It never gets you to 100%. Maybe it gets you to 50%, maybe 60%. I found that these massive, pretty undoable decisions are often like that.

How did you feel? How did you and Joseph reconcile that each time? Was it like, well, this is what our gut tells us and enough of the data is pointing in this direction? Did you lose many nights of sleep as you were trying to make the decision? How did that happen?

Zack: That’s a really fair question. The first time around, it was really moving away from the database and being Neo4j. When we first built it, it made a ton of sense because we were trying to help automate, create recommendations, connect decisions, and stuff. Again, very ambitious.

It worked, which is cool but then we moved away from that. Then in creating different connections within the data, Neo4j just did not serve us well. Painful, but we didn’t lose any sleep. It was a clear necessity. Incomplete but still we’re clear set. We aren’t going to do what we wanted to do with that.

I would say in the more recent world, when we looked at the front-end technology and how things were built, we just looked at it and thought—here are the questions I asked—if we were to build the X feature we’re working on right now, which we’re now on React TypeScript, how much time would we save?

Joseph was giving me some answers on that and I’m just doing the calculations. I’m like, we’re basically launching features that would take us probably all of next year, and essentially, six months is the estimate. We’re never right on that but to me, that was such a huge deal because every single one of our competitors is venture-backed. They’ve got a team of people sitting around working on stuff. It’s me and Joseph. It was just a clear decision. It wasn’t easy to make. I’m not trying to trivialize it like, oh, yeah, it was a no-brainer, because it sucks. You’re re-platforming the whole thing which is stopping essentially new feature development and stuff, but it was just so necessary looking at the time to develop it in the future knowing that that was something we’d never be able to keep up if we didn’t do it.

Rob: That’s tough. It’s tough to make these whole sale changes whether it’s code-based or whether it’s positioning any of these changes. I definitely feel the pain there. You’ve made these hard decisions to re-platform. You have an alpha. You have a V1. You have a V2. You and Joseph are working your day jobs. Joseph’s the developer and you’re everything else I’m assuming, product, marketing, sales. It’s all that. You’re on the operation side. Just trying to keep stuff off is his plate.

I’ve been there. It’s like, we need features so I’m going to do everything else. The two of you are working day jobs. You’re working on Aurelius on the side and COVID hits. There was a big shift that happened to you guys there. Talk me through what happened.

Zack: It was business as usual as it was at that time. It was the end of March, the beginning of April, around that time. I had actually been placed on furlough. None of us knew how long this was going to take. That was fine. I was placed in furlough and just worked from home, but then I thought, well, no problem. I’ve got a company I’m trying to build. I will just focus on that during my day, which is what we wanted to do anyway. Then, Joseph also got laid off from his job. We just looked at each other and said, okay, we can look at this as a challenge and freak out or we can use this as an opportunity.

We decided to use this as an opportunity and we just focused on Aurelius. We had a target in mind. We said, look if we can get to this revenue number—because again, we had no funding—that gives us this runway. We both agree that we’ll go full-time. The pandemic, as terrible as it was and actually still is in many ways, was both a gift and a curse to us. It forced us to do that, also allowed us to get really focused, and reach that goal. We did and part of that was when we launched version three which did not come without its speed bumps on the road to getting there. It was a huge deal because after that, everything, just as the saying goes, went up into the right.

Rob: Getting furloughed or laid off is painful. There are no two ways about that, but it sounds like the realization quickly set in like, wait a minute, I have this side thing. That’s one of the basics of being an entrepreneur. You always have a plan B and often a plan C, D, and E, whether it’s a side project or whether it’s just being an entrepreneur forces you to be pretty creative as a problem-solver.

Were you stressed? When you’re furloughed/laid off, were you ever like, oh, my gosh. This is terrible. Or was it pretty instantly like, now I have time to work to focus on this?

Zack: I don’t think that there is one or the other. They were some of both. Although funny enough, initially, it was more of a fine. I’m going to go heads down on the thing that I’ve wanted to go completely heads down on for years now anyway. That was great.

Some of where the mega stress came in was definitely as we got later in the summer and version three was a real slog for us to get off the door for various reasons. At that point, things start creeping into your mind. I’ve got a family. I’ve got a seven-year-old and a two-year-old, married, house, and stuff like that. I’m the primary income. My wife is a stay-at-home. You got things that start creeping in your mind like, how am I going to feed my kids if this doesn’t work? I know that I’m certainly not alone in the entrepreneur world of people who think about that. Things cross their minds. As gutsy as a lot of us can be and a lot of bravadoes a lot of us might have, that stuff still comes in.

They just got to this point where we were working so hard in getting this version out that I knew was going to bring us success. It was almost like I could just predict the future. Honestly, I can’t describe it any other way. But it was such a pain to get there. I’m not going to lie to you, June, July, August of last year was definitely and literally the hardest time in my life. Absolutely, without question, and I’ve done a lot of hard stuff in my life purposely. I tend to seek out really difficult challenges. Without question, the most stressful or the most difficult time in my life.

Rob: What was going on there? I feel your pain because I’ve obviously built many software products whether I was a developer or someone else was. It always took longer than we wanted it to. I felt stressed, but I wouldn’t say for me that those times were the worst in my life. Was it the confluence of I need money, I need this to work? Otherwise, I’m going to have to get a day job in the middle of COVID plus the delays?

Zack: It was absolutely the convergence of all of those things. It’s funny. I don’t mean to trivialize it because there’s nothing easy about getting your company certainly as a bootstrap, but that was the easy part. It was doing it under conditions of everything that was going on. We got two young kids at home and one that is like, oh, I’m going to go back to school except you can’t go to school. We haven’t really figured out how to homeschool because nobody’s ever done this before. Then, on top of that, you can’t go anywhere and there’s literally no release.

It wasn’t just building the company and doing those stressful things. It was doing it under an additionally exponentially stressful environment. You know what I mean. Then, of course, the things in the back of your mind. It’s like if this doesn’t work, basically how much time do I have to figure out if I need to get another job so I can just keep my family living well?

Rob: Yeah. That’s the thing with uncertainty, man. It is no joke. I don’t think people stay up at night or wake up at 3:00 AM in the morning worrying about things they’re certain about. It’s always the what-if, what’s going to happen. You feel like you can think your way into certainty but in fact, if you talk to any psychologist, a good psychologist, they will say ruminating on the same problem without new information, if you’re stressing about it, is not helpful.

Trying to solve mentally a puzzle that you’re not stressed about—I often do that in the shower, while I’m washing dishes, while I’m walking around—I just think over and over, how can we solve this? I’m not like, oh, my God, I’m worried. I’m trying to come up with a solution to it. That is helpful. But it’s thinking about something for days and perseverating on it, that is just brutal. It’ll eat you up. I totally get what that feels like.

I didn’t have it last year in COVID but I had it. For me, it was 2014 where there was some mismanaged cash flow. I was transitioning away from HitTail, and Drip was just getting going. It wasn’t growing as fast as it needed to be. Then, the big tax bill came through for the prior year. I was like, oh, my gosh, I don’t have enough cash to pay for it. I remember feeling that and feeling the weight of, I don’t know if I can get myself out of this.

We talked earlier about the bravado, the entrepreneurs taking big risks, or whatever but I’ve often found, especially in our circles, bootstrapped SaaS founders that I would say were maybe more risk-averse than a lot of the Silicon Valley founders would have us believe. The folks I know usually don’t take out $30,000, $40,000, $50,000 in credit card debt like you might hear on some fancy podcast about some multimillionaire or sleep in their cars to get this done.

While we take on more risks than our friends who are developers at Target or BestBuy, we still go about this pretty sensibly and methodically. We want something that has a pretty high chance of success. Would you describe yourself that way? In terms of entrepreneurs, do you think you’re a big risk-taker or are you more risk-averse?

Zack: I would say I probably conform more to the description you gave of most bootstrappers. I think that that’s actually why it was particularly stressful because, at the business end of things, there are certain calculated risks that I know I’m willing to take. Joseph and I are actually extremely on the same page. That wasn’t the issue. It was doing that in a completely uncertain world as well.

It’s fine dealing with a certain amount of uncertainty and risk in one area of your life, but then to also not know when are we going to get to have our kids go back to school again, play with friends, or ever see family, it was just literally nothing but uncertainty and risks honestly, physical and otherwise.

In every area of my life, it’s just like, you can’t be serious right now. It was unprecedented. That’s why I say almost the business side of things was relatively easy except at that point because V3 was taking so much longer to get out the door. It was like, we can’t actually start growing until that happens. I was certain of that. Not having at least some semblance of certainty when that’s going to happen—you know what I mean—everything exponentially grows in that case given those circumstances.

Rob: I had a friend that I used to work with. He said I can handle a large amount of uncertainty in my work life as long as my home life or personal life is stable. If my work life is super stable and chill, I can handle uncertainty in my personal life. But I can’t do both. That’s where it tips me over. You’re basically describing a lot of us, especially those of us with kids. A lot of us felt it last year with the danger from COVID. You have uncertainty at your day job. You’re home all the time. If you had kids that mix of, oh, wow, now I have two kids that are at home, whether you’re homeschooling them or not, if they’re of that age, it’s not an easy scene.

Zack: Yeah. It was completely mental. As I said, it’s just an entirely tumultuous time. To add to that, the fact that you mentioned, we both live in Minneapolis. It cannot go without saying there were a lot of socially relevant events happening around that time, too, that again, just added an incredible amount of additional stress and emotional heaviness with what happened with George Floyd. The aftermath of that. It was just a really heavy-duty time in my life.

Rob: Yeah. I remember that as well. The summer is super stressful. You’re just counting the days in essence until you can ship this. It’s taking longer than you and Joseph want. Waiting, waiting, waiting.

In September, you’re able to launch it. It sounds like things literally went up another right from there. What’s funny is usually, as a founder, we’re so certain that this next feature this, next rewrite this, next whatever is going to be the difference. Usually, it isn’t but sometimes, it is. It sounds like for you, this V3, which is actually if you include your alpha as the fourth version, was really what broke it wide open for you.

Zack: Yeah, it absolutely was. Again, I think that’s what added the stress to all of this for me because I was so certain of that. I was so certain that things go up to the right with version three because I do research with our customers all the time. I’m the one that does all the demos. I’m the one that hears all the feedback. I’m the one that’s literally involved in the communities that we serve. I hear what people say. I’m like, I know what we’ve got to do. We need to get this thing out the door. You’re talking about demos. That was a perfect example. It was the first time I demoed V3. We would get pretty good reactions to the stuff that we built in what we were doing even in version two. Not only our design but also the way in which we were doing some things were hit or miss. You either really loved it or it was like, oh, these are the tools to do this differently and we prefer that.

Okay, version three, most of them are grand slams. I’m not trying to be arrogant or boastful, but it really is. The reaction, by and large, is a rare occasion where people are like, oh, I don’t know if this is what I’m looking for. We got to where we needed to get to. I was very confident of that because funny enough, in a very meta-moment, we do a bunch of research. We’re not talking guesses at what we should build. We’re understanding the needs of our customer base really well. These were all things that touched on so many important points that we weren’t touching on at that time.

Rob: It sounds like V3 was a technology re-platforming where you rewrote it mostly from scratch. In addition, you added a bunch of features. Is that right?

Zack: And total redesign, visual UI redesign.

Rob: Holy Moly. That’s a lot of moving.

Zack: Absolutely. It was a massive move. I wouldn’t say that we came to that decision lightly. We first started talking about this. We should definitely change the design. There’s a number of things that we know we can do that would give us a big lift like the redesign. That’s front-end code, CSS for the most part. No problem.

Then, as we started talking about this more and things that we wanted to do as part of that, what was essential to making this decision was how you were able to take notes in Aurelius. Table stakes. You got to be able to take notes and it’s got to be a pretty nice tool to do that. If you consider what is setting expectations of people on a note-taking tool on the Internet, it’s a pretty high bar that can’t suck.

There was a lot of work as you can imagine. It is definitely the most complicated area of our app and we had to rewrite that whole thing. The thing is you start peeling back layers to this and you go, well, if we’re going to do that, then we might as well do this. If we’re going to do that and that, then we might as well do this, too. We just said all right, we’re redoing the whole thing. It’s going to serve us better and we’re going to move a lot faster. Since 2021, we have literally launched—I can look at the list right here—13 new features or enhancements since January. That would’ve never been true on the old platform.

Rob: Because of the tech. The velocity is so much higher. This is one of those things that’s so tough. Joel Spolsky has written a saying about it 20 years ago of never to rewrite your codebase. It’s the biggest mistake in the history of things, but there are slim exceptions where, if you’re early enough this is something we should point out here.

It’s not like you had 5000 customers and $1 billion in ARR and you were going to rewrite it. You were still early enough and it wasn’t resonating. Your V2 or your early versions weren’t resonating as much as you knew that this one could. You knew this from user research. There seem to be a lot of customer conversations.

Zack: A hundred percent. Everything we do, I use this saying all the time, we eat our own dog food. I’m not just some sales guy who’s like, I think I have a great tool for you to use. I used Aurelius for our customer research. I have worked in the industry for 15 years. That’s how we make decisions on what to build. This isn’t made up or it’s not something we just think is cool. Absolutely.

Rob: With that in mind, I’m obviously a believer in talking to customers but I’m also a big believer in founder gut feeling, vision, and there being some element of that because oftentimes, users will just tell you to replicate all of the features of Evernote or all of the features of Mailchimp.

In the early days of Drip, it was just like, I want a mobile app. Mailchimp does this. We were like, yeah, that’s not what we’re building. There was this element of, we wanted to listen to our users but we also had that founder gut feel. As someone who does a lot of UX, does product direction, does user research, how do you think about that?

Zack: That’s really easy to answer actually because funny enough, we just launched a podcast episode with somebody who I have, for years, had an insane amount of respect for their work. A guy by the name of John Coco. He’s one of the people who I would absolutely consider experts on exactly that question of how do you make sense of what you hear from customers and the research you do?

One of the things he said—I’m just going to paraphrase him—is that your world view, your global perspective, applied to what you hear is where the magic happens. We hear this all the time. There’s a difference between what customers say they want and what they actually need. The thing is—and this is also a very meta-moment of something—what Aurelius helps you do is figure out frequencies, patterns, and what you’re hearing in research but being able to capture what that means.

It’s one thing to say, 6 out of 10 people who answered the survey said they want a mobile app. Yes, but why? You say founder gut. I can interpret that a little easier. I have an advantage because I’ve worked in the field but if I hear something, it’s like, well, we need integrations. You don’t actually need integrations. You need an easier way to get the research that you’ve got into a tool. This is why we actually do have integrations in Aurelius.

But that was never a big play of ours because funny enough, we asked people, for example, okay, why do you need integrations? Then, you learn. Well, we have all this research in all these little places. We want to get them into the same tool. That integration doesn’t necessarily solve that. Building tools in your platform that help you facilitate that is what solves that problem, just stuff like that.

Then, I was able to interpret that knowing that a lot of these teams aren’t necessarily using all the tools. For example, to use that example to integrate stuff, they have access to all this other data they want to bring together and analyze together. Does that make sense?

Rob: It does. Did you hear my rant? It’s just probably four or five episodes ago about the Henry Ford quote. If they told me what my customers wanted, I would have built a faster horse. It’s like, yeah if you’re a dumb ass, don’t do that. If you’re a product person, you don’t do what they tell you. You say, what are they saying? They’re saying they want something faster. Okay, don’t build a horse, but build something faster. You don’t take your customers literally. You put your own limbs on it and you figure it out. To your point, it’s what they need rather than what they say they need.

Zack: It’s 100% what it is. Your lived experience applied or filtered through what you hear from customers is actually really valuable. I think that people want to shy away from that. There are some peers who do research. It’s all about what you hear from them and analyzing that. I don’t agree with that. That’s not true. Your lived experience and your interpretation of that are a really valuable addition to it. It just can’t be the dominating voice.

Rob: There’s also an element of innovation that has to happen. Has to is a strong word, but I think that the best companies borrow from what customers want but they borrow from, usually, a pain that the founders discover, whether it’s their own pain or the pain of someone around them. Then, there are innovative pieces that start to creep in that are unique. There’s a certain magic to a lot of startups that if you just make the whole thing innovative, then, it’s too noble and no one uses it. If you mix all those three things together, that’s really your golden ticket for building a great product.

Zack: A hundred percent. One of our most popular early features was an example of exactly that. We knew that people were looking for ways to get research notes, data, and stuff into our app faster. One of the things that I found myself wanting to do is I was like, you know, I can actually describe the situation and how we built this.

This is a really fun, early hacker story. Joseph and I were working together in person. We were actually in my basement. I said, dude, you know what would be really cool? It’s if I could just copy these notes or copy these data into Aurelius. It took every line break and it made a new note automatically that I could tag that individually. I could analyze it individually.

He was like, I’m pretty sure I can do that. We built what is now called our bulk input feature. If you copy and paste any sort of text or data, if it’s a column from a spreadsheet, each cell will create its own new note individually or text file every line break or character turn. It creates its own new note. It was very much a hacker thing. We built it in a night. It’s been in our product ever since. We were getting paying customers. It was one of the earliest most favorite features from our customers.

Rob: That’s super cool. I love stuff like where there’s some scratch-drawn itch. There’s some let’s see if this works. That is the fun of building a product, one of the fun things.

Zack Naylor, congratulations on all your success. I’m super stoked for you guys to be cranking away on Aurelius full-time as well as to be working with you in TinySeed batch three.

If folks want to keep up with you, you are @zacknaylor on Twitter, and of course, @AureliusLab on Twitter as well, and aureliuslab.com. Thanks so much for joining me, man.

Zack: Yeah, for sure. I really appreciate it.

Rob: Thank you for joining me again this week. I’ll be back in your earbuds next Tuesday morning.

Rob: Welcome once again to Startups for the Rest of Us. I’m your host, Rob Walling. This week, we’re talking with another ambitious, bootstrap, or mostly bootstrap startup founder, in this case, it’s Craig Hewitt. He’s back on the show. You’ll remember him from season one of TinySeed Tales and he also hosts a couple of his own podcasts as well as being the founder of Castos. Today, we talk about private podcasting. We dig into Apple’s announcement around their subscription podcast offering, I’ll call it because it’s not private podcasting. It kind of is, but it’s not really. You’ll hear us dig into the differences in this episode, as well as the accelerating growth of Castos. We dig into that in the last five, six minutes. It’s really interesting to hear Craig talk about why that’s happening. With that, let’s dive in to my conversation with Craig Hewitt.
Craig Hewitt, thanks for coming back on the show.
Craig: Hey, Rob. Thanks for having me.
Rob: It’s always good to have you, man. I get positive feedback about our episodes. Folks will remember you, of course, from TinySeed Tales Season One, where we walked through your journey back in—I’m trying to think of it now. It was the bulk of 2019, I think, and a little bit of 2020. TinySeed batch one, where you run Castos, which is podcast hosting, podcast production, and now private podcast hosting.
Craig: That’s it.
Rob: I’m really interested to dig in today to start off with this private podcasting stuff because, for years, you started a productized service that was podcast editing and production. Then, you started a podcast hosting company called Castos and you piggybacked on the back of a WordPress plugin you owned. Within the last six months, nine months, Castos leaned heavily to this idea of private podcasting, so much so that the H1 on your homepage now says, “Public podcast to grow your audience & Private podcast for exclusive content”. That’s literally at the top of the page.
I would call that a positioning shift from what you’ve traditionally been. Walk me through, maybe this thought process and how this has evolved to the point where maybe nine months ago, private podcasting was—I know it was in the back of your mind because we had little conversations about it, maybe there was some code being written or something. Today, my product is doubling down on both of these things and really leaning into private podcasting.
Craig: Yeah. Just for definition purposes, public conventional podcasts like this one, you want everyone to listen, and you want as much exposure. It’s a marketing tool to grow your brand and get people into an email list and to buy things, and whatever for your brand. Private podcasting is like a membership site for your podcast. The applications for it with the maker crowd are online courses and membership sites, and communities that want to offer podcast content only to their students or members or community members, and companies that want to offer podcasts as an internal communications tool to their employees.
Think about new employee onboarding or messages from the C-Suite or sales enablement material for field sales folks, really using the concept of podcasting to drive information throughout the company. You have internal memos, emails, and webinars. We’re all tired of all of those. A lot of companies are coming to us and saying, hey, we want to connect with our team members, but we don’t want them to be stuck at the computer anymore. We want them to be able to consume this asynchronous mobile-first audio-only. Just seeing a lot of interest and a lot of new ways that people are using this as a communications tool, whether they’re a company or they’re a brand doing this with their online worlds.
Rob: Got it. Companies and folks with audiences. With those two use cases in mind, if I was the CEO of a hundred or a thousand-person company, I would offer that private podcast for free, because obviously, I’m not going to charge my employees. It’s really a communication mechanism versus if I were, let’s say we started a private MicroConf podcast or Startups for the Rest of Us started a private podcast, we’d more likely be charged for that. It would be premium content that we essentially would probably charge a monthly subscription for. Is that the idea?
Craig: Yeah. As it stands today in Castos, you can integrate either via native integration with a tool like a member space that we’re directly integrated with. You have member space that controls the membership platform, and there are privileges and charges of everything on your membership site, that then adds those people automatically to a private podcast that you host in Castos or via Zapier. Then Zapier opens up to everything and everybody—all sorts of membership tools, all sorts of LMS and course platforms—and everything where you can gate the access and the people there and make money and then bolt-on Castos to expand the way you reach out to those folks in podcast format. Then the next step for us logically is doing all of that natively within the platform, allowing our customers to charge directly for content right in our application. That’s something that we’re actively working on now.
Rob: How did this come about? Was this something customers were requesting or was it something you and your team came up with, or a third option I’m not thinking of?
Craig: Yeah. The analogies to this right in the membership and course world have always been there and have always been something that I and a lot of other people see. It’s just taken a bit of timing. We’re mostly bootstrapped. It just has taken a bit of time to get the core product to where we want it to be to where we can expand our focus to build this. It’s always been in the back of my mind because the problem that this solves is that the way that people can make money directly from podcasting without having like, if you think of Startups for the Rest of Us as a brand, you have MicroConf that this podcast serves as a marketing channel and lead gen, for now, both TinySeed and MicroConf.
I think you’re very happy to not make money directly from this podcast. There’s a lot of people out there that say, I just want to be a podcaster. I don’t want to do a fund. I don’t want to have a conference. I don’t want to have to sell a course or whatever. I just want to make really awesome podcast content and make money from it. To date, the only native podcast-only way to do that has been ads. It’s just a garbage-like monetization method for a lot of people who have audible.com, or mattresses.com, or whatever, as a person that’s sponsoring your show. Why not let people make money directly from their content? That’s where we’re going.
Rob: Got it. When I think of podcast hosting, I think of it as a commodity business. Any type of hosting becomes a commodity. Remember in 1999, web hosting, there were all these web hosting startups, and then it just consolidated. I remember when WP Engine started in 2011, 2012. It was also one of those like WordPress, focused hosting, app-based hosting, where it’s really optimized for that. Even now, there’s just a lot of low-cost WordPress hosting. I think podcast hosting in my mind is traveling the same cycle where it over time becomes more of a commodity as more people get into it. For you as a founder in the launch and private podcasting, is this a way to stay ahead of that curve and to innovate yourself into not being a commodity player?
Craig: Yeah. That’s a big one. It allows us to shift where we stand with our customers from being, say, a liability on their mental balance sheet to an asset. If we are allowing our customers to make money every month, they’re very happy to stay with us for as long as they can. We hope to participate in the upside of that in terms of things like revenue sharing or being able to charge a little bit more than we can charge for. I agree with what is a commoditized piece of software, which is hosting which is cheap and relatively easy to build. A way for us to enable our customers to make money or expand the other way that they make money online and make that more valuable is really valuable in their eyes. That’s what we’re betting on.
Rob: What’s interesting is, let’s imagine an alternate history or an alternate present. We’re in the Marvel Cinematic Universe here, where we forked timelines. Podcasting doesn’t exist, that term doesn’t exist. If you were to still come up with the idea of sending audio files to a team privately, we didn’t call them private podcasts. We called them private asynchronous audio communication. It’s a private audio broadcast.
Craig: Such a better term.
Rob: Isn’t that great? Naming is the best. While they’re both asynchronous audio, it’s really a different animal in my mind. I know the mechanism is the same because it’s an RSS feed with audio being downloaded. I guess getting jobs to be done is maybe a better way to think about it. When I think of the job to be done of Startups for the Rest of Us, it is mass consumption. As many people that can get value from this, spread the word bootstrapping, and mostly bootstrapping is a viable strategy versus venture capital.
Private podcasting, as soon as I put a wall around it, whether I charge for it or not, becomes this very almost intimate, exclusive. It’s premium if you’re paying for it or it’s intimate communication if you’re not if I’m just sending it to my company. I guess I’m imagining there are people out there who never want to record a podcast. They don’t want to be a podcaster. They don’t want to be a radio personality or something. It’s like I have no aspiration to do that, but they’re the CEO of a 150-person company, and jumping on the mic to talk to their team, I bet, is much more appealing.
They don’t have to perform. They can say, hey, this is the state of our company this week, so and so, we have a new employee in this department, this person got promoted, three more new hires coming through, this is our MRR, whatever. I can just imagine giving either weekly or monthly updates. It’s a completely different approach than what you and I think of as podcasting.
Craig: Yeah. A lot of people and even Matt Maderos on our team talks about it. It’s so much easier to create an episode for our private podcast that we have with our audience, our most engaged fans. We have a private podcast that we share with them. He says I love making those episodes because I know it’s going out to a few hundred people and not the thousands of people that our audience podcast goes out to. We absolutely see whether it’s for a company internally. They say the same things that the CEO is comfortable hopping on the mic because it’s only going internally. It’s not going to the SEC or something where they have to worry about all of the things you have to worry about with your material being out there for everyone in the world to consume and criticize.
We’re having a lot of people come in and say, I want to have a podcast for the parents of my local soccer club or something. It’s like, all you’re wanting to do is just control who has access to that content because when you record this podcast, anyone in the world can listen. If you know that only 20 people are going to listen to this podcast, your approach to it changes a lot when it comes to creating the content. The biggest hurdle for any new podcaster to get over is, what the heck is an RSS feed? How do I upload my podcast to Apple, which is not what happens?
All of the distribution stuff is, even today, like a nightmare, for people to understand. What if you just create a podcast and then put someone’s email address in, and they get it? That’s so much easier. We’re seeing a lot of people build them and say like, I don’t care how many people listen. I’m going to invite the people I want to listen to this private podcast, and they will get it. It’s just not hard. It’s really streamlined. We’re seeing it used in a lot of different ways, which is super exciting. I think we’re at the very leading edge of how people utilize this as a communication tool.
Rob: Yeah. That’s what I like about what you’re saying, it’s what I was trying to communicate, but did poorly a couple of minutes ago when I was talking about the asynchronous intimate audio or whatever. This is a completely different thing than a podcast. We’re going to call it a podcast because that’s what we’re familiar with, but I think this is an entirely new and very massive market. I can imagine communicating with my extended family. There’s a Facebook group with 20 of us, all the cousins, aunts, and uncles. We post periodically, this and that, but that could be interesting.
I can imagine communicating with my team. I can imagine communicating with TinySeed founders. What if some of these Slack groups were just replaced by people podcasting? You and I are part of a small, exclusive group of founders who have this private podcast already. While there is Slack conversation going on as well, I think the bulk of the information is conveyed via podcast. For me, it’s more time-efficient, because I can do the dishes. I can be taking the trash out or whatever and listening to it at 1.5x versus sitting there and trying to type on my phone or whatever. That does raise a question that I have about it. This private podcasting feature, is it broadcast only? Where if I set it up, maybe me and my co-founder or my CEO, COO can get that out to everyone? Can you set it up such that anyone can participate in posting audio into it? It’s almost like a group audio experience.
Craig: Today, it is you as the account holder who is the only one who can publish new content to it. In that respect, it is more like a traditional podcast, where this is your podcast. You record the content and push it out and everybody else listens. I do think there, very well, could be a day where it is more like a community, where everyone can contribute podcast content to the feed or whatever you use, and then it goes out to everybody. To be honest, the question that we have is, what’s the best way to handle that?
Rob: Yeah. That’ll be a product decision at some point because I’m sure some folks will ask for it. When I think about it, again, we come back to the example of TinySeed, and whether we’d probably do it maybe within a batch. Today, Tracy and I could set up a private podcast and we could broadcast. Hey, batch three, that’s starting next week. Here’s new info, here’s an update this week, here’s this and that. Longer-term, it could be really interesting for each company to give updates. But then they would need the ability to basically upload audio somewhere, have the permission to have it distributed to everyone.
We’ve obviously had some conversations about it. It’s funny how the lines are drawn. I listen to a bunch of podcasts. I’m like, yeah, I would do that. Anyone who just doesn’t listen to podcasts is like, that’s a terrible idea. We already have Slack. It’s always that the lines are just drawn. It’s like, you either like podcasts or you don’t. Of course, for me, I can’t get enough of them. Wrapping up this idea of a private podcast, I’ve heard you’ve talked on Seeking Scale, which is your new podcast with Andy Baldacci that started four or five months ago.
If folks haven’t heard that, I highly recommend it. You’re later-stage SaaS founders as so many of the two people talking about their bootstrap, mostly bootstrap startups are early stage, and that’s cool. You’re one of the very few podcasts where I’ll say millions of dollars in ARR are being thrown around. The two of you are just more advanced. You’re thinking about the not later stage, but you think about mid-stage stuff. The team is now 8 or 10. It’s not, how do I get my first 10 customers?
Anyway, Seeking Scale is the podcast, folks. You should check out. The reason I bring it up is, you mentioned on there that you are actually building mobile apps as well for the private podcast side because folks haven’t seen this. Once you upload an mp3, whether it’s a private or public podcast, that mp3 is there, and if someone downloads it to their phone, even if you were to say terminate that employee, they still have those mp3s. They still have essentially what could be proprietary information. If you have a mobile app, where that’s the only place they can listen through it, you can control their ongoing access. They can never get the raw mp3 out. Am I understanding that correctly?
Craig: Yeah. I mean, there are a lot of reasons that we’re developing the mobile apps, and they will be for iOS and Android. It’s the reason a react native. First and foremost, is security, because the first, and second, and third question that we get from our corporate clients is, how is this controlled and who has access? Can they download the file, and all this? We made a very conscious decision in the first iteration of this that it will be streaming only. There will be no file downloaded to the phone. It can never be taken with an employee afterward.
There is no visibility to the RSS feed at all. They can’t copy it and share it with someone else. All of that is vertically integrated from our system into these mobile apps. The other reason we did it, and actually the reason we started it is, you talked about this line in the sand of people that are podcast fans and people that are not, there are a lot of people that get added to a private podcast and they receive from us like a special unique RSS feed just for them. They copy this and they go put it in Overcast or Apple podcast or whatever for someone that’s not a podcast listener, and even people that have no idea how to do that. We said, well, what if we just have an app? The call to action is to download this app, put in your email address, you get a magic link, authenticate into that, and you automatically get all your stuff.
To a lot of people, that is an easier ask for a brand or a company to say, hey, download the Castos app, put in your email address, and voila, you’ll get all of your stuff right away. From a technical perspective, it’s just so much easier than to understand an RSS feed. Don’t click on that because it won’t open in mobile Safari, because it’s just a mess. If you do open it, it looks like a jumbled mess of code. Download the app, and you’ll get all your content once you log in. Then the obvious next step for us is like, hey, instead of just one-way communication, what about quizzes, surveys, announcements, and other things we can allow our customers to do to interact with their audience members in the app?
The downside of podcasting to a large extent is it is a one-way street. You publish this, it goes out, you have no idea what happens right after it goes out. You have no way to get feedback directly in the place where people are listening. We, having our own app only for private podcasting, are going to allow us to enable our customers to communicate and get feedback and dialogue with their listeners much more, not to mention a lot more analytics. We control the playback mechanism.
Rob: Yeah. It sounds like it’s security, it’s certainly the ease of use, usability, analytics. There are a lot of things that are going to go into that to make it a better experience. Since I’m a web person, I’m web first. I think SaaS and building apps and this and that, but when I think of building a mobile app, I think oh boy, now we have another codebase to maintain where it’s a different skill set, all this stuff. Has that been difficult for you and your team to tackle?
Craig: Yeah. It’s been wonderful. Victor from Trustshoring, he’s been to a lot of MicroConfs. He’s a friend. He runs an agency that connects companies like ours with specific dev shops, mostly in Eastern Europe connecting us with the folks who are developing our mobile app. They are amazing. They’re a react-native shop. That’s all they do. We were able to pretty easily say like, okay, this is what we want. This is what we have from our end. These are the APIs that we need to build. You guys need to go build all the front-end stuff in the player. They’re amazing.
Rob: That’s cool. I’m glad it hasn’t been this struggle that made it out to be in my head.
Craig: In hindsight, the thing we did right is we didn’t try to peel off one of our developers that is a PHP developer to go and learn react native is. We just said, hey, let’s go spend the $20,000 that this will cost and hire the specialists.
Rob: Yep. Not your core competency.
Craig: Yep.
Rob: I’m glad that you’re coming on this week. It’s a bit fortuitous. Apple made their big announcement. I know they didn’t invent podcasting because it was open standard stuff, but they effectively popularized it 15 years ago now, or whenever it was. Then they just let it languish, and then they’re like two or three years ago, yeah, we’re going to give analytics, finally. I don’t think those are that great when I log in, but it’s like they fit and start.
I’m curious to hear your thoughts. The only reason Apple cares about this at all is because the space has heated up because Spotify is now dropping $200,000,000 to acquire Joe Rogan’s podcast. Apple is like, we really dropped the ball on this. Now, they’re launching paid subscriptions on Apple podcasts, which is something that in my opinion should have launched a decade ago. I don’t know why this is a very logical next step. It’s almost like they pulled Internet Explorer, who just won the whole market, and then just stopped.
They took everybody off the IE browser, and just let it languish. That’s what Apple podcast feels like to me. They announced, okay if you’re a creator, you pay $20 a year. You’re part of the Creator program. There’s no ability for you to see who has subscribed to your premium content or to contact those subscribers except, of course, through the podcast. You can price subscriptions based on subscriber location. I believe there are monthly subscriptions. There is no RSS feed. There is no connection to your other podcast.
Apple takes a 30% cut of revenue of the first year and 15% in subsequent years, which I think is interesting, and the content has to be manually uploaded to Apple’s platform on an individual episode basis. My editor or Castos Productions, your team, would upload it into your WordPress or your Castos account, and then they have to go and upload it into Apple. I’m actually reading this all from the castos.com blog. It was a post from April 21st. It says, welcome Apple to the private podcasting movement. You have thoughts. What does this mean for you? Do you want a standalone tool? Blah, blah, blah. Walk us through how you think about this as someone who has been knee-deep in podcasting, running a podcast production and hosting company for the past several years? You’re as close to the metal on this as anyone I know.
Craig: Yeah. We always try to be really honest, Rob, going back to TinySeed Tales. I think part of me, I’m kicking myself a little bit because you and I have had conversations about this concept for years. While I am a bootstrapper at heart, and I’ve enjoyed being a bootstrapper seeing this, I say, […] what if we’d raised like $5 million three years ago and built this? We could be the standout leader in this space. We didn’t and we’re not, I think we’re at the very edge of this with what we’re doing.
But Apple offering it natively on their platform is really different from what we do. As I look back over my thoughts around this in the past, podcasting 6 ½ years, I could have done this earlier. I don’t have regrets but definitely, that is something I take away. It’s like, the next time I have a hunch like this, I probably will just jump on it because I don’t want to look back and say, oh man, I could have, should have, would have. That being said, this is not for everybody. This is for the creator who won the majority of their audience is based in North America, I would say.
Apple podcast is the most popular listening platform in North America by far, but for the younger generation and outside of the US, it’s Spotify. It’s not like this being available on the Apple podcasts is going to reach even half of your audience these days, depending on who your audience is. I think that for certain people, this is really great because they’ll take 30% just like the App Store does, and then 15% in subsequent years. But selling on Amazon versus having a Shopify store, you have no concept of who your customers are. You can’t follow up with them afterward. You can’t do nurture sequences and up sales and coupons, and all that stuff afterward.
For the person that, we use the term, you want the easy button to make some money from your podcast, this is a good first step maybe. If you have a more sophisticated brand, funnel, upsells, and cross-sells and things that you want to do with your podcasts and folks that listen to your podcast afterward, then I think this is not the thing to do, because it is just like a siloed thing. Spotify certainly will come out with their own version of this at some point and it will be the same. This is in its own walled garden. It doesn’t talk to anything else. It certainly wouldn’t integrate with your membership platform. That’s how I feel about it. It’s like, if all you want to do is make a few bucks off your podcast, this is a fair thing. If you have different goals or aspirations or plans for your brand and your content, then this is not the tool for you.
Rob: Yeah. The deal-breaker for me is that you don’t know who your subscribers are. That right there as a serial entrepreneur who has run many businesses, the long-term value is in those relationships. It’s in having access to be able to contact people. I mean, that the old internet marketing expression was, the money’s in the list. It’s like having a large email list or having a large, back in the day, it was addresses, physical mailings before the internet. Well, I don’t think of it as like the money’s in it. I think the long-term relationship and the long-term value is really knowing who your customers are.
That’s why, I think, selling my book directly versus selling on Amazon, I’ve always really struggled with this decision because I want Amazon to fulfill it, but I also really want to know who’s buying my book. It’s been the same thing. It’s not a perfect analogy, but I think of it as the difference between Vimeo and Wistia. They both host videos, and they’re both private in terms of they’re not like massive YouTube distribution because they’re all private in one way or another. Vimeo is $100 a year or something, $100 or $200. Wistia is $100 or $200 a month, it’s way more expensive. Vimeo is for filmmakers to go on there for the experience. It’s like, I’m a maker, I want the easy button, and I want to get stuff out there and it’s inexpensive.
Wistia is for, I don’t want to be more sophisticated or just more business-oriented or more people who are thinking about the business, not just about the act of creation, and maybe there’s a parallel there. Did it feel like a punch in the gut when this announcement came out? Was it pretty quickly like, our use case is that what we’re supporting at Castos is so different from this anyway that I don’t know that it’s going to have a major impact?
Craig: Yeah. Mostly the latter. Mostly currently, and even in the future with our product plans around like premium podcasting, being able to charge for your content directly in the platform, we serve a different type of customer to a large extent than folks that would really want to jump on this bandwagon with Apple. That’s definitely how we feel this is different from what we do. The really good thing is that this legitimizes a lot of what I’ve been saying for a while like hey, ads are not the only way to make money from your podcast. This concept of private podcasting or premium paid access to a private podcast is a thing. Then the biggest player in the space just made it a thing. We can go around and talk about private podcasts in email, and everyone’s going to know what we’re talking about in between that in this episode. Everyone’s going to know what we’re talking about. I think that’s a huge win for the industry.
Rob: Yeah, big time. I was waiting for Spotify to come out with this, to be honest. I don’t know, maybe they will. I guess you’ve hinted, you’re like, you think they’re going to come out with it as well, but I just thought that would beat Apple to the punch. Apple really has not innovated in the podcast space for so many years. I’m surprised.
Craig: Yeah. They’ve talked about it, but it’s not available as of today. Yeah.
Rob: Right. As we move towards wrapping up, I’m looking at your MRR graph. Most people listening know that you’re in TinySeed batch one. Of course, we have graphs of all the revenue of the companies. The last three months, bravo, man. It’s a rocket ship, very strong three months of growth in terms of just raw MRR and there’s a nice little kick upward and to the right. You already had solid growth going and then it’s accelerated. What’s happening there? There are a lot of listeners who obviously want to know, how can I grow faster? I’m curious, what learnings have you taken away that I think have helped you achieve this growth?
Craig: Yeah. It’s tough to know exactly just because there are so many moving parts to a business even our size, we’re 12 people. The one thing that I can pretty solidly point to is, we have been focusing from a product perspective over this year, the last four months, on I’d say quality, but like fine-tuning aspects of the platform, revising onboarding, UX fixes, updates to things, and spending half of our development time on that these days. It’s really all that’s changed. I have to attribute this to that shift. Anyone who knows me well is like, it’s not me. I’m just not a super detailed person.
I’m definitely not a designer like we work with an absolutely fantastic designer, who has helped us a lot with all this. I think the lesson I would take away is, my inclination is always to build more features. We have a lot more features on our platform than a lot of other hosts. It’s because I’ve just been beating this drum of like, we need transcriptions. We need YouTube republishing. We need integration with Headliner. We need video support. We need multiple users. We need WordPress integration.
We have a really complex platform compared to even a lot of market leaders for as old as the company is. We’ve been driving hard for new feature creation for a long time. We said, hey, we need to not take a step back, but focus some of our efforts on really perfecting certain aspects of the product. That’s all that’s really changed where I have to attribute the growth. It’s like, we’ve increased growth by 50% versus the other months. We’re growing about 50% faster in the last few months.
Rob: Yeah. That is an easy trap to fall into, more features because it feels like the features are the headline. The features are what you can read a blog post about. You can’t write a blog post about, we improve the usability of the screen. We improved our onboarding. No one cares. Yet, they move the needle perhaps more than the splash. When you think about the marketing or sales funnel for a SaaS app, there are a number of visitors coming to your website, then there’s how many start a trial or request a demo. Then there’s how many go from there to pay, then there’s churn.
How many sticks around? There’s the sheer volume of them coming in, and then there’s also the percentage drop off at each base. So many of us just want more at the top of the funnel. In this case, you’re basically saying, when you say you’re focused on improving, is it a lot of usability and user experience improvements?
Craig: Yeah. Just like, what I would consider edge case bugs, they don’t exist anymore.
Rob: Right. Obviously, with Drip in my experience, when Derrick and I were running a product there, it was always a balance. To be honest, Derrick and I are pretty picky and we’re a little pretentious about the products we use, I’ll just say that. When I use a product that’s half-ass, I get pissed off. I’m like, these people don’t know what they’re doing. I’m the wine expert who’s drinking Merlot or the coffee expert who says, well, Starbucks is so bad. I’m that way with the usability of apps.
I think if anything, Derrick and I tended to veer in that direction, where we would—you can be too perfectionist about it, and you can make every little piece work so amazingly well, but then you’re not moving fast enough on other fronts, perhaps, or you’re not doing enough marketing, or you’re not doing enough sales, or whatever. You neglect other areas of the business. That’s where I think it is this balance. Whether you think of it as a pendulum swinging back and forth. With one Sprint, if you do Sprints, we’re building features. In the next one, we’re fixing bugs and improving usability.
Whether you’re doing both of those at the same time, it would just be so easy as founders if you could just focus on one thing. Don’t you just want to focus on one thing and have that be the only thing? Yet, there are 10 things and they all need to be focused on at the right time, or maybe all at once. You don’t know what the incomplete information is. It’s like, […] which one do we do next? Which one moves the needle the most?
Craig: Yeah, absolutely. There are two additional data points there. One is from a metrics perspective, the thing that is improved is churn. We’ve always had very good churn, but we’re having close to 0% churn in the last two months, which makes growth really easy because we’re having customers upgrading now, which is going back to private podcasting. We have an expansion revenue built into the product now. We’re getting close to 0% churn, which is amazing. We were at 2% before.
The other thing from a team perspective is for about the last six months, we’ve gone into this practice of having one of our developers beyond what we call support rotation each week. That developer is the only contact that our support team can have when they need to escalate a ticket. That developer spends about a third of their time chatting with customers and advanced troubleshooting things, and the rest of their time fixing bugs for that week. That’s really how this focus on squashing bugs, and product and quality stuff came about. I think it’s both products and squishing those bugs and getting those things resolved within that week, but also just having everybody be more clear on what customers are saying and taking care of them better. From a process perspective, it’s been a really cool thing to see happen.
Rob: Yeah, that’s really nice. The way that we structured it at Drip, too, although we didn’t rotate. Are you rotating through your engineers?
Craig: Yep.
Rob: They take a turn. We had a dedicated—usually, it was a junior—software developer, a junior engineer that we hire, and we’d say, you are the technical support escalation. When Andy, our support guy, would dig in as much as he could. But truly he was like, it’s a bug, or I just can’t, it’s code, someone needs to look into it, then they escalate to the junior. The cool part about that junior is they would dig into the bowels of the app, of every part of it. They learned it really, really well. They learned all these little esoteric areas because they’d have to dig into API one day.
Then the next hour, they’re over in the park that sends emails or schedules. Then the next part, it’s just completely dealing with SendGrid or whatever. They became really well versed in the app. By the time they start burning out on that roll, which is about 12 months, they’re a pretty solid developer in terms of being able to get into Drip and build it into the codebase and such. We’d hire and rotate into an end. The other approach that I’ve seen is exactly what you’re talking about where each engineer takes a stint whether it’s a week or a few days, usually, it’s a week and you just rotate through it, and they have to be. That’s the week you’re getting interrupted a lot because you have to respond. You have to write code and respond to these tickets.
Craig: Yeah. I think it’s nice breaking the cadence, too. They work hard on features. We’re five developers, so four out of five weeks, and they get a week of different work. Yeah.
Rob: Makes sense. Well, sir, it’s always a pleasure having you on.
Craig: Yeah. Likewise, Rob. Thank you. Thanks for having me.
Rob: Folks who want to catch up with you—normally I say Twitter handles, but you don’t really hang out on Twitter. You’re the Craig Hewitt if folks want to ping you. Thank you for coming to the show. Really, Seeking Scale, I think would be where they can hear from you every week. Then Rogue Startups, you record with Dave Rodenbaugh a couple of times a month, it seems like.
Craig: Yep. Either of those are great places. Yeah.
Rob: Awesome, man. Thanks again.
Craig: Thanks, Rob.
Rob: Thanks again for joining me this week. If we’re not connected on Twitter, please reach out, @robwalling. If you’re a bootstrap, or mostly a bootstrap founder, and you want to be part of a community of more than 2000 other founders and aspiring founders, go to microconfconnect.com. It’s totally free. You can apply there, and we’ll let you in. It’s our Slack group, where we hang out and we talk about all the things—jobs and hiring, marketing, we talk about coffee, whiskey, and just whatever you can imagine. Whining on the Yacht I think is one of the channels in there. It’s a good group of people, really positive and supportive, and you should check it out, microconfconnect.com. Thank you again for joining me this week, and I’ll be back in your earbuds again next Tuesday morning.

Hello and welcome to this week’s episode of Startups For The Rest Of Us. I’m your host, Rob Walling. Every single Tuesday morning for more than 10 years, we’ve shown up and we’ve shipped an episode. It’s about building ambitious startups. These days, we focus on bootstrap and mostly bootstrap SaaS, but it’s always been about founders, developers, designers, and people who want to start companies, but don’t want to jump on the venture train, but they still want to build amazing businesses. They want to do things that are not only interesting for them, but be in control of their own destiny, and want to ship something into the world that people use. They want to have the freedom to work on what they want, they want to have the purpose of working on interesting problems. They also want to maintain happy and healthy relationships.

That’s what Startups For The Rest Of Us is about and that’s what we’ll continue to focus on. Even as things change, as the landscape has changed so much back again, 10, 11 years ago, we were talking about info products, iPhone apps, one-time downloadable software, and SaaS was part of that, too. Back in the day. It was all about bootstrapping because it was such this binary difference of being in control and giving it all away to venture capitalists with their crazy terms. But things shift over time, we look at problems from different angles, and we take the best information that we have and we make smart decisions from them.

The show has many different formats. Sometimes there’s a conversation between myself and a founder or subject matter experts. We have startup news roundtable episodes where we cover news related to bootstrap and mostly bootstrap founders. We have QA episodes. We have breaking news episodes. All kinds of stuff. This week, I’m flying solo on a Q&A episode, which is something I do every once in a while. We have a great backlog of listener questions. It should be fun to run through a few today.

My first question is from Joe. “Should I switch to a C-corp to take advantage of QSBS in five years?” He says, “Hi Rob, longtime listener, first-time caller. Thank you for all you do for the mostly bootstrap founder community of which I have been a quiet participant for many years. My question is around QSBS,” For the listener, that’s Qualified Small Business Stock. “I’ve been fortunate enough to have had a couple of asset sales of my former SaaS businesses. I’m working on a new SaaS business now that I think I can grow and sell in five years. I’ve been operating under an LLC for all of my apps and I’m considering switching to a C-corp to take advantage of QSBS to save on taxes if I’m able to sell it in five years. Do you advise the companies you invest in to switch to C-corps for this very reason? Thanks. Joe.”

This is a complicated topic, to be honest. No, I don’t advise anyone to switch to a C-corp for a specific reason because there are so many trade-offs with C-corps and LLCs. Einar Vollset and I actually recorded an entire episode of Startups For The Rest Of Us focused on this question and the trade-offs of the two paths. If you want to check that out, it’s episode 442 Corporate Structures and How the Choice You Make Now Can Impact You Years Down the Line.

QSBS for those who don’t know is Qualified Small Business Stock. I’m now reading from Investopedia. I’m not a lawyer, I’m not a legal adviser, but Investopedia talks about how any stock in a small business that is acquired after August 10th of 1993, the capital gains from that can be zero from federal taxes not from state taxes. This is the US only, obviously. Can be zero if, and there’s a bunch of things. The investor must not be a corporation. The investor—meaning you, the founder—must have acquired the stock at its original issue and not on the secondary market. You have to get it when the company starts.

The investor must have purchased stock with cash, property, or accepted as payment for a service, must have held it for five years at least 80% of a company’s assets must be used in the upper… blah, blah, blah. There’s a limit. I don’t remember what the limit of the company size is, but it’s high. I’m going to say it’s something like $50 million in annual revenue. If you get above that, then you’re no longer a small business. It’s something to that effect. Zero cap gains. Imagine building a SaaS app and selling it for $10 million and paying zero federal cap gains on that.

In fact, Josh Pigford, who was on this show just a few episodes ago, talked about how we sold Baremetrics. He qualified for this and he only paid state tax because he lives in Alabama and they have a tax that he wasn’t exempt from. Is it worth switching to a C-corp? If you plan to run it for five years and sell it personally, that’s not a bad idea. If you plan to pull dividends out, it’s not a good idea because C-corps have double taxation. Where whatever income you make, the company pays income tax on it, and then if you were to draw a dividend, you pay an additional dividend tax on it. Currently, that rate is 15% or it’s 18% if you pull out. I don’t know if your income is above a lot like half a million or a million a year.

If it really comes down to that, there’s no right or wrong answer here and most bootstrap startups are LLCs, sometimes S-corps and that’s because they’re pass-through entities and you can have the money flow out to you and it goes straight to your personal. You don’t have to pay double taxation, but there are many companies, I see in many companies that I have invested in, in fact, the vast majority of companies that have invested in are C-corps. That’s both my personal angel investments and TinySeed companies. But there is absolutely some portion. It’s definitely a minority portion who remain LLCs such that they can run a long-term profitable business that they draw dividends as their payout and they really don’t plan to sell it.

That’s probably how I would think about it. I hope that helps, Joe. Thanks for the question. My next question is from someone who asked to remain anonymous. He says, “Do you have any advice on what sort of offers or arrangements can work for attracting entrepreneurial employees when offering equity doesn’t make sense? For context, where a team of seven now doing north of $5 million a year before payroll and there are a few people in my network I’d love to convince to join the team who have been trying to get their own ideas off the ground for a few years while filling the gaps with contracting and stuff but never really making it. These sorts of folks would be a huge value to the team because they think like entrepreneurs and have the right values. But I don’t think they’d ever want to settle for just a regular old salary job without some other factors to scratch their entrepreneurial itch. Even if they haven’t been able to reach escape velocity with their own stuff. Offering equity feels tough because we’re not based in the US and our staff is all over the world and we don’t have any ambitions of building a big team or trying to exit. We’re just super-profitable and pay out tons of dividends to ourselves. I also kind of feel like giving people some tiny percentage of the company over three or four years still doesn’t really scratch the entrepreneurial itch. Nobody I know with that tiny equity stake in their company seems to actually act like it’s their company or takes meaningful responsibility for the company’s success. Any thoughts on what we could offer people who have dreams of running their own thing that would be attractive and feel like a good opportunity that is still somehow aligned with their goals, instead of feeling like it’s delaying their own ability to try and make their own thing work? We thought about profit sharing, four-day workweeks instead of five, so more time for side projects. But do you have any other ideas? The answer might well be nothing that I am prepared to accept. Thanks, and hope things are awesome for you.”

It’s a good question and I actually know the asker. I know of his business and it makes sense. I don’t think that they’re going to sell the company long-term. I do think they’re going to run it and run it highly profitable and have built an amazing company. Frankly my hat’s off and congratulations on all your success. I do have some thoughts on this. I think some of the options you named if properly engineered, could work. But honestly, my first thought is are you sure that you want to hire people that really just want to do their own thing?

There’s a difference between hiring entrepreneurial-minded employees who maybe think like entrepreneurs a bit, but don’t actually plan to strike out. You can hire them and they will stick around as long as they’re doing interesting work, they’re paid well, and they like who they work with. They’ll stick around for years at a company, especially an interesting start-up like this, a small team where they can have a big impact. But on the flip side, there are those truly entrepreneurial-minded people who, the whole time, they’re just thinking, I want to do my own thing. If you realize that kind of no matter what you do, those folks will go out on their own at some point.

A good example is Derrick Reimer. Derrick, when he and I met, he was 21 or 22 years old and he was hacking on these amazing little SaaS apps that he was building. He won a couple of local startup competitions. That’s where we met. I was one of the judges of these competitions. When he and I started working together, he was a contractor on HitTail, and then he was a part-time contractor on Drip. Then he was a full-time contractor on Drip, and then he was a W2 employee on Drip. At a certain point, we started talking. He was like, yeah, I’m going to go do my own thing because really, I want to be a founder of something. I want to own something.

If you know Derrick today, you know that he’s a gifted and talented entrepreneur. He always wanted to go out and build his own thing. That was at the point where he and I decided, okay, we’d move forward the way we’re going without you having equity in the company. I had bootstrapped and done all these lifestyle businesses. I saw Drip as the next phase of that, maybe a more ambitious version of that, but I hadn’t honestly given a ton of thought to giving out equity. It just wasn’t really in the game plan for a lot of the reasons that this question asker is mentioning. I just didn’t know that it made sense.

In the end, Derrick and I did land at, obviously, an equity split. He took the title of co-founder since he had been around since the early days. But I always knew if we didn’t sell Drip at a certain point that Derrick was going to transition out. He was going to do something where he owned the whole company in essence. That was fine. That was the understanding. Back to the question, do you want to hire those people knowing that the clock will be ticking and almost no matter what you do—unless you give them ridiculous amounts of equity that I don’t think you want to do until someone has 10% of equity, it depends on the person but it doesn’t have to be 10% equity—they don’t really feel like an owner.

To your point of giving someone 0.5% or 1%, it doesn’t tend to mean that much. That’s the first thing I think about is even if someone’s skills and their attitude are a perfect fit for your company, if truly what they want to do is their own thing and you think you’ll have them for a year or two years, think about whether that’s what you want to do. Or do you have these friends who have that attitude, but you do think that with the right motivations, they could stick around for years assuming you plan to run your company for years. That’s the first step. I would give that some thought.

The second thought is I like the idea much more than equity since you’re not going to be selling. You’re not looking for liquidity events. I would really think about profit sharing. I would think since the company is so profitable—obviously, seven employees making millions of dollars, I’m guessing millions of dollars in net profit being thrown off—that’s where I would think about hefty profit sharing. There is an interesting thing of do you know what their motivations are, aside from I want to be an entrepreneur?

The ones who might stick around for the longer term, if they made a solid base salary for where they live and then had the opportunity to really make a big chunk of money through profit sharing and feel perhaps again, on a team of seven or eight people, you can feel like you have ownership. Especially with profit-sharing, not only are you thinking about growing the top line, but you can also think about, are there ways we can potentially save money for being a little extravagant with things. There’s this ownership of both the top line and the and the bottom line because that profit turns into money in my pocket.

If I were going to do any of those options, there’s profit sharing, there are bonuses, there’s equity. I actually covered this in a solo episode, episode 519, Profit Sharing Stock Options and Equity. I talked about bonuses there, too. If you want to hear my general thoughts on when I would use which, that episode is where I would go.

The other thing to think about is if someone could bring so much value that you think even if they work with this for a year and they were only three days a week or four days a week, they would still bring more value than anyone else I could find. I don’t know if that assumption is actually correct, but maybe that is. Then, that’s what I would be thinking. I’d probably start a conversation with a couple of these folks and try to figure out, is it individual motivations that some people be happy to make buckets of money, an egregious amount of money because you do have the luxury to be in that Basecamp situation where Basecamp importantly, has 55 employees because they’ve grown so slowly over so many years and they have so much net profit coming off that they pay all of their people no matter where they live. It’s like the 90th percentile of a San Francisco salary for the role. They have that luxury, most people can’t. You have that luxury, too, in theory. Again, I don’t know all your numbers. But you have the luxury to do things that are outside the conventional wisdom because your company is so profitable and you’re looking for these high achievers.

My guess is if we took four of your friends, there might be one or two of them who would stick around for an extended period of time if they literally made twice as much in salary and had a great job where they contributed, worked with you, and worked with the rest of your team. They might stick around for several years and maybe could put their side project thoughts and ambitions into your company. I know that at certain points, I did that.

I was always working on side projects and then I’d get into a really interesting contract or really interesting job and I would turn it off for a while because that creative itch was being scratched. I was working with really cool people. That allowed me to turn it off in the short term. Then the other two may be motivated by working a few hours a week and making a full-time salary or working a few hours a week and just working on interesting projects with you. I think that’s the big thing is, do I think this is possible? Yes. I almost feel like it is potentially not a blanket approach. It might depend on the individual. Obviously, without knowing the individuals, it’s hard to know. I’d be curious if you brought this up with one or two of them independently and just started the conversation on how that might pan out.

Those are my thoughts. I hope that was helpful. My next question is from Anonymous Hackerman. I’m getting a lot of anonymous questions today. You’ll see why. The subject line is actually Anonymity. He says, “Hey, I have a question regarding Anonymity. I’m currently at a large SMP 20 company and would love to begin indie hacking. But I feel like I’m at a disadvantage as I can’t exactly hack with the garage door open as I’m assuming it would not go down well with my current employer. Do you see any way out of working around this?

First, I’m not a lawyer, a standard disclaimer. The first thing I would do is I would definitely look at my employment agreement and any IP agreements I’ve signed and figure out legally, do they think or could they make a claim to own everything you do even if it’s on your personal computer and on your personal time. There are certain states where that’s allowed and there are certain states where it’s not. Even in those states, some employers still have you sign things that maybe would be inadmissible in court, but you’d have to fight it in court and on and on. But I would at least in my head know have I signed anything that essentially commits everything I own to them so that I know if that’s at least on the table.

Then if I had the means or if I had an attorney that I knew, had worked with, or I could maybe go to Google, I would try to figure out does my state enforce that. Is the state that you live or the state where the company’s headquartered—I don’t know, not a lawyer—but I would try to do some research whether that involved paying an attorney or whether that involved just using the interwebs to try to figure out, do I have a case if I were to try to go on. I‘m not saying you would ever want to fight this in court, frankly, if anything, it would probably be settled out of court as most of these things are. But at least then, you have the information. The first process is 30 minutes of reading through your docs and then the second process is a few hours of either conversation or some research to just get yourself educated on legally what it is.

Then there’s this whole other idea of it not going down well with your current employer because whether they own stuff or not, if the culture frowns upon you doing side projects or you doing any kind of side work, then that’s a whole other issue. It’s not necessarily a legal issue, but it is an issue that could cost you a promotion, a raise, or it could cause them to let you go because there’s obviously a big difference between them having a legal case against you which is a real problem. It’s something that will come up in due diligence if you ever sell. It will come up if you ever decide to raise funding or it can come up and it’s a problem.

Personally, it’s your risk tolerance. I would not mess up if I had signed something that said that someone else owned all my stuff, even done in my own computer or my own free time. I would not indie hack. I would then think to myself, I have three options. I can not work on side projects, I can find a different job, or I can risk it. Of course, I couldn’t risk it if I had signed something. But that would have to be your choice. It comes down to personal risk tolerance.

If I had not signed anything that said that they owned all the stuff that I’ve done and in fact, I will say, at the last salary job that I had, this was 15 years ago, it was right as IP agreements were becoming a thing, especially with developers. I signed all the HR paperwork. When I came to the IP agreement, I looked at it and I don’t even remember if it said they own everything. I just remember thinking, I don’t want to sign this and I never signed it and no one ever said anything. I guess HR maybe didn’t have their act together enough to realize that I hadn’t signed it because I knew I was going to be working on stuff on the side and I needed to know there couldn’t be a case, in essence, brought against me, a claim, a threat, or whatever it was.

If you haven’t signed anything, then you have the choice of being secretive about it and trying to be anonymous online as much as you can be and still launching things. Again, this is your choice. You have to assess the risk tolerance because if you get caught doing this then potentially, you could lose your job, not get a promotion, whatever. I’ll tell you, in my personal experience, I just did it on the sly on the slide. I built some tools and launched them. I acquired DotNetInvoice. I’m trying to think if I would still work there if I was contracting. I honestly don’t remember the series of events. But I was definitely hacking on things on the side. I had my blog, and then I also had software side projects that were generating at the time not a ton of income, but I was definitely coming home nights and weekends and working on them.

There’s no insight. This is such a personal decision and I think a big part of it is getting educated so that you know what you’re actually dealing with and that you’re comfortable with the risks you’re taking. I hope that was helpful, Anonymous Hackerman.

The last question for the day is from Pramad. He says, “Do you think the disruptive innovation idea by Clayton Christensen can help find a niche? Disruptive innovation is the idea that former Harvard Professor Clayton Christensen came up with where a product is targeted at the lower end of a market and which is ignored by the big players. A new company can target this market segment by creating a product that leverages new technology which may not be mature enough for the higher-end market. For example, Google Docs versus Microsoft Word. Do you think disruptive innovation can be applied by bootstrappers to find a niche??

I think this is the play of every bootstrapper, to be honest. Not necessarily a disruptive innovation where you need technology because your disruptive innovation as a bootstrapper is you move extremely fast, you’re extremely capital-efficient, and you only need $10,000 a month to quit your job. You probably only need $50,000 a month or $100,000 a month to completely change your life. You hit seven figures of ARR and if your SaaS app feasibly sells that company for $4 million, $6 million, $7 million, $8 million depending on how fast you’re growing, that’s it.

If you truly are a bootstrap or mostly bootstrap founder and you want to change your life, you don’t need to own a massive market like a venture-backed unicorn land grab startup. Those are your advantages. The way you’re disruptive is what I just outlined, you don’t need all the things that such a large company needs. Leveraging new technology is fine, too, but then that introduces product risk. There are three types of risk when you’re launching a new product. There’s the product, there’s market risk and there’s essentially marketing/execution.

Product risk is, can we build this? If you’re using new technology, the answer might be no. Building Google Maps at the time and Google Docs took a lot of work because it was Ajax technology, they called it back then. It’s just having web apps in the browser that are super interactive and don’t need to refresh every time you submit anything. There are a lot of risks there. There wasn’t a ton of risk for Google because they had a bunch of really smart engineers and billions of dollars. But for an individual trying to build those, it introduces product risk. Most SaaS apps have almost zero product risk, and that’s why you’ll hear me say don’t go build the product because there’s no risk there.

The risk usually is in the market or in the execution. What I mean by market risk is does anyone care? Will anyone buy it? Will you build something that people want? Is there a market for this thing? Can you find a product-market fit? Does it even exist for the product that you’re inventing and usually the more novel you go in, the more new, and the more innovative with those ideas the harder it is to find that. The more you stay in the lane of an existing category, like electronic signature apps, like email service providers, and marketing automation providers, like online scheduling apps, things that everyone uses, the more you need to put your own spin on it. You either need a marketing channel that you own or you need to have enough differentiation in your positioning in your feature set that a certain subset really wants it, but staying in those existing categories helps reduce that market risk.

Then again, there’s product risk, market risk. Marketing or execution risk is can you implement, can you drive leads because you can build a great product and there can be a great market for it. But if you don’t know anything about marketing or sales, building a product and expecting people to find you is just not going to happen. That’s probably the most common mistake that I see with early founders is, especially developers and designers who think that the product is everything, where in fact, it’s 25% of the things and really all the other things, the marketing and making sure you hit the market right, is the rest of the equation.

To summarize, I don’t necessarily think you need disruptive innovation per se. But I do love the idea of entering larger markets at probably a lower price point in a niche that’s ignored by bigger players. I’m going, to be honest, if this truly is your first time launching a SaaS app, then, of course, I would say go back to the stair-step approach, play high school baseball, then go to college, and then play minor leagues, major leagues before you really get to the big time. That would be the stair-step where I would try to build a smaller add-on with one-time sales.

You can hear me talk about stair-step approach on many other podcasts because entering these larger markets is awesome, but if you don’t have the experience, or you don’t have some funding, you don’t have just some prior knowledge of how to do these things, there are so many things that have to fall into place in order to build a SaaS app in order to launch it, in order to market it. It’s quite hard to do that. I think for a first-time founder, it often requires an exceptional amount of luck or an exceptional amount of hard work and skill. I tend to want to do things and recommend people to do things that are repeatable and that don’t need to be exceptional.

They don’t need to be outliers in order to succeed and that’s what I see with the stair-step approach is that you can put one foot in front of the other and you can execute and you pick a small niche. You get it to $5000 or $10,000 a month and that’s amazing. Maybe that one app gets there, maybe have to cobble a few together, then you buy out at your own time. Now you have all the experience of having supported customers, having learned which features to build, learned how to market learned, how to do some innovation, learned how to manage products, learn how to manage developers, and potentially, support people and VAs. You don’t have to tackle that all at once if you try to launch that SaaS app into a large market right at the start when you’re still pretty green on all these fronts.

Thanks for the question, Pramad. No one’s ever sent that question in before and I actually think it’s an interesting mental model for thinking about bootstrapping SaaS.

That’s going to wrap us up for today. Thanks again for joining me this week. I have a favor to ask, if you have posted on Twitter or LinkedIn about Startups For The Rest Of Us or just told a friend that you get value out of it, I’d appreciate it. We’re @startupspod on Twitter and if you feel like these episodes help keep you motivated if they’re entertaining, if they’re tactical or strategic or what have you, I’d really appreciate a shout out, and of course at @startupspod, @robwalling on Twitter. Thank you for listening and we’ll be back again in your earbuds next Tuesday morning.

Rob: Welcome back to Startups for the Rest of Us. This week on the show, I had a conversation with Tracy Osborn about the value of learning 80/20 design fundamentals. We talked a little bit about her book that comes out in a couple of weeks called Hello Web Design. We dig into a few topics that I think are pretty interesting. One is Tracy’s self-published Hello Web Design, and then is now publishing it through a publisher. We talked through her thought process there. We talked about why these 80/20 design skills or design fundamentals are useful to entrepreneurs, or bootstrappers, or developers.
I weigh in quite a bit on that one because that was something 10-12 years ago as I learned just enough design fundamentals. I’m not a designer, but I learned just enough to help me in my work as an entrepreneur. Then we dig into some basic fundamentals, give an overview of a few things in the book. Let’s dive into our conversation. If you’ve been a longtime listener to the show, you’ll recognize today’s guest. This is Tracy Osborn. She’s been on several episodes of Startups for the Rest of Us. You can find out more about her at tracyosborn.com.
Today, we’re going to be talking about her new book. Actually, it’s a revised version of an older book called Hello Web Design. She self-published it originally a few years back and now, she is publishing it through No Starch Press. This is a publisher who is cranking out those hardbacks? I think I saw a photo of a pallet.
Tracy: Yes, they upgraded it from paperback to hardback which was a nice little compliment on their team’s end because they were like, we’re going to go ahead and increase the quality. There’s what we call the little binding that’s on the hardback so it can be a contrasting color. They added all sorts of little details to it which was really awesome.
Rob: That’s sweet. A lot of us, I’ve self-published a couple of books and they’re all paperbacks because hardbacks are just too cumbersome. You have to buy them in bulk. They are more expensive, blah, blah, blah. Is that legit?
Tracy: Yeah.
Rob: That kicks off the first question. There are folks in the audience, a lot of makers who are doing things other than software. A lot of folks are going to publish books. We saw Keith Perhac published in TinySeed batch 2. He published a book about marketing funnels. I think a lot of folks are doing it even when they’re SaaS founders, as not only marketing. They have that expertise and they show it. You self-published this, and now you’re going through a publisher. There are obviously a lot of pros and cons to both approaches, but talk us through that decision process.
Tracy: Yeah. I started self-publishing books, not with Hello Web Design. It was with my first book that’s called Hello Web App. It was a book to teach beginner web app development. Like a lot of other startup founders, I was a founder. I started a company called WeddingLovely. I learned a lot about the process. I taught myself how to code with my startup. When I taught myself how to code, I looked back at the experiences I had to learn to code before launching WeddingLovely. I went to school for computer science. I end up switching over to art and there’s always the horrible experiences I had.
I looked at self-publishing a book as a way for me to have a fun side project because I was burnt out in my startup, but also to teach programming the way that I thought it should be taught after I taught myself. I went to self-publishing because I read all those things about people who work with publishers. Actually, No Starch had given me, for Hello Web App, I reached out way back in the day and asked them, would you be interested in publishing this book? They said, yes. I ended up saying like, actually never mind, I’m going to self-publish this instead, because the lure of self-publishing is you get to keep 100% of your profits.
It just takes a lot more work because you don’t have someone who’s printing for you. You don’t have someone who’s helping marketing for you. I was at a point in my life of working on a startup and needing something else to occupy me. I did a whole Kickstarter, my background is in design. I did all the design myself. It was a really fun process. I self-published Hello Web App and Hello Web App is aimed at designers.
When I was looking for something else to do, Hello Web Design came about because I have this background in design. I realized I can do the same thing for the other side of the coin. I could write a book teaching design to developers, marketers, and startup founders. The same process as before, this is quite a few years back. I wrote the book. I got people to help me edit it. I put it there on Kickstarter. Kickstarter by Hello Web Design was way successful. I think I got $22,000 which was awesome and helped me do the whole printing process.
Maintaining the book over the next year was easy enough, but then I started working at TinySeed. Continuing the marketing and continuing the promotion for the self-published book became harder and harder because my time was wrapped up in TinySeed. I looked at Hello Web Design as being more of an Evergreen book as compared to Hello Web App which was a programming book. Django and Python, those things are changing so fast that a publisher wouldn’t want to upkeep that.
With an Evergreen book, I thought that there was a good opportunity that a publisher would want to see the success of what it had done so far through Kickstarter and through the sales I have done, and want to bring it into their inventory. That’s basically what happened with No Starch. I went back to No Starch. The reason I reached out to them before, was the reason I went back to them is that most authors I talked to had a really good experience with No Starch as compared to some other publishers. I said, hey, I already have this book. It’s written. It’s designed. I actually thought I was just going to sell the content to them but because I designed it, they decided to just keep everything. We did a whole round of updates to bring it into their style. But the book essentially looks exactly like what I had designed myself which was really nice seeing their confidence in the book and confidence in what I’ve done.
That’s essentially the long story short of going from self-publishing a book to publishing a book. What I learned is that, I think a lot of self-publishers out there whose content is Evergreen, but they’ve gotten to a point where they don’t have enough time to support the book, or maybe to do more marketing. Maybe they’re seeing the sales drop off. Selling the book’s content to a publisher could be the next step for them.
Rob: Right. When you do that, you get an advance, and then the publisher keeps the majority of the revenue. You basically get 10% or something. I’m making up numbers. I don’t know your contract. It’s sliding. It’s like audio, you can get more and if it sells more, there’s usually tears and all that stuff. There’s a contract, and then they essentially own the copyright at that point.
Tracy: Exactly. No Starch is upfront with the advance and the percentage that you get. I can’t remember what the exact numbers are right now but essentially, I got a few thousand dollars. I think I’m keeping 10% to 12%. It’s not that much. But again, I was just done with the book at that point. I didn’t want to go through another Kickstarter campaign or another press push especially again, I’m working at TinySeed. I’m very busy at TinySeed. I don’t want to do all that.
It was nice to have this company and be like, okay, cool. We’re going to help run the marketing. It does give me an opportunity to say, I am now a published author because before I felt that was silly. I was saying, I self-published, a lot. Now I’m like, I am actually a published author. It allows me to say, hey, this book is coming out again. I can use this to pitch conferences. I can use this to pitch to other press.
I can use it to start doing conference speaking, as COVID, hopefully, it’s going to get better and conferences start up again. I would like to do some conference speaking again and that’s why I used the book before. I did quite a few design panels and talks beforehand. It was an opportunity to bring it back into the spotlight without having to do a lot of work for it.
Rob: Right. It’s an interesting way to think about it—self-published at first, such that you get the lion’s share of the profit when you’re marketing to your own audience. That’s the low-hanging fruit as if you have your email list or Twitter following, your Insta following, or whatever. You do capture that revenue and then, as a subsequent step, you’ve gone and done this. I’ve been talking to Sherry because she just signed a book deal. It’s a book about grief. She also had a similar thought process.
She did not self-publish that first although, in her first book, The Entrepreneur’s Guide to Keeping Your […] Together, we did self-publish. Her thought process there was, a book about grief is definitely more of a horizontal book. It’s just widespread. The audience is much larger. Frankly, even across her and my followings, it’s not going to have the same amount of traction as The Entrepreneurs Guide. Going through a publisher gives her reach because the publisher already has this audience.
These audiences are the people who expect. Like No Starch already has designers and developers looking. It’s a more technical publisher and similar to Sherry, her publisher Sounds True. They publish a lot of psychology, mental health, and spirituality, and that kind of stuff. This is an intersection of a lot of that. I always struggled. I’ve only self-published books. I haven’t gone through a publisher. In fact, I did talk to several publishers in the early days when I was writing Start Small, Stay Small a decade ago.
I did start talking to a few of them about the potential of publishing. I think for me, given that I had the audience, I didn’t want to give away 90% of the profit. I was willing to do the work and I’m honestly pretty interested in doing the work like I wanted to learn what it was like to actually have a cover designed and typeset it—typesetting is not the right word—but pick the fonts and just make the book happen and buy an ISBN. I wouldn’t do that again. This time, I would hire more of that out. But it is an interesting trade-off. I used to be more black and white about it like, well, the publishers take everything. But there’s a lot more nuance to this I think than people realize.
Tracy: Yeah. Again, you can self-publish and then move onto a publisher. It’s something I never realized or never even thought about when I first self-published my books. Now, I’m just trying to share the works. I know there are so many people out there who have written really great content but don’t have the time to promote it. If that content just fades away, there are other opportunities to share and get 10% of the profits and get an advance and whatnot, not a lot of money. Not as much as if you did the whole press push again, but just enough that it can keep that content alive.
Rob: Let’s mix things up a little and switch topics because I want to talk more about the content of the book itself. It is effectively teaching fundamental design skills to entrepreneurs, or to developers, or anybody really. The first question that comes to mind is why are these design skills useful to the Startup for the Rest of Us audience? There’s a lot of developers. There are some designers. There’s a lot of mostly bootstraps and bootstrap founders. Why should they care?
Why might they want to go out and pre-order this book for example? By the way, nostarch.com/hello-web-design, and we’ll also put that in the show notes, obviously. But the book is $20 and PDF $25. Is it a hardcover?
Tracy: It is hardcover.
Rob: Yeah, that’s crazy. That’s actually relatively inexpensive.
Tracy: It is a shorter book. That’s one of the reasons why, while it’s a hardcover, it’s $25, but I think it’s going to look really great.
Rob: Yeah. Why is this important to an entrepreneur or bootstrapper?
Tracy: Right. I think a lot of my career has been around how great it is to have skills in multiple areas, having just enough skills in sales and marketing and development so that I can launch these projects. I’ve self-published these books, but I actually have a whole platform that I use to sell them on my own and called them Hello Web Books. It’s a whole selling platform and dashboard. I have my videos there. I have all the content from my books there.
People can log in to this website and buy the books, and read everything. I’ve coded all of it. Because I could do every single bit of this, I could do the design. I could do development. I can do the marketing for this platform. I’ve been able to do more faster without having to rely on people, rely on hiring contractors, and going through that whole process of working with other people. It’s been really great to just do it myself and get it out there.
When I talk about design skills—and by design, I mean not HTML, CSS, frontend development stuff—I’m talking purely about the visuals, the user interface, user experience. There are so many people out there, their bootstrap companies are working on launching a side project. They’re working on their first SaaS. The design side of it, if you don’t have a background design can be really intimidating. You know that’s what the customers are seeing. You know that’s what the customers are using. I wanted to write a book so that people can be more efficient. They can be more unicorns where they can get just enough design skills so that they feel comfortable designing these interfaces themselves, so they get their projects out faster.
Not just interfaces. This also applies to slides if you’re doing talks and whatnot. You’re doing a keynote or those other platforms. Designing your slides, designing your personal website, designing your SaaS, if you can do the design yourself, I think you can do a lot more. This book is different from other design books because I’m not teaching you to become a designer. I don’t go into this theory. I don’t go into all those little skills that you’d want to know to be a proper designer. This is just like the shortcuts, the fundamentals, and the shortcuts. They were a little dangerous.
Rob: Right, 80/20.
Tracy: Yeah, the 80/20 of it. You can feel comfortable doing it yourself. If you want to become a designer afterward, if you decide that you love design, you can use this book as a platform to then read more traditional learned design books, or you can just take this as a basic set of skills, and just so you can launch your projects and do the design faster.
Rob: Right. A couple of things, earlier, you said unicorn and you didn’t mean billion dollar evaluation. You meant you’re very unique like you’re both a designer and a developer, or designer, plus developer, plus entrepreneur, whatever. There’s a big piece of this that I want to drive home what you’ve just said. It’s that the less you have to—especially in the early days when budgets are tight, time is tight, timelines are tight—rely on someone else, like a contractor to get back to you, or even one of your team members who might have other priorities that slow things down, it either costs money or costs time.
I’m not a designer and never have proclaimed to be, but I learned enough. I wish Hello Web Design had been around at the time, but I learned enough and dug around on the internet and read a few design books such that I could download—let’s say 10 years to 15 years ago when I was super bootstrapped and super cash strapped—landing page templates that I would buy on ThemeForest or something for $10 to $15, and I would put up landing pages.
They would look good enough. It’s 80/20. They were not phenomenal. I didn’t design it myself but the concepts you talk about in this book are things like using a grid, colors typography, whitespace, layout and hierarchy, user experience, images and imagery, and all of that stuff, I know just enough that I can get a landing page up and it doesn’t look like crap. You also mentioned slides. Sometimes I have a designer help me with my slides and other times, I’m able to put them together myself.
If I’m able to put them together myself, it’s so much better because I don’t have to rely on someone else. Even blog posts and long essays that I want to add imagery to or add balance or break up walls of text, this type of thinking helps. I’ll bring up another example. Anytime I work with a designer, if they’re a phenomenal expensive designer, then I don’t really need to know much. But I’ve often worked with designers due to budget who are good but not great in every area. Like when we redesigned startupsfortherestofus.com, for example, the designer was good, but we were on a budget, obviously.
I had quite a bit of feedback that I think made the design look better. He had a good concept and a first step, but I remember looking at it being like, yeah, these things are off. Again, it’s not that I could do the design, but I could tell what was off. It’s not that I could do the design but I could tell. I have enough taste. Taste, I’m defining as just knowing a lot of these concepts, these rules of thumb of like, there should be more whitespace here or there are too many colors, or why do we have five fonts on this page.
Those weren’t actual examples that happened. But they can, if you hire an inexpensive designer, if you go to Upwork and hire someone for $15 bucks an hour, you might need to know these things in order to wind up with it with a good product.
Tracy: Yeah, exactly. There’s a whole chapter in the book, I titled it Training your Design Eye. A lot of people will say like, how do I know what’s good design? It’s knowing the principles and knowing the fundamentals that you talked about. But there’s also a part about thinking critically about other designs that help a lot of people who are not designers themselves to pick out what makes a good design.
If you get to a website, and you’re like, dang, this is a good website, take a moment and break it down. Try to think critically about what makes it a good website because the more you insert that into your brain, the more you can regurgitate it later in your own designs. It could be a phenomenal experience like the NAV is just great. Maybe it has a really nice user experience of the NAV. Maybe you notice that the illustrations that they’re using are particularly nice. There’s a lot of whitespaces.
I do some of these breakdowns. I did one quite a while ago. Maybe I’ll give it to you for your show notes where I broke down SavvyCal’s website. I listed out all the little design details on the SavvyCal website. People can notice those details and then they can better remember them when they’re doing their own design. It’s kind of like that critical thinking part when looking at good design. It’s going to help people become better designers, or at least become better at seeing and being able to critique designs that people give to them.
Rob: Right. SavvyCal is a good example because that’s obviously Derrick Reimer’s app. Most people will have heard of him as listeners of this show, or of The Art of Product Podcast. SavvyCal is such a good example because Derrick is the unicorn you mentioned earlier. He’s a full-stack developer plus designer, a really good designer, actually. Every site he has done, because I’ve worked with Derrick, gosh, for almost a decade.
We don’t work together anymore. But he helped me with HitTail then Drip, just years and years of working together. I was always struck by his designs which are very simple. They’re sparse. They are minimalist. Yet, it looks easy. He makes it look easy. I’m always like, how did you do that? I’ve sat and watched him for hours. I’ll appear over and watch his design process. I’ll watch him, look at his screen and watch him just take things away, and just keep it very simple.
I remember that SavvyCal breakdown that you did. It looks easy, but it’s not like his level of design because I’ve sat down and tried to kind of do something that’s simple and it looks simple. It doesn’t look good. It doesn’t look as sophisticated, I’ll say.
Tracy: Yeah. That relates to actually the first half of Hello Web Design. I was going to tell someone, what is the number one thing to remember if you’re saying I want to become a better designer? What do I do? I say, reduce clutter. You can reduce clutter in your content by making things shorter, tighter, easier to understand. You can reduce clutter in your colors by reducing your color palette, making things simpler. Reduce the clutter in your fonts. That’s where that rule of thumb of only two fonts per design comes from. Reduce the clutter in terms of your layout. By having a grid, you have this like an invisible skeleton to your design.
All these principles that I go through chapter by chapter in the book, all relate to just reducing clutter. Obviously, there are great designers out there that can make things that are very busy and yet work super well, but that’s because they’re awesome designers. But if you are someone learning design, and you want to just know one thing, aiming towards simple and clutter-free is going to get you. Honestly, that’s the 80/20. That is going to get you most of the way there if you just look at every piece of your design, and just try to reduce clutter.
Rob: Another chapter of the book that I liked is chapter 3.3, Prototypes. The process of sketching your ideas and making prototypes will help you play with solutions and try out different ideas faster than if you move straight to coding. Then you have some hand sketches then you talk about them, kind of iterating on those. Then you talk about wireframe tools, like Sketch and Balsamiq and UX pen. There are several I hadn’t heard of. I think that chapter alone is likely for, especially early-stage founders trying to get an MVP, have never done wireframes and all that. Talk us through a little bit of your thought process on mocking up designs and getting wireframes out.
Tracy: There are things out there like Tailwind, Adam Wathan’s design framework, that a lot of entrepreneurs use to do designs, which is awesome. The designs that come out of using this Tailwind framework look really good. I find a lot of people who want to launch their first project. They’re like, cool, the design’s taken care of for me. I can just take my content and the things I want to build and just throw on Tailwind, and then you’ll have a design site.
There’s a reason why I want to recommend a prototype in between that and starting out something which is like sketching. A lot of people who are new to design are used to being on the computer all day long, they don’t want to go off the computer and start doing hand sketches. When you can do hand sketches, don’t worry about Tailwind, don’t worry about the colors, the fonts, and everything. The first thing you should look at is just sketches out like boxes and lines, how your layout would be for the thing that you want to build.
Don’t just do one, maybe do one layout and then be like, okay, what else can I do? What if the NAV is going to be in the middle? Maybe it’s going to be a smaller column of information. Maybe this piece of my project should be in a different place. When you can work with just pen and paper and just sketch things out, you can play with more layouts faster than if you’re going into CSS and trying to switch out where the columns were, where the things are going to be.
You’re going to be a lot more constrained if you jump straight into code and you start relying on some of these frameworks. This helps a lot when it comes to content because when you’re just sketching out the lines, you can see that, oh yeah, you don’t want a giant wall of text here. You want something short so you can get to that next piece of your homepage. Maybe that feature’s block. Maybe the next thing will be people’s testimonials.
You can figure out where those things land before you move in and code. Step one is just pen and paper, just being super-fast and efficient. Step two, then, is you could go into something like Photoshop, Sketches, the Balsamiq, and whatnot and start just doing things. You can move things around a lot more easily that way, rather than just sketching something new. The whole process is, it allows you to play faster with the layout, rather than going straight into, say, a typical layout, something that you coded in CSS and you just have a column and you have the three columns below, and things can look very the same between all these websites.
Just having this little prototyping process is going to help you move things around faster. I think that’s a piece that a lot of people miss if they are just saying, I want to build this project. I’m just going to build the backend. I’m going to have the quick frontend, and I’m going to throw a framework on top of it.
Rob: Yeah. I always had a little bit of an issue with 37signals, but now it’s Basecamp. They have a book called Getting Real and a big part of that was like, don’t do mock-ups. Just start building an HTML CSS because it’s so fast. If you’re as good as they are, then go do that. But I’m not that good, apparently. Derrick and I would sit down and the rest of the product team as we expanded, we white-boarded the […] out of things. We white-boarded everything and that’s the equivalent.
That was our hand sketching. I would grab a whiteboard pen, my handwriting and my lines are all crooked and everything, but we have this pretty complex thing. We’d do it. We’d start to talk throughout stuff at work. We’d realize within seconds, that’s not it yet. Then we go and we go. Sometimes these sessions are 15 minutes and sometimes they are three hours. We would just sit in front of a whiteboard.
I think that’s one of the reasons why the software was built. It’s really good. It’s good, solid UX principles. Of course, Derrick or Brian, the designer, could have gone into the CSS and probably done a good job, but the iteration would have taken longer. I know that there are some design agencies or some maybe heavy processes that are like months and months of prototypes, and user testing, and clicking, and paper prototyping, and blah, blah, blah. We didn’t do that either.
I do think you get to the point where it’s overkill. I get that maybe 37signals or Basecamp was pushing against that at the time, which is fine, but I am definitely more in your camp of some type of sketch. I didn’t tend to use paper because I was doing it collaboratively and with a whiteboard, it was so much easier to erase. Then we just took a photo at the end. We would attach that to an issue of like, this is a new screen or series of screens. It was oftentimes whiteboard sketches, photos of them just slapped in issues with a little bit of text, and that was it.
You have to have been in that session to know all the nuances of it. But that allowed us to move very quickly. From there, doing this CSS itself was not that hard once a lot of the paradigms were ironed out in that fashion.
Tracy: Imagine an onboarding flow. You want page one to be this form and page two, as maybe you’re getting that credit card, and then page three as you get into the app, and you have these tooltips. Imagine if you take a post-it or something like that where post-it number one is page one, and post-it number two is page two. You have these little quick sketches of boxes and lines and whatnot to figure out that layout is, but then you decide, oh, wait, I need to have a step 1.5 in this onboarding flow.
You want to add extra steps. You want to feel for that user experience process, and if you’re in code, suddenly adding step 1.5, you have to go into the backend. You have to switch over where it’s point two. You have to go to that page. You have to design that page really quickly. It’s so much slower than if you’d had a post-it and you can move post-its around. You can add new post-its. You can sketch over the post-it. You’re going to replace the post-it way faster, quick, and dirty.
You don’t have to do that again, that huge design process, like you said, with those designers. But you just have something just enough that you can get that imagination going. Get those creative juices going and kind of realize that your first instinct is often not correct.
Rob: Yep, indeed. Well, @tracymakes on Twitter, tracyosborn.com.
Tracy: Tracy couldn’t get Tracy Osborn on Twitter.
Rob: That’s exactly right. If you’re listening and you’re intrigued by Hello Web Design, you should obviously, can hit the show notes, but nostarch.com/hello-web-design. It should be released within a few weeks. It’ll be released in May of 2021. This episode will go live in mid-April. Thanks so much for joining me today.
Tracy: Yeah, thanks for having me on.
Rob: Thanks again to Tracy for joining me on this week’s episode. Thank you for coming back and listening week after week. I really appreciate it. I’ll be back again in your earbuds next Tuesday morning.

Rob: Welcome to this week’s episode of Startups for the Rest of Us. I’m Rob Walling. I’m your host today, and I’m excited to have Josh Pigford back on the show. We run through listener questions covering topics like annual pay increases, should my B2B SaaS write a blog post about our price increase, whether offering discounted plans in exchange for people to have your powered by link or your branding is a good idea, finding good startup people, and all kinds of other stuff.

We actually chat about Josh’s new effort, which is called Maybe at maybe.co. I’m pretty excited for him. You’ll hear me bust his chops about getting started with something so soon.

Before we dive into our questions, Startups for the Rest of Us has 905 ratings across 47 countries. Our most recent is from DABOOM1234, the title is Gateway drug for starting a company. “This podcast inspired me to start my own company and changed my life for the better.” Awesome. Love to hear it.

If you want to give us a rating or review, log in to your podcatcher and give us five stars. Really appreciate it, and that’ll help me get to the 1000 rating mark that I am trying to achieve by some unknown date, but I definitely would appreciate it. There are very few podcasts with four figures of rating, and I think that we can get there.

With that, let’s dive in to my conversation with Josh Pigford. You may remember him from an episode within the past couple of months where we talked about him selling Baremetrics for $4.7 million and he dug through all the details of that. He had run Baremetrics for years and hired up to 12 people, so he has a lot of thoughts on these topics we’re going to talk about today. I had a great time chatting with Josh. I hope you enjoy our conversation.

Josh Pigford, thanks so much for coming back on the show.

Josh: Hey, thanks for having me, Rob.

Rob: Why is your Twitter handle not your first and then your last name, Josh Pigford? It’s Shpigford, and I’ve always wondered about that.

Josh: The handle comes from instant messenger days. I think I was just 19-year-old Josh. It was one of those things. You would have your instant messenger handle so I had Josh Pigford just a single word, but you could change the spacing. You could put spaces and capitalization and change that stuff and it wouldn’t change the name. Because it was really funny, I changed it to Jo Shpigford one day, and then the Shpigford part, people just started calling me Shpigford in real life so it kind of stuck.

Nobody’s got that handle at all. Nobody’s got Josh Pigford either, but it’s just a little bit shorter and it’s a little bit more unique than just my name.

Rob: Yeah, I was going to say, Pigford is not a common last name so I wasn’t imagining you were using […].

Josh: People are already going to butcher the spelling, so I might as well just make it more difficult.

Rob: Yeah, exactly. Well, that’s settled, and I feel better about that. It’s been bothering me. I woke up at 3:00 AM in the morning last night thinking about it for some reason.

Josh: Well that’s sweet. That’s cute that you’re thinking about me in your sleep.

Rob: I was thinking about you. I got to bust your chops, man. We’re going to answer questions, I promise. You and I on the last show, we were chatting, it was nice and calm, and I said good. If I only have one piece of advice for you, Josh, it’s take six months off. Don’t rush into anything else, and you yourself were like, man, I just don’t know. I’ve been making money in software for 15 years. I don’t know that I ever want to do it again. Then record scratch and suddenly, within a week of that episode, I see you tweeting, hey, I’m building software again. For folks who want to see it, it’s at maybe.finance or it’s company.maybe.co?

Josh: It’s maybe.co, actually. You just go to maybe.co.

Rob: Maybe.co. Maybe is modern, financial, and retirement planning. You have the best MVP ever. It is literally a notion document. What the hell is going on, dude? You said you weren’t going to do it? What happened though? I’m curious to hear this story.

Josh: I have an addiction to building things.

Rob: We all do.

Josh: We talked a little bit about this in my previous episode about a financial advisor. I can’t remember if we talked about it—if it made the episode, or if this was after the fact or something. The whole financial advisor taking X percentage of the assets that they manage. That cost me ultimately $2 million over the course of the next 40 or 50 years.

So then that jumped into me managing it myself. Then it was like, okay, the more I started reaching out to other founders who have had exits and been like, how are you managing all your money? They’d be like, man, it’s stupid—Excel spreadsheets, I try to use this thing but it’s terrible, or I just don’t even do anything with it because it’s there’s no good way for me to do this.

I was like, you know what, I’m just going to build something myself. It was one of those opportunities. It feels like there’s an opportunity from a market perspective where investing has become a lot more democratized. People want to have a better handle on their finances differently than say our parents who were optimizing for retirement. Now I would say most people are not optimizing for retirement. They’re optimizing for how can I do the things I want to do now and not wait until I’m 60 or 70.

I think that software can answer the what-if questions or the maybe. The whole name Maybe sort of revolves around you asking yourself like, hey, maybe I would like to open a coffee shop, maybe I’ll take an international trip, maybe I buy my dream house, and then we answer how that’s possible or show you how that’s possible.

Rob: Got it. I have a lot of thoughts on it because I’m concerned that you and I care about our personal finances. I’m like a nerd about it. It sounds like you kind of always have but really once you had more wealth after selling Baremetrics, you obviously have a concern about it. It doesn’t feel to me like the average person does.

Josh: I think the average person has been—culturally speaking, we’re taught, you work, put money into a retirement plan, you bust it for the next 30 years, and then you can retire. That’s the mindset, and I don’t think that that’s necessarily what everybody has to do. I think there are ways around that when you properly plan.

Maybe isn’t going to all of a sudden give you a million dollars right, but in the same way that a financial advisor can help you or would help you have a plan, Maybe is like replacing the financial advisor.

Rob: See I was hoping that you are building a tool for financial advisors because when I think about building a personal finance product and I think about selling B2B, I’m like, okay, I can get behind that. But if you’re talking about going B2C, can I just tell you please don’t? Please don’t do that.

Josh: Well, in the same way that you told me to not start anything after six months and I’m doing it anyway, same.

Rob: It’s very much on purpose.

Josh: That’s right. Part of this comes out of the fact that I was playing around with the financial advisor software that our financial advisor was using and it is truly terrible. That’s not to say that six months into this I’m like, okay, pivot, whatever. Maybe this does turn into some sort of B2B play. But I also think the whole financial advising world is also having a big overhaul. New fresh financial advisors aren’t billing in the same way that previous ones were. There are all sorts of stuff that’s happening in the finance space, I guess, or at least personal finance.

This is me getting my foot in the door and figuring out the best way to tackle that.

Rob: Yeah, I could see that. You and I’ve known each other long enough. It’s light-hearted ribbing, and I’m obviously rooting for you.

Josh: Sure. In reality, it’s a good thing to have people question what you’re doing, right?

Rob: Right. And that’s the thing is you shot the gap. With Baremetrics, you got in early in the Stripe ecosystem. It was a change that was happening where we had all these […] payment gateways and it was a […] nightmare, to be honest. Stripe fixed that and a bunch of us started using it. A bunch of us being SaaS founders. We all built custom dashboards, which is what I was doing at the time. You came in and saw that need and boom, within weeks, everything was going.

This could be that case again or it could not be. You’re trying to hit a trend that you think is happening because I think if you tried to build this (let’s say) even five years ago, I just don’t think anyone cares.

Josh: It wouldn’t happen.

Rob: Especially with millennials and folks who are younger than you and I, to be honest, they do think about finances in a different way. That’s your big risk here. You know you can build the software. You can do all the things. The risk is are you going to hit a movement as it’s happening, and that’s really the gamble here.

Josh: With Baremetrics, one of the things that I felt was this indicator that something was ripe for being built in the software space was that everybody was doing custom stuff—either actually programming their own stuff or doing it in spreadsheets. Everybody was hacking together tools. Now software has mostly just kicked that to the curb.

That’s also the case in this personal finance world where when I talk to people, well, how do you manage your investments or your finances in general? Outside of just basic budgeting, which this is not a budgeting app at all, everybody’s using spreadsheets.

Rob: Yup, Google Sheets for me.

Josh: Exactly, right? This is one of those cases where if the timing feels right and there are these clear indicators that people want something because they’re hacking together their own tools to make it happen. That’s where the timing part—instead of waiting another six months or doing this in a couple of years—timing feels right on that. That’s why I begrudgingly jumped into it.

Rob: I mean, I obviously wish you the best and I’m going to be cheering you along from the sidelines. I had two friends who sold businesses years apart and jumped back into something really quick within weeks where they were inspired. One of them wound up regret. Well, they both wound up regretting it but for different reasons. One of them burned out and he was like, I was still burned out and I didn’t recover. Because you had a few months off, right? I mean, you had four or five months off, I think.

Josh: That’s right.

Rob: I only took six months off after leaving Drip before diving—well, it wasn’t even six months actually if you want to know the truth. I mean, oops. Yes, it was definitely six months. Anyway, sir, maybe.co. If folks want to follow along, you have links to all the stuff, and I’m super excited to see what you build.

Josh: Thanks, man.

Rob: All right. Let’s dive into listener questions today. We have some really good ones. Our first one is about annual raises. This author or the question asker writes in quite a bit actually. He has to remain anonymous, but he’s doing very well. I think he sent me another email and I believe they’ve just hit a million ARR, to give you an idea of the size of his business. Mad props to the anonymous question asker.

His question is about annual raises and he says, “When we were a company of three to five people, pay raises were easy to figure out on a case-by-case basis. But as we grow, that’s getting harder. What rules should we put in place so that there are reasonable expectations on all sides?”

And this is a question that I would not have had an answer to until we got acquired because when we were eight full-time plus two contractors, it was all case by case. When we were acquired by Leadpages, which was 170 people at the time, they had all of this figured out. That is actually one of the advantages I think of seeing both sides. Basically, working in a venture-funded company, they had 38 million ventures, 170 people. I got to see way down the line of what Drip maybe was going to be 10 years from now.

I will weigh in after I hear your thoughts because at Baremetrics, how large did you guys get team-wise?

Josh: I think the largest is 12?

Rob: Okay, and how did you think about annual pay raises? Did you do it off the cuff on a case by case, or did you have some standards?

Josh: This was the thing that kept me up at night the most probably on a regular basis was I never really loved how we handled this stuff. We sold at the end of 2020. At the beginning of 2020, like Januaryish, I had just started really hashing out how we would not just raises but actually compensation. How can we standardize compensation so that (a) it doesn’t require negotiating and, (b) is repeatable and as fair as this can be?

There will always be some disagreement probably between what I think someone should get compensated and what that same person thinks as far as skill levels and whatnot, but trying to standardize that stuff.

The biggest help for me on how to figure out that stuff was Buffer’s salary formula. We didn’t use their exact formula, however, what that led me to check out was—that I had not really researched before was—Radford. They have the Radford surveys where they have compensation surveys that they run, and it costs a few thousand bucks to get access to it. But this lets you standardize base-level compensation.

Then what you do is you take the base-level compensation and then you have these different buckets for essentially how someone moves up in the company. But it’s different ways to figure out what someone’s skill level is or how they’ve improved. So you do basically biannual or annual performance reviews. Then talk directly with the employee about where do you think you are on this scale, here’s where I think you are, here’s how you can move up, et cetera, and then that is what influences your salary and not this, well, you always get a 5% raise every year or whatever.

You get a raise by becoming better at your job versus getting a raise just because you’ve existed at the company for a while.

Rob: We’ll try to find that article or we will find that article on Buffer’s site and link to it in the show notes. When we were small, I mean we were four or five people. I remember saying to a new hire, we don’t do annual reviews because I hate annual reviews or something, which is fine to say at five people. When you’re at 100 people, you can’t. It just doesn’t, you know what I mean? You can make any reviews not suck. You can make them to where it’s not so formal. I think of Microsoft, IBM—Fortune 500 company doing it, and you don’t have to do it that way.

So here’s what I saw and what I admired about what they did at Leadpages, and then of course, now at Drip now that Leadpages is no longer part of the company. The folks were hired and jobs were posted based on a market rate salary. The HR folks did salary surveys and they had paid for this expensive software. My salary surveys involved me going to Google and typing in a location and a role. Or if it’s remote, then I try to just wing it, but Glassdoor and salary.com usually come up so I have some idea of where the market rate is.

Here’s the thing, you can get people lower than the market rate if you have advantages. We used to have advantages as bootstrappers because you would say we’re a super small team and you’re going to make a big impact on the product, you’re really going to love your job, and you can be fully remote and work from anywhere. Well, that last one has been removed recently because everyone’s remote.

My hope is that it does come back because I do think some bootstrappers are having harder and harder times finding people at reasonable salaries because there are companies—now that all of Silicon Valley and most of the Fortune 5000 is hiring remote, they can pay a lot more bottom line, so it is harder.

If you’re paying below market like someone really either needs to have stock options or some other advantage that makes it worthwhile for them to do that because, over the long term, no one is going to work for your company for years for below-market-rate for no other reason.

What they did that was interesting too is every year someone worked, they would re-run the salary survey because sometimes (let’s say) you hire a senior developer in Minneapolis or a senior designer and that role is maybe $110,000. Within a year, that role may jump to $130,000. It’s possible that Target, Best Buy, General Mills, and a bunch of the other Fortune 500 companies here in town have hired a bunch of people and raised that rate.

They would actually adjust to the market, give or take, which again when you’re 5 people or 10 people, I don’t know that you have to do all this. But you probably should keep an eye on it because if you don’t, people will look at other jobs. It’s like the price of your house. You don’t always check the price of your house, but you just know how much it’s worth, we all do. I think that’s similar to salaries. I don’t have to really google what a senior software engineer makes in town if I’m a senior software engineer in town. I kind of know what my friends are making and you figure it out. That was an interesting thing they did.

Now they were venture-funded. They had the budget to do that. If you’re bootstrapped, maybe you don’t fully have the ability, but that was a thing. Then in terms of annual raises, it was 3%–5% based on performance, and if you were doing amazing, you got a 5%. That was just the cost of living raise. If you were getting 3%, you needed feedback, just like you said. You’re only getting three and here’s why. The annual review should not be breaking them this news. You should have had this conversation before that of hey, here’s where you’re not performing up to the level, or here’s where I want you to exceed this to actually get that full 5%. Any other thoughts on that?

Josh: No, I think that’s spot on. It’s not just about you figuring out, is this person performing? It’s also about they’re not going to be happy if they look back over the past year and are, oh, I haven’t actually improved. Or I’m not better at being an engineer, customer support rep, or whatever it is. That they also want to be better at their job than they were a year before, and they should be rewarded for that by getting paid more. But if they’re not, then you need to be able to tell them how to fix that.

Some people are really great at realizing, okay, I’m falling down on the job here. Here’s how I need to fix it. Other people have no clue. They have zero self-awareness. You can fix that by helping them see it, but you have to give them feedback and there has to be this set opportunity via (say) an annual review to talk about that stuff.

Rob: That’s right. The alternative to this because this sounds complicated like it’s going to keep you up at night. It is complicated and it does keep you up at night. It’s hard, and the alternative is I watch folks like Rand Fishkin who’s launched Sparktoro and they’re doing plenty of revenue to hire as many people as they want and they have no employees. They only hire contractors and consultants because they don’t want to deal with this aspect of it, and that’s your trade-off.

You might maybe pay a little more per hour, maybe people wind up taking the job, they don’t have time for you, they’re freelancers, or whatever. But going the consulting route is not a terrible way to go especially if you can afford it because it’s purely performance-based. If you want to hire a marketer full-time W-2 and they’re not performing, I feel like as the founder/CEO, the marketing manager, or whatever, it’s your job like you’re saying to bring them up to speed. Well, why aren’t you performing? Let me help you do that, let me help you with personal growth, and let me help you with business growth.

If you hire a consultant for a three-month contract or six-month contract and they don’t perform, you let them go and you find someone who will. It’s an interesting trade-off people should think about.

All right, next question. This question is from Steve McLeod, and he is the host of the bootstrapped.fm podcast. He says, “I recently made a substantial increase to the prices of my B2B SaaS. It’s called Feature Upvote. Instead of a flat $49 a month, I now have three tiers: $49, $99, and $249. Existing customers stay at the old price. I just implemented these prices without any announcement, was that a mistake or a lost opportunity? Should I have written an informational blog post about it? If so, what’s a good way to explain a large price increase?” What do you think, sir?

Josh: So to his questions, was that a mistake to not post about it? No. That’d be a really weird thing to write a blog post about. I think as the owner, developer, or whatever of your own company, you think people care and look at your pricing and see, they’ve changed their price or whatever. Nobody cares. Literally, no one cares.

If they’re using your software already and you’re not raising the price for them, again, they don’t care. And if they weren’t using your software, there’s a handful of people who may have been shopping and had seen the price, but a blog post probably won’t be seen by them nor will it help them. No, I don’t think there’s anything to say about price increases or changes at all, and the reality is you should be testing and changing prices all the time to be figuring out what’s the optimal price point, what are people willing to pay for. There’s no need to write anything every time you test out some new pricing.

Rob: I think I’m on the same page with you. There was one time where I increased pricing. We did it both on Drip, and this is when I increased pricing, not when the subsequent owner did and everything blew up. There were at least two times, probably three, where we did pricing overhauls during the time that we owned it, and then I did this with HitTail as well.

Here’s the thing, if you’re going to raise prices, people are evaluating the software, they’re doing a trial or they’re looking at it, then suddenly you raise prices one day, and they come back the next day and say, hey, your old pricing used to be this, I was about to sign up. The way I would do it is be like, cool, I’ll just honor that. I’ll give you the old pricing just because it doesn’t matter to me.

Since I’m going to do that anyway, before we raise pricing, we did send out an email to anyone on our marketing list and probably did a tweet or something. I don’t believe we did a blog post, but we sent it because that’s again that sticks on your—like you said, no one cares and it doesn’t need to stay on your site forever. But for us, it was a promotion and it was like, hey, pricing is going to go up next week, and it’s going to double or whatever it’s going to do. But if you sign up now, we will honor the old pricing. We’ll essentially grandfather folks. Not forever, we didn’t commit to that, but we did say for the foreseeable future. It did get a big rush of trials of people trying to get in under that wire.

Now, did I ever go back and analyze and figure out how many stayed around and how many didn’t? I did not, but I do remember having a good growth month. I’m not saying that you should do that all the time either though because we didn’t do it every time, and there were certain factors that we wanted to weigh in. Sometimes, like you said, we just wanted to test and play around, and we didn’t want to be so public about it because we wanted to be able to roll it back if it was a disaster. In that case, we didn’t do the big promotion.

Josh: It was probably two years ago or something where we were on our company-wide retreat for Baremetrics and one morning I was like, guys, what if we just literally doubled our prices? Did nothing except take every price and multiply it times two on the marketing site, let’s try it. So by that afternoon, we were A/B testing, doubling our prices for zero added benefit. Again, this is not for existing customers.

It would have been silly for us to write a blog post because a month later, we rolled that back where we stopped running that A/B test. You should always be testing out different prices and seeing what sticks and what doesn’t stick, and there’s no need to make a big to-do about it. Except for in your case when you can use it to your advantage like a marketing opportunity.

Rob: Right. Before I announced it, I was pretty confident that it was going to work and that we were going to stick with it and all that. That’s the thing, I agree with you. More founders should be messing with pricing constantly and testing. It’s just so scary to do so. I remember how terrifying it was to think I could just decimate my funnel. You just have to push through it.

When folks come into the Tiny Seed batches, within the first few weeks, I mean, that’s the biggest lever in SaaS is pricing. You don’t need to build new features, you don’t need to get more leads. You can double growth if you were to double pricing and keep the same conversion.

We do talk through a lot of price increases too to early founders in Tiny Seed. In fact, usually within the first couple of calls, I will do a call for hand raises and say, who on this call thinks that they’re either underpriced or they’re mispriced—their value metrics are off. Usually, it’s about 70%, 80% who have a gut feel their pricing’s off, but they don’t really know why. So then we do a bunch of deep dives, analyze, and chat them through. Pricing, it’s no fun but you got to deal with it.

All right. The next question is from Adam at paidmembersapp.com. He’s asking about free or discounted plans in exchange for branding. He says, “What do you think of a discounted tier that includes branding i.e. my customer will get my brand at the bottom of emails sent from my app to their customers. Fairly unobtrusive but still present, and they would have to upgrade to remove the branding.” I’m going to cut in right here and I’m going to say this is fairly common like Drip head, powered by Drip on the widget. Mailchimp on their free plan I think there’s a powered by Mailchimp badge at the bottom of the emails. E-signature apps like a doc sketch back to his email.

“If my main plan is $49, I was considering offering a $29 plan which shows branding, given that I am essentially offering a discount in exchange for the customer providing marketing about my SaaS. Does this seem a valuable enough trade-off to be okay with people being on the less expensive plan forever? I was going to add a higher transaction fee to move customers up to my higher plan, but then I thought maybe just having someone on a lower plan is fine if I get a lot of clicks from the branded emails, footers, or links on their website. How valuable in general is having branding like this? Is it worth the trade-off of lower MRR from the customer?” Do you have any thoughts?

Josh: Yes. I think there are a few ways to tackle this. On the base level, should I offer a lower price plan and the only difference is adding branding? No. Instead, I think of it this way. Someone who’s that price-conscious that they’re like, I’m going to save $20 so that I can remove the branding, probably isn’t going to send you anything anyways. They’re too small or too early in business or whatever for wherever they’re including a link—nobody’s going to see it so it doesn’t matter.

However, what you’ll typically see is this called white label or they’ll have a white label plan where you actually pay a lot more to remove the branding. Basically, all your lower plans—whether that’s $29, $49, $99, or whatever—have branding by default, then offer a $100, $200 a month plan that removes branding in addition to other things.

I don’t think you can do pricing just to remove branding, you’re not going to really see that big of a difference, but having that grouped into a higher paying plan I think can push people over the edge to be, okay, sure. I’ll pay the extra $50 a month so I can also remove the branding in addition to getting all this other stuff. But I think if you’re going to do the branding bit included on all your sub $100 a month plans by default and then pay a lot more to remove it.

Rob: I would agree with that. I don’t think branding should be the only difference, and in fact, back with Drip, we had a powered by Drip link in our email capture widget people could put on their site. Our lowest plan was $49 and that included the link, you couldn’t shut it off. At the $99 plan, you got whatever it was double the subscribers, some other integrations, and you could turn off the powered by Drip link.

I mean this is when we’re at 200, 300 customers versus later when we’re 10X, 20X that. In the early days, there were some people that complained about it at $49, and I believe it was so small though that we just added a little checkbox in the admin dashboard and we just added $20. Will you pay $20 to remove it? If it bothers you that much, be on the $69, and it worked. But again, it was like most people didn’t care and most people didn’t ask.

The big thing I would say to Adam who’s thinking about this is, is there a way to test this without messing around with pricing? Because what you want to test here is the viral loop, is the virality. There’s a viral coefficient—you can google this, I won’t go through it here. But basically, if every one of your customers refers another customer within one month, that’s an amazing viral loop for B2B SaaS. That would be off the charts. That’s really what you want to test is how many click-throughs do you get, how many trial signups or customers do you get.

I would sit down and think, is there a way to test this? Maybe everyone who signs up for your main $49 plan—which is your main plan you have today—as of tomorrow, the branding just shows up and see if anyone notices and if anyone complains, and measure that for the next couple of months. It’s pretty easy. You’ll see how many customers have it, how many links, and how many trials.

You’ll quickly be able to calculate, is any of this worth it? Because I do think it depends on your customer base, their reach. To your point, if they have 20 website visitors a month, it’s not going to help. If they have 500,000 website visitors a month, there’s probably going to be enough traffic to make it worth it. That’s where it is.

I remember with us, we did look at it. We put Google utm params on the powered by link and we measured it. I remember it being, it was worth having it, but it wasn’t some groundbreaking marketing channel. The business wasn’t going to grow on autopilot purely with the viral loop, but I remember it was worth it enough to keep it around. But that’s my experience. It depends on a lot of things.

Josh: If you think about now versus five-plus years ago, I think it used to be really popular—especially with analytics tools especially Mixpanel doing this—where if you put a little Mixpanel tiny little graphic in the footer of your site or whatever, they would give you an extra 100,000 sessions or whatever for their free plan. That used to be more common I think, but now, from a technology perspective, people just don’t have websites as much anymore so there’s more just app-based stuff. These things that a lot of people have read or even seen in the past 5–10 years aren’t as applicable just based on the landscape now.

Rob: Yeah, I think that’s a good point. I agree with you though. It’s complicated, but I wouldn’t overthink this is the bottom line. I don’t think it’s such a big deal that you need to spend a bunch of time on it. I would just get out and test it, see what happens.

Josh: To some extent, if anything, it’s more about being a branding play for yourself where it’s like, man, I’m seeing this little widget everywhere. What is that? I think Intercom is a big one. Their icon itself in the little chat bubble is probably what people know more than a link that they’ve seen.

I think if you’re going to do it, make it a branding play in the same way that you’d be advertising or something. Think of it more that way instead of how can I get people to pay me more. There are lots of ways to think about it, and I don’t think there’s any right or wrong answer there.

Rob: Thanks for that question. I hope that was helpful.

Our next question is a long one. I’m going to have to summarize some pieces of it, and he asked to remain anonymous. He said, “I’m the co-founder and CTO of a tool that makes workshop planning easy. We’re a mostly bootstrapped fully remote business, and since we achieved product-market fit in early 2018, we’ve had steady 7% month over month MRR growth.” Which is not bad for three years. I mean, that’s pretty good. It depends on where they started from.

He says, “Overall, we still consider the business quite stable, and we have a lot of ideas on how to improve the business, but we need more resources, we need more hands, so we want to grow our team. About a year and a half ago, we started growing the team and went from two co-founders to our current team of six. We’ve realized we need to continue the process of hiring as our backlog is ever-increasing, and here comes the core of my question. Any advice on how to find good people that are a fit for working in small startups? Meaning they’re good at managing themselves, wearing many hats, and finding and learning new ways of doing something.

There are a couple of challenges. First of all, is there a good place to find such people? Second, how do you identify the versatility of skills and the small startup fit? I have a feeling most people tend to emphasize few specialties in their resumes so they may seem more professional rather than being all over the place, but is there something specific you look for? Are these kinds of people too busy building their own startups?”

No, I don’t think they are. Josh, sir, you and I have hired many people. I’ve hired them for big companies and for small startups, and I know you’ve hired for yourself and at small companies. What do you think of this question?

Josh: You skimmed over this in his email, but there was one part where he’d said that they had hired six people. He says, “I’m sure by now our overall performance as a company has increased, but there are moments when it feels it would just be easier to do all the work myself.” I get that feeling for sure, but I think he’s probably downplaying that their overall performance as a company has increased. When it comes to finding good people, you have to find people who you know will basically free you up to do other things that you’re specialized at.

He’s correct that you want to find people who can do lots of things or wear many hats. For us, one of the big indicators to me of someone being good at wearing lots of hats were people who were self-employed before joining the company. I optimized for finding those people or at least wanting to push through the interview process a lot more. Or people who are freelancers because running your own business, even if it’s as a freelance business, you are still wearing many hats to pull that off.

That was always a very quick indicator to me was have you ever been self-employed was a question that I would ask that I thought was pretty crucial to finding if somebody is capable of self-managing, doing lots of things, and not thinking, well, I’m only the JavaScript mobile whatever. Anybody who’s hyper-focused on a specific job likely wouldn’t be a good fit in the early stage because they’re optimizing for being the very greatest at a very specific thing, and that’s not what you need in those early small team days.

Rob: Yeah, we used to put the phrase “not my job” is not something you hear anyone on our team say. That was in the job description, and it was just a way of yeah, we wear a lot of hats.

I think to address his first question is where do you find such people? I don’t think they’re all busy building their own startups. A lot of people want the experience of working on a successful one. I definitely think that back to in-person events, if you come to MicroConfs or you find whatever else type of events, meetups, and such in your city, I do think that networking is a piece of it. It’s getting to know other people. MicroConf Connect is another example. That’s an online thing with about 2000 founders and aspiring founders. There’s a jobs and hiring channel, and people have hired other people in the Connect community who are still working the day job and doing stuff on the side.

There are some pretty good job boards for this. Weworkremotely.com, which was started by Basecamp and later sold, but it’s still up and running. It is a startup-minded, small team, remote people. Authenticjobs.com is one that I used back in the day. I believe they’re still good. Dynamitejobs.com from Tropical MBA guys. Remoteok.io, those are the four that I know about.

There’s one called Parachute List, parachutelist.com, which I believe was launched right as COVID happened and there were a bunch of layoffs. I don’t know how accurate Parachute List still is, but the other four are certainly places I would be thinking about posting.

Then identifying the versatility of skills was always a big question that I had. If we were going to hire someone who was currently working at a big company, I wanted them to really, really not like working at the big company. If they enjoyed that, they were not a fit because that shows that, like you said, they probably have a very specific job role and they like all the answers. They like having an HR department you can go to for that, which isn’t going to be at a six-person company. They like to go to procurement to buy their laptop. Nope, not going to have that. All this stuff we just have to handle you just have to do it.

If it was someone at a big company who really didn’t like it, if they had a lot of prior experience at small companies, or like you said, freelancers running their own business was a thing.

There was a good fit that I found which was someone who had worked at a startup or on their own, then had gone to work for a big company and just hated it, and they were trying to get out of it and they’re trying to go back. They had experience doing both, and that showed me they thought the grass was greener because big companies typically pay more. We call that combat pay where you’re getting paid because your job sucks, you’re getting paid more.

Again, a Fortune 500 company will probably pay 20%, 30% more than my bootstrap software company can pay, but your job sucks and you don’t enjoy it. That’s the trade-off that folks have to make.

Josh: This is less applicable now, or it’s probably not as good of a filter, obviously, as a remote company we wanted people who were comfortable they were going to work remotely. But people who had already been working remotely, similar skill sets I found as someone who was a freelancer and that they had already made the decision to work from home, and so they were already very good at managing themselves. They didn’t have to be in an office managed by someone walking around, looking busy, or whatever. That’s less the case now I think.

If they’ve been working from home for a long time even if they were working for another company, chances are they’re pretty good at managing themselves to begin with.

Rob: That’s a really good point because when I was hiring (let’s say) 10 years ago, trying to find people who had work from home experience was really hard. Nowadays, let’s say barring COVID. Let’s say a year ago, pre-COVID, it was a lot easier to find folks, and so I do think that’s probably a minimum requirement. The folks I’ve seen who try to transition from working in an office to working from home usually have a pretty rough transition, and that would be (I would say) at least a yellow flag for me if they didn’t have pre-COVID work from home experience.

He added two additional questions in his P.S., and I think we’ll answer these and then wrap for the day. He said, “Any advice on full-time versus contract developers when we’re trying to ensure continuity? So far we have only hired full-time.” I’ll let you take a crack at this one first.

Josh: I get the feeling of wanting someone full-time. That person, by default, is probably a little more invested in the long-term well-being of the company. But I think there are a number of times where I’d wanted to hire full-time but then I was like let me just try contracting with this person for a couple of months and see where we go. A lot of times those would not work out, not because the person was bad at it, but because that work that I thought I was hiring them for, there wasn’t enough of it there in the way that I thought there was going to be.

This happened a lot with data science roles where I was like, we definitely somebody who can do data sciencey things. I would hire someone as a contractor and then it’d be like, well, I don’t know what else to give you to do here. Having someone who can contract for say 3–6 months, knowing that they’re available to hire full-time, to me is the best of both worlds there where you both get to try it out and make sure that there’s a good fit. But you also aren’t asking them to go quit their job somewhere to potentially come on board full-time when you don’t have enough work for them.

Rob: Yeah, I think that’s a good point. I think in the early days, I certainly was all contractors because I just didn’t have confidence in revenue to be able to hire people full-time. But the question asker is not in that situation. They have a business that’s been growing 7% for three years.

At that point, if I truly am just looking at developers, I lean towards hiring full-time. If it’s just we need another Rails developer or we need a Rail/DevOps developer. It’s someone that I know there is absolutely full-time work available for them and we can just crank out features more or get there faster. I like full-time because there’s focus, there’s two-way loyalty. I think we’ll take care of you, you want to have our back, there’s ownership. Even if it’s not actually true equity, there’s that mental ownership of I work here, this is my company, I have pride in it versus I’m a hired gun.

I lean towards that direction if you’re going to build out a dev team. I like having camaraderie among the developers because, at certain times, it does feel—I mean, when the servers go down or […] hitting the fan, it’s nice to have that team that is cohesive and has a really good way of working together and a lot of respect for each other. I feel ensuring continuity is a phrase that he used, and so I do lean towards that. But again, if I was doing $10,000 a month barely paying my bills, I wouldn’t go out and do that right away.

Josh: You mentioned developers specifically. I think it depends on the role but specifically with developers, there can be a very long on-boarding run-up to them being really productive. It’s hard to bring in someone who can just jump in. A back-end engineer, especially if you’ve got a pretty complex product, could take them three-plus months before they’re contributing something that’s making a business impact. It is hard to do that on a contract basis.

Rob: And of course, the flip side of that is something I said earlier, which is the more W-2 folks you have, the more of them you have to manage, do pay raises, do annual reviews, and check-in with them once a week, once a month, and there are complexities there. See, I’ve felt managing developers specifically—I guess maybe I’ve gotten good at it maybe being a developer. I don’t know what it is, but I don’t feel it’s that hard. Our product is software and it’s like, I want the folks building that to be on the team. But if I’m going to look at marketing, sales, operations, or any of that stuff, I would be much more likely to consider having contractors or consultants in those roles.

Last question of the day. Still from the same asker, it’s in his P.S. He says, “Using recruiters, are they actually good at finding people?” Have you used recruiters ever, Josh?

Josh: I have not. Not passed. Well, not an individual recruiter. I’ve used a few sites where it’s like put in what you want and then the site guarantees that you’ll get X number of applicants or something, but not an individual going out and doing recruiting for us, no.

Rob: I had experience with recruiters (let’s say) 15+ years ago, it was almost 20 actually, and I was still a developer. They would find me, they’re contingency recruiters. I felt they didn’t know what they were talking about. They were not good at it. They took 15% of my first year salary. They didn’t take it from me, they took it from the hiring company. My sense of recruiters at that point was very negative.

As I built Drip in the early days, I did all the hiring, which was a mistake because I spent way too much time on it and took way too much headspace. Once we were acquired, they had two full-time recruiters on staff, and I resisted allowing the recruiters to get into the process because I was like, no, I know how to do this best. I’m the founder, I’m the CEO. You know what, I was wrong. The recruiters at Leadpages and then Drip were phenomenal. They took so much headache off of my plate.

They would post the jobs, they would do the initial scan of the resumes, narrow it down based on the criteria we talked about. We would work on the job description together they posted, then they would filter, and they would do an initial phone screen—20–30 minutes. They handled negotiation, they handled so much stuff. I will never go back. There are certain things that I learned that I just won’t go back on. But they were in-house, they’re full-time W-2.

So then, after I left Drip and we had to hire for our first role, we hired Tracy who’s the program manager at Tiny Seed. I contacted a recruiter friend of mine who does recruiting as a day job. I said, could I pay you a few thousand dollars to basically do all of that stuff for me just as a side gig for you? It’s an income for you, and I know that you’re good at this. That’s what happened, and it was absolutely worth it.

That’s been my new mindset. If I’m going to hire, I want to find a recruiter who is willing to do that thing—a flat fee engagement. I’m encouraging Tiny Seed companies to do this now. Again, you don’t lose control of your hiring process, you just hand off the stuff that you don’t need to do, which is posting to all those job boards that I just said, monitoring that, and filtering from 100 down to 10 resumes, which we can all do, but you shouldn’t be doing it as the founder, as a CEO.

I obviously am not going to give out the name of the person who I’ve used because they’ll get overwhelmed and they do it on the side, but dynamitejobs.com who I’ve already mentioned from Tropical MBA folks. Dan and Ian actually do some of this and I’ve been sending some Tiny Seed founders to them. I mean, they publish the rates on their side. It’s $4500. It’s a flat fee and it will take that off your plate.

Again, if you’re a bootstrapper, you’re hiring for your first role, you may not have that much money. But if budget allows, yes, I absolutely think that finding a reputable recruiter usually—I mean this is where I would ask in MicroConf Connect or another community or a network on Twitter or whatever who has used a recruiter that charges $3000–$5000 as a flat fee and will help me find this person in any country and is knowledgeable in this and that. That’s my current advice and current thinking on that.

Josh: You mentioned having somebody who’s doing posting on the job boards and filtering things down. I did have an administrative assistant at Baremetrics who would do that kind of stuff. If you’ve got someone who can just manage the part where you’re filtering things down or doing the stuff that doesn’t require your brain who’s trying to understand culture fit, there’s a lot of people who can actually handle a lot of the administrative minutia of hiring that takes up all your time.

Rob: Yeah. Did your admin assistant do initial screening calls, do salary negotiation, and that kind of stuff?

Josh: No, she would not do that. Though we very rarely did screening calls. We didn’t have to do calls that much. I did most, as much as I could, via text anyway. She would handle all that stuff.

Rob: There you have it. Those are our questions for today. Sir, thanks for taking a few minutes and hanging out with me. I had a lot of fun on this episode.

Josh: Yeah, man. This was fun.

Rob: You’re Shpigford on Twitter, and of course, maybe.co if folks want to keep up with what you’re doing. Awesome. I look forward to having you back, man. You’ve been on the show a couple of times, but I feel like I should have you back more often.

Josh: Yeah, any time.

Rob: Awesome. Thanks so much, man.

Josh: Thanks, Rob.

Rob: Thanks again to Josh for coming on the show, and thank you for listening this week. I’ll be back in your earbuds again next Tuesday morning.

Rob: Here we are with another episode of Startups For The Rest of Us. I’m your host, Rob Walling, and each week on this show we cover topics related to building and growing startups using an ambitious yet sustainable approach. We are not willing to sacrifice our health or our relationships to grow a company. We want to build real businesses with real customers who pay us real money.

Welcome back. Thanks for joining me again this week. I had a great conversation with the CEO and co-founder of SquadCast. His name is Zach Moreno, and we’ll dive into that in just a few minutes. SquadCast is at squadcast.fm and they are the highest fidelity recording available in a web browser to have two, three, four people remotely meet and record high-quality audio and now video, which they just launched and we talked about it in the show.

It’s the tool that this podcast has been recorded on for, I think 18–24 months. At some point, we switched to SquadCast and we’ve never looked back. In fact, when we switched, our editor said, what did you do differently? Your audio sounds so much better this week. It records in multiple tracks, it’s just an audio editor’s dream, and of course, it is part of what increased the production value of this very show.

One fascinating part of SquadCast’s story is how they 10x their revenue from 2019 where they were doing low six figures until 2021. When shelter-in-place happened, they 10X. Zach talks about how they passed $3 million in ARR just a few months ago. They were bootstrapped until just about a year ago. They took funding from us, from TinySeed, which is obviously not a tremendous amount of money. I mean, it’s still a mostly bootstrap company, especially compared to their revenue and growth. It’s just a really fascinating story. We’ll dive into that in just a second.

Before we get there, I received an email and I have to anonymize it because he gives all types of awesome numbers. He says, “Hey, Rob, I wrote you last year asking for advice if I should take out a $20,000 loan to pursue my software application. You advised me not to. I didn’t take the loan. I took on consulting work and got my finances in order, and I slowly pushed for updates and improvements when I had time, and I just sold it for 25 times annual recurring revenue.”

I won’t go through all the numbers. He actually asked me to keep them confidential, but the amount of money that he sold for (I’ll just say) is mid-five figures given that he lives in Eastern Europe. He said it’s about two years of runway for him. It’s been truly a life-changing occurrence.

He said, “I really wanted to share this with you since I really appreciate all your insights, and I just want to let you know how many lives are impacting.” He also wrote, “I wanted to say thanks a ton, for asking those questions on episode 532 with John Warlow. That interview helped me start higher than I would have felt comfortable with my negotiation. Ultimately, I achieved a purchase price far beyond what I thought I could achieve. Thank you so much for all you do, for all of us SaaS founders.”

Bravo, sir. Thank you so much for writing, and I love hearing success stories like this because this is what it’s really about. It’s about impacting other people. It’s the freedom for each of us. Freedom for me to work on what I want, the purpose of helping other people be able to achieve what they want, and then it’s the relationships—both the super close relationships I have and then even the further away relationships.

The person who wrote in here, who I believe we never met in person, but it doesn’t matter. You can have an impact on people whether it’s through building your software product, an info product, putting yourself out in the world, starting a podcast, writing an essay, and you can have a lot of impact. Thank you so much for writing in. I really appreciate that.

If you do have a success story about how Startups For The Rest of Us, MicroConf, or myself have helped you, of course, just write in any time. I would love to share them, and I do keep them in a dial or in a label in my email because I can go back through and it reminds me just how worthwhile this work is and just how worthwhile helping other people is.

Speaking of helping other people, I hope today’s interview with Zach Moreno from SquadCast is inspiring and also can give you a few ideas, strategies, or tactics that you can use to improve your business. Let’s dive in. Zach Moreno, thank you so much for joining me on the show.

Zach: Appreciate it, Rob.

Rob: It’s great to have you here. I’m sure folks heard in the intro that you are the Co-Founder and CEO of SquadCast. You’re also the initial dev who wrote all the code. You guys are killing it. You’re doing really, really well. I think part of that we’ll dig into a little bit is the shelter-in-place order certainly encouraged folks to try to figure things out remotely that maybe they were doing in person before. But to set the stage, what are you able to share in terms of your revenue, your customer account, just to give folks an idea of how big your business is.

Zach: Thank you for saying that, by the way. A large part of that is due to TinySeed, so really grateful there. I think a few months ago, we cleared a huge milestone of $3 million annual recurring revenue. We’re, of course, a SaaS business, and I think north of 13,000 customers. That’s very humbling and an honor to help serve so many podcasters creating content remotely.

Rob: Absolutely. It’s a heck of a business to have built. I think you’ve said publicly in other shows, in other interviews that you were in the low six-figure ARR almost 18 months ago, maybe 2 years ago, and it’s a big jump. We’ll cover that in this show.

I think that the number one question that a lot of people probably have is, you entered this space, which is remote podcast recording, studio-quality. There was already an existing solution that worked relatively well at the time. It’s called Zencastr. It’s what we use to record this podcast on, and at a certain point, I switched because there were a bunch of things. There’s audio tracking and how the two tracks get out of sync because it does client-side […]. My editor kept saying, these tracks were kind of messed up.

They started having outages back in—I forget if it was 2019, but I went out to look for another solution. Which I had done originally, and back when I started using Zencastr, there were no other solutions. But when I then did a Google search or whatever, I was like, wait, SquadCast. There’s a competitor, this is amazing.

You have essentially—I mean in my opinion—growing very quickly. I see you as the visionary, I see SquadCast as the market leader in this point, in essence. How did you possibly come into a space where there was already an existing leader and essentially figure out how to get traction in that space?

Zach: It actually gave us quite a bit of pause. We had started working on SquadCast because of a pivot from a remote podcast that we wanted to do and we started building. I think a few months in, we actually found Zencastr. It actually gave us quite a bit of pause and we’re like, oh crap. I don’t want to spend or waste my time, the team’s time, or anybody’s time building something that already exists. I want to work on solving new challenges and do them in unique ways.

That actually gave us some pause, but we did our research and found that there were a ton of reliability concerns. There were the audio drift timing issues that you brought up, and it just seemed while it was state-of-the-art for a period of time, it seemed to really fail to evolve.

Podcasters that we talked to—OG podcasters, new podcasters alike—people in the community were really big on listening, it became very clear to us that nobody was very satisfied or happy with the results. It was just the only option. It was either that or Skype back then. I’ll give Zencastr credit for being better than Skype, but I think it’s a failure to evolve in a number of different ways.

SquadCast, we’ve rebuilt the thing a few different times. We’ve tried a lot of different ways of how we can deliver both quality and reliability every time. There’s a lot of unique technical challenges that go into that that may seem, on the surface, like straightforward challenges to overcome but are really technically challenging. That has led to two patents pending.

One of them for how we record and upload. We call that Progressive Upload, or you can think of that like a cloud autosave. And then the other is a solution to the audio drift that you mention. We have a process to normalize that, so we save people time in post-production. Other things like automatic backups or key differentiators were innovations.

Rob: I think that’s something for folks to take away as you’re listening to this. Entering a space with a market leader or even just a crowded space is totally doable under certain circumstances. If you raise buckets of money, you can at least take a go at it. If you’re an experienced founder, maybe you’ve had exits or successes in the past, this is where you can push into these.

Or if you find an angle, if you find that wedge, which is some things that people hate about that competitor or about the competitors in general, and that was what we did with Drip where we found out that Infusionsoft was this tool. A lot of people didn’t like it. A lot of complaints online on Twitter, in forums, in Facebook groups. We kind of pivoted into that space. We weren’t building marketing automation, we were just building basic email capture and emailing. Then we realize, wow, there’s a real opportunity here. When Derek Reimer was talking about building a competitor to Calendly that is now SavvyCal that he’s having great traction with.

Zach: Big fan.

Rob: Yeah, we use it here at TinySeed. A big part of that conversation was, what’s your angle? What’s your innovation? We know it’s not just building a better product. You have to do that and then you have to market and position and communicate it. The same with Docskecth with Ruben Gamez. Of course, any of us could clone HelloSign, in a couple of months with some engineers. But how do you then get traction beyond it, figuring out what people don’t like about it, and getting those traffic channels?

It sounds like you took a piece of that. You fixed some things that perhaps were broken with an existing solution, and then you innovate in addition to that. But beyond that, just building the product I don’t think would have done it, right? What else was there?

Zach: I think a big part of it is our branding and our position. Design is a really core competency in our team, and super proud of Alex and the design team for really establishing a high bar there when it comes to the experience for podcasters and their guests on SquadCast.

There’s a whole bunch of UX things that need to get right with all the different complexities of, if you think about a guest for a podcast, they’re essentially expected to be a podcaster for like an hour. They don’t really have the context, the background of how to do that equipment, permissions, and all that stuff. How do we make it just as easy for them while providing a really powerful set of tools for remote content production on the creative side?

The balance there was something else that I would credit as an innovation. From our beta, we had video of the conversation. You could have body language and eye contact, and there’s a whole large part of communication that is nonverbal. That was another area that some people prefer the video, some people don’t. It’s all good as a setting. We just felt we wanted to make the conversation on SquadCast as close to reality as possible.

We do that in a bunch of different ways, with kind of real-time presence so you can actually see your guest’s microphone, what equipment they’re using, their network connection—all of these little things add up to building confidence that you are going to record quality content, and that you can just kind of stop worrying about the technology not getting you to where you want to go. You’re always going to get that file at the end. That’s really I think a core to our approach here.

Rob: You do have a unique challenge that you called out there where some guests or podcasters for one hour. I have a guest or two a month, and luckily, many of mine have done podcasts before, but there are some who have not. I need to say, hey, can you get a headset or a USB microphone because we’re not recording on your onboard laptop mic.

Then when they come on, you—meaning SquadCast—has to guide them along, handhold them in a way that makes me look good. Because if SquadCast or whatever solution I’m using screws up, it reflects poorly on me, it makes me look unprofessional. That’s a big responsibility.

Zach: That wasn’t super clear to us when we first started. But we learned pretty quickly that this is a brand asset, why does quality matter? We not only need to communicate that to our customers, but if their guest is like, well, why don’t we just record this on Zoom? Some percentage of podcasters would be like, okay, let’s do that.

What we do is try to communicate to the guests and everybody, why does quality matter? It reflects on your brand, it reflects on your credibility. There’s a study from USC that directly correlates the quality of the content to the credibility of the people in the conversation. All of these things we work to communicate to the guest in a way that’s not really invasive and tries not to be too involved as they connect and record on SquadCast.

Rob: Your co-founder, Rock, told me—this is vague so maybe flush this out. But my memory was in the early days—let say 2018, 2019 as you were trying to get traction—you would attend in-person events and you were out there in “the community”. I presume that’s Facebook groups and forums, but also in-person stuff such that people kind of saw you everywhere, is that relatively accurate?

Zach: I don’t know that we quite got to everywhere status, but we sure tried, and still do (to this day) involvement in the community. I love to say that podcasters speak eloquently for a living. It’s our job to listen and be very active listeners to what it is that they need, and try to keep that feedback loop as tight as possible.

Being in the Bay Area in California is a very robust diverse community of podcasters and content creators. The narrative and podcasting are very East Coast-centric, I’m not exactly sure why that is. Oakland and San Francisco are a huge epicenter as well, as is LA. We use that to our advantage, and online to your point. There’s an active community on different Facebook groups, different in-person events, that’s some really great advice.

When we first co-founded SquadCast, I was also holding down a day job for the government. I was committed to teaching at UC Berkeley for a night class. I was getting married and had the idea for SquadCast. Part of that was, one of my students at Cal Berkeley happened to be involved with Intel’s Venture Capital Fund in the Middle East and was taking this course to kind of brush up on his technical prowess.

He really pushed us, over coffee one day, to really get out of our comfort zone, launched in beta way sooner than we were comfortable with, and really put our money where our mouth was, and go and sponsor the largest conference in the podcast community—that’s Podcast Movement. Thankfully, that was in Anaheim in LA that year. We could drive, my best friend’s mom got us a hotel room, and we just put ourselves out there. We were all very anxious. I was writing code in the car there before, during, after, all that stuff. It was barely an alpha kind of product.

We learned within the first five minutes of the event starting that somebody came up and told me, I came to this event looking to solve this problem that you all are working on. That just was amazing to me because it was a real sink or swim moment for us. I’m really grateful that that worked out.

Rob: That’s that capital efficient scrappy bootstrapper mentality of you don’t have $2 million in venture capital to throw your own launch party, so you just figure it out. You drive down somewhere—I’m sure you guys didn’t sleep much—and spent a bunch of time hustling.

Zach, Yeah, and nobody knew who we were either. We were very nervous that we didn’t have any street-cred in the podcast community, what are people going to think? The downside could have been we would just drop a couple of thousand dollars and then we were just standing in this booth with nobody talking to us for a couple of days. Thankfully that didn’t happen. We met our founding advisor Harry Duran there, we got our first customer, and our first revenue there. It was just astounding and surpassed all expectations.

Rob: It sounds like it’s some of those asymmetric risks, if you think about it, where the risk was that you wasted a weekend and obviously some money with the sponsorship, but the benefits far, far outweigh that. Those are the gambles we have to take.

Zach: I’m really grateful that our first customer, Gina, is still with us today. That’s pretty cool too.

Rob: That’s awesome, cool. You and I both mention your co-founder, Rock, quite a few times. You are the developer side of it, right? I mean you do a lot of the coding and managing of the technical side. Rock does a lot more on the sales and internal operations, that kind of stuff. I’m curious, it’s a weird question because I guess if you say, yes, you’re like throwing Rock under the bus, but you’ve only done this with a co-founder. What would it have been like to try to do it on your own? Do you think you would have made it?

Zach: I don’t think I would have started, to be frank. I had a list of one for potential co-founders, also Rock introduced me to podcasting as a listener back in high school and college. That was something where I had some degree of hope that he would agree to go on this journey and be a key part of it. But at the same time, I mean, he’s got his job, he’s got his life, all that stuff. It’s a really big ask to say, hey, let’s do this 10-year plus journey together and put it all on the line, to revolutionize content production. That’s a bit audacious for someone to ask.

I’m really grateful that Rock and I, thankfully, had a relationship, strong foundation in trust as longtime friends. I also knew that our skills complemented each other but there wasn’t a ton of overlap. He understood enough about technology, I understood enough about finance and business. Each of us had a focus in those areas. It’s this real symbiotic relationship with that foundation and trust that has led to a really, really great partnership. It’s hard for me to imagine doing this without Rock.

Rob: Again, as the developer, normally what I see is if you have a developer and a non-developer co-founder relationship, that it’s the non-developer who is CEO, and the developer usually gets titles like CTO or something else. In this case, you are the CEO. How did that come about? I’m not sure I’ve ever seen that actually.

Zach: Well, what you described was what I wanted. I’m a reluctant CEO, I’ll put it. I was essentially trying to convince Rock, trying to see if there’s another way, and the team just continued to lift me up and say, no, we think it should be you. You should be the CEO, you’re the one with the vision, and you’re the one who had this initial idea.

Also, I’ve met enough engineers in my time where I can understand how that would be a non-starter for a lot of engineers because of communication skills, putting yourself out there, getting up on stages, recording with interviews, and all this stuff. These are all things that are assumed as part of the role of the CEO. I know enough engineers to know that there’s not a lot of people who would be comfortable with that.

I’m really grateful that I have built up comfort with public speaking, writing, and all the different things that are really key soft skills to being a successful CEO, but those were learned skills. That’s not something that’s intrinsic to me. Anybody who knows me from way back, I had depression, social anxiety disorder, and was very much focused on my fine art career and all of these other things way back when. Sixteen-year-old Zach would be looking at me now like, what the hell happened?

A big part of it as well is Rock and I discussed openly that we learn pretty quickly through research and studying startups. As first-time founders, we wanted to be students of startups and really understand where things can go wrong, where things can go right. It became very clear to us that the reason leadership and startups have turnover, changes hands, or anything like that—it can happen for a number of reasons, but it seems like the biggest reason is failure to evolve with the company. The company can evolve at a rate that the leadership doesn’t. That can be a big bearer.

That’s on a day-to-day or month-to-month time horizon, that’s what Rock and I focused on. It’s just making sure that we are evolving at the pace of the company. That we’re not going too fast, that the company is not going faster than us, and trying to maintain that speed. We also make a lot of decisions together. In some sense, there’s shared roles there like some co-CEO-ing going on.

I’ve asked Rock since making this decision. You sure, do you want this? Maybe I should be the CTO as well? Because I essentially have two titles—I’m the CEO and the CTO. I just have two calendars and I schedule time for CTO, I schedule time for CEO. That is weird. That’s taken some time to get used to, but I’m also really grateful now that with the success that we’ve had that we can actually grow beyond me as the solo engineer here and empower people like Jean, our new Lead Software Engineer and new hires that were working on this year to grow the engineering team.

Rob: Yeah, what is your total team size now?

Zach: I believe we’re up to nine. A lot of other people helping around that team.

Rob: Sure. That’s a nice small team size for north of $3 million in ARR.

Zach: Yeah. It’s a bit crazy because Rock and I are always trying to keep it as efficient and lean as possible with the team size. I remember having conversations with him where he’s like, man, if Instagram sold to Facebook with 10 employees, we should be able to do it with 5 or 6 people. Here we are over that already. I’m really, really happy with the team. That’s another aspect that is something that Rock and I focus on fostering a culture internally to the SquadCast team that I think is a big part of what got us here.

Rob: Mixing things up a little bit and circling back to something I mentioned at the top of the show, there is this quote from you that my assistant producer pulled from a previous podcast, I’m guessing. But you said, “Our biggest inflection point was shelter in place.” What happened there? Do you want to walk us through it? My memory of it was, there were a couple of months where you doubled one month. You were already doing, I think, tens of thousands in monthly recurring and you doubled, and then you doubled again.

Zach: Yeah. That’s a pretty good lap around it.

Rob: Was it a fun time or terrifying?

Zach: A little of both, honestly. It’s surreal just to zoom out for a second. It’s surreal because of how many companies experience the exact polar opposite. That’s not lost on us that we had experienced any amount of success. We would have been happy standing still in an economic time of that magnitude, and to experience any amount of growth was just tremendously humbling.

It makes sense because we had always focused on this inner section of quality content production but remote-focused and remote work. Our team is remote so we didn’t really have the challenges that other organizations would have being focused on in-person. We were able to really just hit the gas pedal and keep riding the wave as hundreds of people, thousands of people a day signed up.

I had my concerns, for sure, because while we do our best to scale the technology and scale the team, there can always be bottlenecks even with that, even with that being the focus. We had certainly felt in hindsight, it doesn’t feel like this. But at the moment, it felt like the SquadCast infrastructure and technology had been, to some degree, over-engineered. But that was because we knew we were planning for this growth.

One of the weeks there I did a scalability audit and ran that by you and some of the other mentors—I think Derrick at TinySeed. We were really trying to understand at the moment, okay, what do we need to get in front of to continue this growth because we didn’t know where it was going to take us and how the scale was going to evolve.

Same with the team. My brother Vince is the head of our support team and also the head of our content production team. It became very clear, we need to grow the support team to help onboard all these people. We need to improve self-service and we identified a number of things that we quickly got into the product to continue double down on self-service. And really just trying to make sure everybody was experiencing the magic of SquadCast while all of that stuff is happening.

That’s really where the roller coaster feeling—another way to describe it is like a time machine—of startups really was the most extreme version of that that I had ever experienced. I’m so grateful that we rose to all of those challenges and really provided the experience that people expected. A lot of those customers are still with us today. Very proud of that.

Rob: It’s a good problem to have when you’re just inundated with customers. It’s still a problem. I have learned firsthand, witnessed this, and experience it for agonizing months of scaling issues. I remember when we did that scaling audit, I said something like, wow, if you are going to build this today and tell me you didn’t have any customers, I’d say you’re gold plating this. But you gold plated it and it was the right call because now, you could scale so far from where you were.

Zach: I had never done anything like that. I had never worked on an app the scale of SquadCast before. That was another thing that we’re very proud of. Just to give you a sense here, in over 130 countries, in 2020, we helped record over a decade of quality audio. I think that’s just staggering numbers that I personally as an engineer or a startup founder had never experienced.

Rob: Yeah, for sure. Obviously, the upside of that is, oh my gosh, our MRR is doubling and this amazing success. There had to have been a day, a week where it was just awful. Do you have the worst memory of that five-, six-month period?

Zach: You know, I don’t. That’s weird to say, to be frank, but I don’t really. It was more of just like, hold on, stay focused, and do the things that we can do. I remember the team having anxiety and Rock and I talking about the ways that this could go wrong or that this could kill us. People don’t talk about success as something that may kill your startup. But that’s totally something that can happen. We were mindful of that.

We were just like okay, how far is this going to take us. We have been working for this moment. We had done our homework that inflection points do happen and that we had not really had ours yet was our sense of that. And then there are other things that are crazy to me still, Rob. April 2020 was still our highest record month out of nearly five years of working on SquadCast, but there are other inflection points that can happen as well.

The demand for video throughout that whole thing was probably, to answer your question, the closest that I felt to it was like, wow, we’re focused on scaling, making sure everybody is having success with their recordings, and getting all their files and all that stuff. Yet more and more people are very passionately requesting the ability to record video as well.

That’s where I’ll say that if we have had a second inflection point, it would be January of 2021 when we launched video recording. The difference there is, one was the world happening to SquadCast. But video recording, us launching that felt like—that being our second highest record month when we launched video recording was an inflection point that was self-inflicted, self-made. That felt really cool that we had gained that ability and the skills to really ride that wave.

Rob: That’s an interesting way that you frame it where the world happened to you versus you being able to put something in the world that you’re at least in a little more control of.

Zach: I think Rock actually had that insight. I think it’s a brilliant one. And then also, we suspected that that would happen with videos. We did a lot of testing to get it ready for prime time. We knew that with the scale that we had that on day one, or to give you some real data, on month one, we helped record over 11 months of video. It was essentially still in beta at that point. We suspected that that would happen and we prepared for it.

Rob: Right, and video recording was something you worked on for quite some time. You announced it publicly, was it the fall of 2020?

Zach: Yeah, that’s really when we started talking openly this is going to happen. We’d gotten the infrastructure in place to make it happen. We had extended our intellectual property for progressive upload that I mentioned before. We had engineered that in a way that would set us up for success when it came to video recording, which we knew about back then. In some ways, that was pre-requisite work that we have been for a while up to that point. But video has its unique set of challenges in addition to audio.

A lot of companies only really get one opportunity to innovate and move the needle forward. I’m so grateful that with SquadCast, we had essentially two. We could start with audio and then once people started talking about video, it sounded like a mirror conversation of what people were telling us in 2016 about audio. Which is like, hey, we’re not happy, the quality is not good. Sure, there are some hoops we can jump through, but the experience is whack.

This would be very valuable to us. Podcasting was evolving at the same time. Audiences’ tastes are evolving at the same time. There was a real demand for that. We’re really grateful that we could play a role in helping so many people grow their show, grow their audience from the roots in audio to video from there is a really cool thing to have experienced.

Rob: I know that you wanted to get video out. You wanted to get it out as soon as possible. It felt to me, I don’t think we ever talk specifically about this, but it felt to me like it’s like shipping any big feature, it just takes longer than you want it to. I know you were doing a lot of testing. Tracy, Xander, and I hopped on one to do some video recording and check it out and stuff. But was there a moment where you were like, I hate this, I hate my life right now and you were thinking as it drags on for weeks and weeks of, I want to push this live but we just keep having to circle back on things?

Zach: Yes. That is one of the things that—it’s a terrible quote, but, “Move fast, break things,” from Mark Zuckerberg. You lose that over time as you gain customer trust, as you are more and more relied upon as the industry standard. To really throw something against the wall like that could really rock the boat and disrupt what is a reliable system for existing customers. That’s really where I was very mindful that we did not want to do that. We had worked really hard to establish this relationship and reputation of reliability and quality.

But also, there’s a lot of other elements to it that we don’t necessarily think of as video recording. But you played an instrumental role in this and as did Einar and the TinySeed mentorship is the pricing that goes along with a major product release. Before we joined TinySeed, Rock and I had already developed pricing to give credit to Rock, he is a real student of SaaS pricing. I don’t think enough founders are. That’s a bit weird to me. He has really embraced that and we had developed and designed pricing that we thought was going to work. It probably would have, to some degree.

But I remember having a conversation really early on when our batch started at TinySeed where you and Einar reviewed that pricing with us and were like, you shouldn’t do it this way. Let’s do it differently and start with a fresh sheet of paper. I’m so, so grateful that we did because it’s setting us up for success into the future—future-proofing—pricing as we grow and add more features. That’s another element that we really needed to get right when it came to a big update with V3.

Rob: Yeah. Pricing, as you said, very hard to get right, easy to screw up, and often not even know it, not even realize it. I’ve said, pricing, it’s the biggest lever. It’s the number one lever in SaaS. You don’t have to build a new feature, you don’t have to build a new marketing channel, you don’t have to add more leads. But changing your pricing can literally make a business that won’t work into a wildly profitable one.

Zach: Absolutely agree. We had experienced that a bit ourselves with some of the experiments that we had done before joining TinySeed. But to be transparent, that was one of the major reasons where we knew enough to know that we didn’t know enough. That’s really where it was like, all right, let’s lean on experts, people who have been there and seen many, many, many more SaaS founders, pricing, all that stuff to really understand how we can create this win-win situation where we have a healthy sustainable business that can grow over time. as well as provide an economical solution to content creators at any size of their show.

Rob: We’ve talked a bit about TinySeed today. I know that you received a lot of term sheets to invest in SquadCast. You had several offers and you decided to go with us. You said that you joined batch 2. I’m curious why that was because I know that you and Rock are deep thinkers, you’re very deliberate, you evaluate your options, you’re not impulsive. You do things in a very thoughtful manner. I’m curious to hear a bit more about your thought process in deciding to go with us.

Zach: I appreciate you saying that and also for accepting us. It’s been a real delight and pleasure to learn from the TinySeed community, to contribute to the work being done by all these amazing founders, to see the next batch coming in. It’s all very, very exciting that we can play a part in that. You’re right though, we are fundamentally bootstrapped. We worked day jobs for a year and a half, jumped in full time once our product was paying for itself, and experienced some really great opportunities to scale. That tends to get the attention of venture capital, seed funds, and all these things.

We also got some really great advice from one of our advisers, Scott Winston, that maybe it contributed to this (to your point) that if you ask a venture capitalist for money, they hear that all the time. We’re in the Bay Area, we’re constantly going to events that have a representation or a sponsorship by venture capital. We used that to our advantage to learn from these people who have been places that we have not and been founders already and grown amazing businesses. We didn’t want to sacrifice that knowledge. Just because we weren’t going to raise capital necessarily, we didn’t want to sacrifice the wisdom and the knowledge that often comes with that—so-called smart money, emphasis on the smart.

That is something where we leaned on our advisor. Scott recommended, when you talk to these venture capitalists, try to learn as much as you can from them. Don’t ask them for capital, ask them for advice. This weird thing will happen where they will offer you capital when you ask them for advice. That’s totally true. We have seen that happen over and over and over again, almost to a fault. It’s predictable these days, so thank you, Scott.

If you are interested in raising venture capital, I highly recommend that we were not focused on raising venture capital. We looked at this as kind of an experiment with bootstrapping where we would essentially try to bootstrap for as long as we could. Worst case scenario, we increase the value of our asset and it should get easier and easier to attract capital. At a point, we hypothesized in the beginning that we would reach a point where the venture capitalists were coming to us and offering us term sheets.

That was surreal to imagine back then, but it has totally come full circle. When it came to looking at ways to continue finding knowledge investors—it’s kind of how we look at it—that’s really what nudged us towards looking at the accelerator options. We had applied for Y Combinator, we had applied for a number of others like Launch, Earnest.

We had talked to the community around this with an emphasis on bootstrap because we know enough about self-funding and customer funding that there’s a real different set of knowledge there. There’s a lot of overlap, but at the same time, there is not. There are unique challenges that come with bootstrapping.

Because our experiment had continued and we still hadn’t raised any venture capital, for us it was more like, how can we get into an accelerator that is the exact right fit for us? I think there is only one TinySeed, just to be frank about that. That has proven true for a lot of reasons. But the other thing was that I think at a point when we were talking over the term sheet for TinySeed, we’re even entertaining the concept of no capital. We’re that focused on just the mentorship, advice, and the community that would come with that. That was the more valuable part to us.

If I can be real for a second, Rob, and hopefully Rock’s okay with me saying this, but I believe we still have that capital in our savings account. We haven’t needed to touch it. That’s the best-case scenario. We have it.

I remember walking in Santa Cruz with Einar. He just looked at me and was like, there needs to be some capital. You can’t sign this paper and not take some capital. You should take some capital even if you’re not really planning on it. It’s just like, okay, that makes some sense to me. I’m glad he leveled with us. There was a lot of leveling through the—I hesitate to even call it a negotiation—forming of our partnership.

We really look at TinySeed as a long-term commitment as well. That was our biggest concern. It was just, okay, we’re big fans of Rob Walling, we had read your books, we had listened to this podcast which is surreal that now I’m talking to you on it. We had researched Einar and the work at Discretion and all the different things. Tracy and Xander. That all came to life once we started engaging with your organization.

We suspected that you all felt like it was a long-term relationship for founders as well. Because the biggest indicator of that is the duration. The duration of the program was one year, which is longer than most accelerators. It was also a remote accelerator, in which we are a remote-first team. You are an active podcaster. All of these things and of course your heritage and background in bootstrap SaaS, we also knew that we wanted to grow as a company more towards enterprise customers.

I think we’re a bit of an outlier now having met the other founders in the batch that we’re a part of. As the majority of your focus is B2B, we are kind of B2C, B2B, prosumer so-called. That’s another area like, okay, we want to grow in this way. These are all factors for us in our consideration. But I think our biggest thing was just like, okay, what about the 2nd year, what about the 3rd year?

I want to keep learning from Rob and Einar in the community. I want to keep contributing to the MicroConf and all that stuff. That’s been very clear to us that we’ve made the right decision, and so grateful that we could be a part of it.

Rob: Yeah. I mean, it’s obviously been a real pleasure working with you guys over the past—well, it’s almost a year now. It’s like 5 weeks, 6 weeks?

Zach: Yeah. It went by so fast.

Rob: I know. The COVID year 2020 felt like it was 10 years, but some of these things like this feel like it went by fast. But to your point, you’ll be the second batch that essentially graduates and becomes alumni and not that many changes. There may not be the twice-a-month mentor calls, but I still talk to folks on a weekly basis from both batches. You’re still in the Slack group. It really is a graduation into more the same with perhaps less recurring stuff.

Zach: We had talked to founders that came out a batch one. That was another area that maybe if there had been five batches or something like that, it would have been a little bit easier for us to validate some of these things just on our own. But because TinySeed was a relatively new thing, which has got its perks too. That’s proof of innovation that this is a relatively new offering in the space, so that wasn’t necessarily seen as a negative bias. It was more just like, let’s talk to some of the founders.

Thankfully we knew Craig Hewitt, the founder of Castos was in batch one and is a member of the podcast community. We had already had some rapport with Craig, and we’re able to kind of say, is this what it seems? Is everything checked out, and kind of do a little bit of our due diligence, which I’m grateful that we did. It was super easy to find out that the answer is yes, these are real people, and they are deeply rooted in integrity and long-term thinkers.

Rob: I think that speaks to reputation—brand and reputation. That’s something that when we went to raise the first TinySeed fund and when we went to open applications for the first batch, what did we have other than marketing words on a landing page, conversations with investors, and our reputation? I mean that’s really what we went in on. The nice part now is TinySeed itself, much like MicroConf before it, much like Drip before it. It starts as this thing that no one knows about and has no reputation on its own. It has no brand.

Same with Squadcast. Four years ago you say, we’re Squadcast, and people were like, what are you? But now, it’s 13,000 customers. You have a brand and a brand is what people say about you when you’re not in the room. That’s how I like to think about it. I don’t know how to say this without sounding preachy, but it’s like if you are kind of living up to your moral standards, and the ethics of how you believe things should be. Like hey, should people be able to cancel without calling a phone number? Do I refund if they got overcharged or if maybe they didn’t use it for a month or two and they’re not being ridiculous about it?

There are just certain judgment calls you have to make in business. That’s whether you’re running a SaaS app, or whether you’re running an accelerator or a conference. And that stuff follows you around in both the good and the bad ways. If you do a lot of good things, it builds, it builds, it builds, and your reputation builds on the positive, and similarly in the negative.

Something I’ve really enjoyed already is to be able to say—because we were really almost wrapping up the selection process for batch three right now, I’m pretty stoked about it. Several founders say I’d love to talk to founders from batch one and two. Every time, I say, go to our homepage, click on any logo. Every company is on there. Click on any logo, contact any founder, and ask them what they think. I want to be able to say that forever. I want to be able to say that for 20 years. Do you know what I mean?

Maybe that’s a little too ambitious. Certainly, at some point, you wind up with a bad customer or a customer who’s a little overly demanding. But the bottom line is, that’s a big piece of this game. I think a lot of folks who get into building their own company,—whether it’s a SaaS company, whether it’s info products, whatever they’re doing—think well, I can get away with stuff. I can get away with something here and I’m going to have a short-term mindset around it. In the short term that will work, and in the long term this space is pretty small. Our world is pretty small and the word gets around.

Zach: Yeah, exactly. Another element that just occurred to me was that we also have experienced some amount of growth before we applied for TinySeed or while we were applying, more accurately. That also kind of made it seem like a moving target. It could be tempting if you’re a founder listening to this and you’re like, well, why do we need an accelerator? I’m already at like $50,000 MRR? I challenge you to think, was that something that you got to $50,000 MRR because of something amazing insight that you had and put into practice, or was that kind of the world happening to you like a mini inflection point?

When we really took a step back and looked at that, we realized that we’re still first-time founders, we still have a lot of questions, we still have a lot of growth opportunities, we want to move towards enterprise, we want to do all these things, we are experts in none of those things, and TinySeed had a lot of experts in those things. That’s the area where you may be tempted to be like, well, we don’t need it. We’re good. But that’s essentially where we were at for a day or two, and every time we talked to you or Einar, it just became clearer and clearer to us that this is the right move, whatever size we’re at. I’m so glad that we made that call.

Rob: Sir, it’s been a pleasure working with you so far. Looking forward to a continued relationship with Squadcast, and it has been a pleasure having you on the show today.

Zach: Thank you so much, Rob. You really honor me by being able to participate in TinySeed, being a guest on your show, and it’s been a lot of fun. Thank you so much.

Rob: Absolutely. If folks want to keep up with you on Twitter, you are @zach__moreno and we will link that up in the show notes.

Zach: Two underscores.

Rob: Oh, it is two underscores. Okay.

Zach: Yeah.

Rob: Thanks for pointing that out. Then is it, @SquadcastFM on Twitter?

Zach: Yes. @SquadcastFM on Twitter, squadcast.fm if you want to check out our website. We’d love to help you get started with your podcast and have really high-quality audio for your audience.

Rob: Absolutely. All right sir, thanks again.

Zach: Thank you, Rob.

Rob: Thanks again to Zach for joining me on the show today. If this is your first episode and you heard about this podcast for MicroConf Remote last week, welcome. Hope you enjoyed it and I hope you continue checking out the next few episodes. There’s a lot of variety, this is not just an interview show.

We have Q&A episodes, we have episodes where it’s just me on the microphone talking about things that are on my mind around the SaaS and bootstrap or ecosystem. We have startup and bootstrapper news round tables, all kinds of things. I hope you will stick around. I hope you enjoyed this week’s episode. Thanks again for listening. I’ll be back in your earbuds next Tuesday morning.