Josh

Rob: Welcome back to Startups for the Rest of Us. I’m your host, Rob Walling. Every week on this show we cover topics related to building and growing ambitious yet sane startups. We look at building companies, not as a vanity project, a way to get power and status in the world. But we think about it as a way to improve our lives to bring us freedom and purpose and allow us to maintain healthy relationships.

It’s not about being a total bootstrapper, it’s not about raising buckets of venture funding. It’s about being capital efficient and building a company that serves perhaps multiple purposes, rather than just being an IPO in 10 years, but that actually changes our lives and those around us.

Welcome back to the show. Thank you so much for joining me again today. We’re going to be covering bootstrapper news today with Tracy Osborn. I’m excited to talk about it. We have some pretty interesting stories, actually. Stack Overflow was acquired for $1.8 billion. It came as a total surprise to me. Just a few minutes prior to recording this, Moz was acquired. We talked about people quitting instead of giving up remote work. We wrap up the episode by talking about remote work and remote retreats, and if you are a remote team, how often you think about getting together.

We also talk about a few highlights from our 2020 batch of founders and talk about what we feel went well with that. That dovetails into the whole remote conversation of not being able to get together for retreats during this batch here, and how we feel that impacted us and perhaps the cohesion of the batch itself.

Today, I’m talking about these topics with Tracy Osborn. She’s @tracymakes on Twitter. Of course, she is the Managing Director of TinySeed and the author of Hello Web Design. Within the first few minutes of us chatting, you’ll get to see that book hot off the presses. She self-published it and then later went through a publisher and has a nice hardcover copy. So with that, let’s dive into today’s show. Tracy Osborn, thanks for joining me.

Tracy: Yeah, happy to be back.

Rob: Last time you were on you were talking about your book, Hello Web Design. Before that, we did a bootstrapper news episode. You’re getting the book out. Is that a physical hard copy, hardcover of your book?

Tracy: Yeah, it is a hardcover. The publishing company wanted to up the quality of it. Apologies to anyone who’s listening to the audio format. Just imagine a book that’s hardcover. It used to be a paperback. It looks really nice now. Gosh, I don’t know the exact date it’s coming out, but it’s going to be this month. I know some people have already gotten their book.

Rob: That’s cool.

Tracy: Listen to the last episode where I talked about my design book. You’ll get the link to buy my book that teaches web design. Sorry, I have to put a pitch in there. This is the perfect opportunity.

Rob: Nostarchpress.com/hello-web-design. Before that, you and Einar Vollset were on the show to talk about bootstrapper news. We’ve had all kinds of conversations around this. Einar is out of the office today. He’s taking a day off, and so it winds up being you and I here recording. Thanks for doing it last minute. I found myself at the end of the week saying, I have no episode next week. So it’s great.

Tracy: I like how you just admitted that. I wasn’t going to say anything. But, yes, I’m very happy to be the person you go to when you are in a pinch.

Rob: Scrambling. That was a thing. It doesn’t happen very often. I mean, I often record at least a couple of weeks ahead or I get stuff done Tuesday, Wednesday for the following week. But, I don’t know, this week there was a lot going on and a lot of email. But we are really talking through news and other topics. We even have a listener question I might throw in depending on how time works out. This is stuff that’s related to developers, designers, founders, bootstrappers, and such—the folks who would listen to this podcast.

The first story, what’s funny is I hadn’t heard about it. It wasn’t until I was digging through a bunch of social news sites for news over the past couple of weeks that I read that Stack Overflow sold to a tech giant that I’ve never heard of called Prosus for $1.8 billion. It says that it’s Prosus’s biggest investment in online learning and comes weeks after it’s sold a chunk from its massive Tencent holding.

Stack Overflow, this site. I listened to Joel and Jeff when they were launching Stack Overflow. They had a podcast around it. I’m an early account, I don’t think I ever answered a question. This is like a mainstay for our communities. What’s your take on this?

Tracy: I haven’t answered a question ever either. I’ve gotten so much out of Stack Overflow, whatever I’m programming. Like any programmer I’m using it on the minute, every minute, it seems like when I’m trying to debug something. This is interesting to me. I mean, one of the reasons why I work at TinySeed is that I’m a big fan of smaller companies. I try to enable a lot of people on the internet to launch small things, and I love small teams. This goes into real life for me. I do small businesses, not big conglomerates and whatnot.

It’s been interesting to see the trends we have in (I want to say) the physical world of consolidation, of businesses like news industries. Seeing that move into online industries, and you can see that here with Prosus, which I had never heard of either. For being such a tech giant—I guess it’s South African—I’ve never heard of them.

When I was researching a little bit for this story, looking at all the different acquisitions and properties they have, they’re all around online learning. It looks like they have this plan to go through all these online learning websites, supposedly, keeping them independent and they’re still running on their own, but they’re still consolidating all these online learning websites.

It leads me to wonder about what it’s going to look like in five or so years as these companies are getting acquired and consolidated. Are we going to have these mega-corporations that are pushing for a certain way of learning when it comes to online learning. Pushing for certain ways of learning or being more (I want to say) anti-democratic. You know what I mean when a big company comes in and takes over these small companies, and then all of a sudden, they all start looking the same. They all kind of had the same processes and whatnot.

On one hand, it’s more efficient, on the other hand, I mourn for the freedom of these small businesses. I might be going way too broad here, but it made me think about news corporations and consolidation there, and seeing this happen in the tech world. I told you earlier, I kind of miss the ‘90s, where it seemed like everyone was just individuals running websites. And now we have these mega-corporations that are running things that I use actively. It makes me wonder how it’s going to look in the short future.

Rob: I wonder if you’re the only person that misses the ‘90s because, man, the fashion was terrible/ I guess the music was pretty good, but no, I’m joking. Very fond memories of the ‘90s.

Tracy: Frame websites. We’d have friends and development nonsense. I just built it with frames.

Rob: Yeah.

Tracy: Sorry, go ahead.

Rob: The thing is with any industry, there’s always a bunch of players and the consolidation has been inevitable. Where it’s like there were a hundred car manufacturers in the US, and now there are three. There were a hundred airplane manufacturers, and now there are a handful around the world. There were a bazillion TV stations, and then it became just three, maybe that one’s not true. But radio? Each of these things has consolidated. TV is the one where it got distribution, cable, and it actually expanded. But then there’s only a handful of companies now that own them.

There’s NBC, CBS, and AMC, or whatever, but they’re only owned by a handful of companies. I hear you on wanting the days back where it’s small players. Again, Joel Spolsky started a little software company called Fog Creek Software in 1999 or 2000, started blogging, and then start Stack Overflow. He was the CEO until 2019, I found out, and then he became the chairman. At that point, when one of the founders steps away from being CEO, I feel like the clock is ticking for an exit.

This type of thing where they did raise venture funding, I think, a lot of us were surprised because Joel was one of the few bootstrappers. He was the first person I’d ever heard who started a software company without raising venture funding. As shocking as that sounds today, in 2001 I was like, you can do that? That’s a thing? I literally didn’t know that was possible. Just every model I had seen was someone raising funding.

When they raised for Stack Overflow, I remember being super surprised and Joel was like, look, certain types of businesses, if you want to do some certain types of outcomes, you need buckets of money. To do Stack Overflow the way they wanted to do it with all the stack exchanges and all the stuff, that was what they wanted to do. Once you raise that level of money that they did—through venture, not TinySeed money, not angel money—the clock starts ticking. You have to have a liquidity event. So they needed to IPO or they needed to sell at a certain point.

I look at it as I think it’s cool for Joel, Jeff Atwood, and the founders (whoever had equity in this) that they built something amazing and that they now walk away with boatloads of money to be able to invest in and fund future entrepreneurs. Of course, I’m concerned about Stack Overflow itself. I don’t use it at all anymore unless I’m helping my son troubleshoot a 3D printer driver or something. I don’t know if Prosus is private equity, or venture equity, or what they are exactly. I guess I could have actually done some research. But basically, they’re some type of big conglomerate investment that’s rolling things up.

But I’m excited about the opportunities. There’s always the opportunity for scrappy entrepreneurs to come in. If Stack Overflow is not going to be good, should we all start a new Stack Overflow that would be a competitor? That would be crazy. You wouldn’t have done that while Joel was running it because they would win. I guess there’s just a lot more money in the startup ecosystem with Jeff Atwood, Joel, and the other founders having this money to reinvest.

Backing startups, I think that’s something that they will do. They will do interesting things with the money. They’re not going to go retire on a beach somewhere. They’re going to start their next company or they’re going to help other entrepreneurs. But I’m a silver lining person when it comes to this stuff because there’s definitely (as you’re saying) both sides of it. There’s a real negative take I think that is very real. It’s a real possibility.

Tracy: Yeah, I just looked it up actually. Prosus has stakes in companies. It still has a stake in Tencent. But they also have other education companies like Brainly, Codecademy, Udemy, Remitly, PayU—some things I haven’t heard of and some things I have. It gives you an idea in terms of their ecosystem there.

When I say something about consolidation and mourning it, when I think about radio stations, you see the radio stations consolidating to get more plans, boring, and vanilla because there are no local radio stations. It’s harder, I think, for individuals for radio to start up their own thing.

But with tech, that’s the thing that makes me optimistic about what we can do on the internet. What we can do as tech entrepreneurs is that if Stack Overflow does go in a direction that people don’t want, then it’s easier to start something new and pull out those features, pull out anything that doesn’t work anymore—Stack Overflow, as they make changes. If they make changes and that the internet evolved pretty quickly to fill in that gap as compared to say some of these more (say) physical businesses.

That brings me a little bit of comfort. Obviously, I don’t want Stack Overflow to change. I mean, I’ve never given back, which is not necessarily a good thing. But I appreciate all the people out there who have spent the time and unpaid work to answer people’s questions. I hope that that kind of community sticks around post-acquisition.

Rob: That’s a good point because starting a new car company today would be very, very difficult. As we’ve seen with Elon Musk on Tesla—even with all the money, all the influence, and network he had—it’s been a real uphill battle for him. Versus starting a competitor Stack Overflow, the network effect will be really hard, like you said, the marketplace aspect of it. But way more possible than starting a car company. It’s interesting. We have another story we need to cover in-depth, but literally 33 minutes ago, the story broke that Moz was acquired by iContact.

I got a text from Einar and I’m like, wow. You know it’s gonna happen, but I’m always surprised when it does. And really, why should I be surprised? Again, it’s a venture-backed business that was doing, I think, $70 million a year last year, it’s SaaS App, it’s worth a lot of money. The founder left a few years ago to start SparkToro. It’s probably natural that the new CEO they brought in was to groom it and get in line for an exit.

We don’t have any details about price, outcome, or anything, but this is another thing. I think this is the critique of venture capitalists is that they don’t build businesses for the long-term because there does have to be this liquidity event, usually a sale. But what’s interesting is I’ve realized over the past couple of years, an IPO obviously is also a liquidity event, and an IPO is just really just raising funding from the public. Do you know what I mean?

A lot of people will say like, oh, they IPO and they sold out, or they sold everything. And it’s like, no, they just sold another 10% or 20% just like a funding round. Oftentimes, the founders or the current CEO will stick around for that.

Tracy: I didn’t get that for a long time either. IPOs felt like this big—I mean it is still a giant event and whatnot. But still, like you said, it’s the same thing. Taking a bit of your company, instead of going to private investors and going public.

In the Moz thing, I am looking forward to seeing what news comes out of this. I hopefully will hear from Rand soon. I hope that it worked out well for him. But iContact is another company where it’s like, oh, they’re acquiring Moz to form a suite of leading SEO, email, and digital marketing solutions for small- and mid-sized businesses. It’s another example of this consolidation. A bigger company being like, okay, we need another company in our portfolio, so we have this full portfolio, this full ecosystem of different tools. I guess we’ll just see what happens with Moz too.

Rob: Yeah, and that’s it. The plus of this is hopefully Rand, whoever else had equity, and the investors walk away with enough money that they now are reinvested back in the ecosystem. I mean, Rand himself, even before this exit, is an investor in TinySeed. He’s a mentor. He’s giving back to the entrepreneurial community in ways that his means have allowed, and if Rand has more means he will, I think, give back more. That’s the plus side of this.

And of course, the negative side is if you’re a Moz customer, things are going to change. They’re pretty likely to. That’s where it’s good that we do have competitors—Semrush, Ahrefs. There are other tools out there that do similar things. It’s just a bummer if you’ve been using a tool for 10 years, it gets sold, you’re waiting for the inevitable changes. The playbook, as you said earlier. These things, they start to be run the same. It’s the playbook. The private equity or the strategic playbook.

Tracy: Got to bring the people in to make sure everything is efficient, that efficiency is reflected across every one of their properties, and then everything looks the same.

Rob: Yep. Don’t do this, but if you read The Hacker News comments for any of this or even just the comments on anything, you’re going to see things like the founders sold out. You hear this phrase. It’s almost like, no one should ever sell their company. And you know what, that’s just not realistic because people don’t want to run the same company for 40 years, (a) it gets boring, (b) there’s a lot of risks.

You can have tens of millions of dollars in net worth tied up in an asset that you have no liquidity. So it just doesn’t make sense. It’s usually said by someone who’s never built a company worth tens of millions of dollars a year who is saying these things. Of course, do you think sometimes it gets worse after a company is sold? Of course. But there’s a flipside. Are there silver linings to this as well?

Tracy: Yeah. I mean, the service is more stable because there’s more tech support within the company, more A-team, or more personnel. Are they able to add more features quickly? The consolidation with other parts of the suite. I think of Microsoft. Microsoft has a whole suite of applications. A lot of these applications, they’ll talk to each other, so there’s a lot of benefits there as well when you opt in to some of these conglomerates.

Rob: Yeah. It is still disconcerting though, I’ll admit.

Tracy: Right.

Rob: Next story. We’re going to link up all these stories. This is on bloomberg.com and it says, “Employees are quitting instead of giving up working from home. The drive to get people back into offices is clashing with workers who’ve embraced remote work as the new normal.” And it talks about someone who is called into the office for a six-minute in-person meeting or something, and she’s like, that’s it. I’m quitting.

My brother lives in the Bay Area, most of my family is actually. He said that he is friends with some folks who work at Apple, and they lived near him. When the remote work started, they moved like a two-hour drive away because the houses are so much cheaper, and you can get a view on all this stuff. Maybe it was even two and a half hours.

He’s like, they think they’re going to be remote forever and I think they’re not. I don’t think Apple’s going remote with the big flying saucer campus there. What are they going to do when they come back or when that happens? We were chatting about that, and I said, boy, if they’re developers or they have skills, they can just work remote for someone else, probably. What’s your take on this?

Tracy: I mean, ignoring COVID, this is just what happened with Yahoo because they had a remote policy, Marissa Mayer came in, and then it was like, oh, we’re canceling the remote policy. Everyone has to come back into the office because there’s still this pervasive idea, that productivity is tied to butts-in-seats. I was like, oh look, we’re taking this company, or we’re making it more productive in bringing people to the office. We’re going to have all those “benefits” of having butts-in-seats. That was pre-COVID.

Yahoo is its own thing. Who knows what’s going on with Yahoo now. But I remember that happening in the Bay Area, and COVD happened. That forced all these companies to adopt a remote policy. It’s the same thing, COVID’s lessening, the pandemic is lessening. It’s allowing people to get fully vaccinated, have the possibility of people going back to the office.

Company is ill-advised, the pursuit of efficiency and managers who have maybe not a lot of confidence in their teams or they are insecure managers (I want to say) going to pursue bringing people back in the office so that they can not have that question over their head of are my workers being as efficient as possible?

So it’s not something I agree with. We’ve always been 100% remote. I love working remote. I just look at Yahoo, I look at what’s going on right now, and this is like duh. Watching these companies force people to come back to the office, people are going to quit because now they realize there are more opportunities out there.

I expected the companies to do this. What is different now is that so many companies are going to be adopting more remote work than these companies that have, say, insecure managers, and insecure C-suite teams that want to move people into the office, now, they have more competition. Now their workforce is aware of remote work.

I watch the industry, people are going to be trying to adopt these policies. People are going to be quitting. Other opportunities are going to show up that are fully remote. Again, five or so years from now, there is going to be a major shift in the industry that started now because of COVID.

I’m not surprised but I expect that this is going to be, hopefully, a long-term change. These companies that have insecurities around productivity, I expect them to have this reaction, but hopefully, they’ll change.

Rob: It’s interesting because I’m much less black and white on remote being the end all be all. Every company I’ve ever run has been remote or half remote. In Fresno, we were partially.

Tracy: Yeah, I didn’t mention that. I’m not black and white either, and I didn’t really go into that. I actually think, TinySeed, I wish we were half remote. I would love to work with you two days out of the week.

Rob: Yep. That’s my ideal.

Tracy: I think that is the ideal for these companies as well. I think the black and white thing is like whether fully remote versus fully in the office. There’s a lot of gray there. Sorry, continue.

Rob: That’s the tough part is every time I talk about remote, I talk about the best setup I ever had and it was in Fresno. There were five of us or six of us—I forget how many were in. It was two and a half days a week for me. Some people showed up three. I think Einar worked there five days a week in the office because she liked it better. She was alone half the time anyway because none of us were there, but we were able to whiteboard.

Our staff meeting was lunch, and we’d go out on Thursday. I mean, that was the best. And then I could go home, put the headphones on, and not worry about having to drive in those days. It’s really hard to do that. Not for Apple, I guess. It’s hard to do that if you’re a small company or a bootstrapper because if you’re going to pay for an office anyway, that’s a cost if you’re only using it half the time.

In addition, then it does restrict you to I can only hire within a 30–45 minute drive. You live in Canada, Einar’s in California, I’m in Minneapolis, Producer Xander with MicroConf is in Hawaii. If I had to hire everyone in Minneapolis, we wouldn’t have the team we have. It instantly breaks that. I really struggle with it.

Tracy: It’s the same thing if you were like okay, TinySeed, COVID is over. We’re going to pursue being in person in Minneapolis. I would have to quit. It was like the same thing. I don’t want to, but I have to because I’m here. I feel like that’s going to happen a lot to these companies where, like you said, the example of someone who moved out of the Bay Area—two hours out so they have a lower cost of living—is going to be very unwilling to come back into that high cost of living area. That’s maybe where this change is going to happen. There are companies that can make this work.

My first job out of university was at a tech company. That’s my example of an insecure manager. Over the four and a half years I was there, they kept adding more and more policies that make us more efficient. So (a) we were all in the office, (b) we started clocking in and clocking out, (c) bonuses were tied to us working nine hours a day, rather than eight. If you only work eight hours a day, you’re not eligible for any bonuses. These policies kept adding up, adding up because they’re like, we wanted to extract all the productivity. Curious how they’re doing now with COVID. I eventually quit because of that.

Rob: Absolutely. Hours do not equal productivity. That’s the thing is my kind of shades of grey, or my spectrum view of this is not because I think, oh, I’m going to get more productivity out of people, or I can make sure they’re in their seats those two or three days a week. It is purely for social interaction. A lot of the companies that say, we’re fully remote—Basecamp’s a typical example, they’re all remote. From what I’ve heard, they hired a bunch of introverts, and everyone in the world is not an introvert. The extroverts I know don’t love working out.

I have worked remote for 20 years, literally two decades of working remote. I had a couple of stints in there where I had jobs for a year or two. But in general, I’ve had a home office. Sometimes that was a desk in my living room when we had a small house, or in my bedroom during COVID when I didn’t have room. I generally prefer remote, but I also miss a lot of the social. It purely is social and the ability to sit in front of a whiteboard or to hash things out. It’s that water cooler conversation that just doesn’t happen because you’re not hanging out all day.

You just have other wild thoughts that you drop on someone and that spark something, then there’s a brainstorm, and then there’s a hey, can you… That’s what I miss rather than being a hardcore manager.

I think of Apple with thousands of people, that would be tough for me. There have to be people that are just totally abusing it at that scale. On our scale, there’s four of us, or at the Drip-scale there were 10 of us. That was pretty easy for me to see who was shipping, what we were getting done, and to know that everybody was in on it. But if we were a hundred or a thousand…

I mean, I’ll say, once we were exorbitant to Leadpages, which is about 180 people total, it was three days in the office, two days work from home. There were absolutely people that were slacking off. That’s tough. I don’t know how to handle that, other than to require people to be in the office.

Tracy: Yeah. I mean, that happens if you’re in the office all the time too.

Rob: Yeah, that’s true.

Tracy: I mean, not to defend myself, but I got really irritated by that one company constantly tracking hours. One other thing they did was I wasn’t allowed to have my phone out because then I could potentially be looking at my email during work hours. It’s just crazy. I wish I could name and shame them, but I’m not going to.

Rob: I know, I can’t even… this is crazy.

Tracy: I’ll tell you stories later. What I did, I just stared at the corner. I would just take breaks, stare at the corner of the wall, and let myself drift off because there was no way they could stop me because I was just so mad at their policies. That’s going off track, but it’s a funny story.

What I want to say is that it still happens. There are still going to be workers out there that are maybe not performing as well as they could have. Maybe they’re a worker that the company might want to hire a person to replace that person. I don’t like tying everything to productivity, but you know what I mean. The person is not necessarily a good fit for the company.

That doesn’t matter whether they’re remote or all in-person. What it means is that companies need to have better ways of tracking the quality of work. Instead of just being hours in the office, like that company that I originally worked at. We were doing all we could, the person’s here all the time, this is as efficient as we could be. Look at other metrics and then those metrics can apply to whether someone is in the office or out of the office.

Hopefully this forces these companies to remove butts-in-seats and find other ways of tracking quality of work, productivity, and whatnot. If those things apply to in-person or out of person, I think that overall, it’s going to be better for the company anyway.

Rob: I love that you just said in-person or out of person. That makes me feel like I’m leaving my body. I’m floating guys, I’m seeing myself.

Tracy: Oh, gosh. That’s what my brain does. I’m thinking two sentences ahead and forgetting what I’m currently talking about.

Rob: It’s all good. Our next story is a Twitter thread I’m going to be posting next week. Maybe I’ll post it the day before the day that this episode goes live. It is about TinySeed and the end of our second batch, which is our 2020 batch. I want to be careful. Audience, listener who’s sitting here listening, this is not going to be a big hooray for us or hooray for TinySeed, but I did want to visit some milestones that some batch two folks achieved. As well as reflect on things that we did well and some things that maybe we need to work on. As well as just the structure.

Someone asked me in the last couple of weeks how do you run a fully remote accelerator, and why were you running a remote accelerator before anyone else? Because we were running that pre-COVID. Now, all accelerators have been remote for the last year. We orchestrated and architected this to work that way.

Tracy: Actually, this ties into our previous conversation. We were talking about tracking performance and quality and not necessarily being butts-in-seats. For us, some context around this is that, before the first batch, we were able to talk to the founders and the accelerator in person at MicroConf. We’re able to say, how was this year for you? And kind of get the down low. Of course, fully remote we weren’t able to do that.

We have anonymous surveys because we want to know how well the accelerator is doing, which is especially important being that most of the people—actually, I’ve met a few people in batch two, our 2020 batch of MicroConf—I’ve never met in person. This is the only way we have a gut feel for how the year went, but how does this look from the founder’s side of things? How well did this year ago, being that we had no in-person events and we had to do everything remotely?

Rob: That’s right. Because if you think that hiring someone remote is difficult, imagine running someone a $120,000 or $180,000 check remote having never met them and only being able to talk to them via Zoom and email.

A couple of numbers. Our first batch, our 2019 batch was 10 founders. 2020 batch, that just ended was 13. And our spring 2021 batch is 18. But the 13 companies in our 2020 batch grew an average of 413% during the accelerator year. While fundraising is not an implied goal of TinySeed, we had—I guess there’s one company who secured their pre-seed round and two others who are basically about to wrap it up.

We had our first acquisition, which was SeekWell. The founder of SeekWell was on this very podcast probably about six months ago. ThoughSpot acquired them. We had some great milestones.

ScrapingBee is great because they are very public with their revenues. We can actually say exactly, not just percentage stuff, but Scrapingbee was at $40,000 ARR when they applied. I don’t know if it’s when they applied or the batch started, but now, they’re at north of $500,000 ARR. The founders there told us that TinySeed played a huge part in that.

And then SegMetrics. Many of you know Keith Perhac, he’s a long-time MicroConf-er and has been on this podcast. SegMetrics grew 10 times in the last 12 months and they’re on track to hit mid-seven figures ARR by the end of this year.

A lot of cool milestones. Pretty stoked about it. It was a big bummer that we couldn’t meet a person. It’s not a regret because you can’t do anything else, but the fact that we weren’t, as you said, able to make that connection I think was a pretty big struggle.

Tracy: We always knew it was going to be remote. We wanted to help companies and these founders grow their businesses, help them reach (what you say) escape velocity, which I think some of those stats we were successful in helping those companies reach those milestones. But a huge thing is also just community between founders, especially for solo founders. We talked to a lot of our solo founders. It gives them a sounding board, people to talk to. And all these things that we can do remotely fairly well, but there’s something about getting in-person and having this group of people all together in-person.

I mean, it’s the same thing as a company. Working remotely is fine with you, me, Xander, and Einar, but it’s a different feel when you do have those like in-person meetings, in-person events, and whatnot. It’s a bummer that we weren’t. We were able to have a lot of community. There’s a difference in feeling between the 2019 and 2020 batches. I think it has to do with the fact that there weren’t any in-person events. Hopefully, as things open up this fall, we are planning to have some sort of in-person event like a makeup retreat for the 2020 batch. Hopefully to add that into the end and solidify all those relationships we were able to do remotely.

I will say that I do feel like there was a different feel, and it was interesting to have that experience I guess. I think when we did that anonymous survey, thankfully it seems like people still got a lot of the program without those in-person events. I am looking forward to bringing them back in though and re-establishing that side of TinySeed.

Rob: It’s a big deal. It makes a huge difference. I think when we originally started TinySeed we said, let’s have four in-person retreats per year. That means that every four months you essentially get together. The founders told us, this is too often. I’m busy and I don’t want to travel every four months. So then we made it six months apart, which means you have three retreats.

Tracy: Beginning of the program, end of the program, and middle of the program, to be clear.

Rob: Yep. Every six months. We haven’t had a chance to do that yet, but I feel like that’s going to be perhaps our optimum cadence. And the reason I’m calling this out is let’s say we were a team of 20 people, would six months be the optimum cadence? Or would we want to meet more frequently like every three or four months? Because I know that there are certain companies that only have one—I think Zapier has like one retreat a year. There’s a lot of people working there. They spent a quarter-million dollars or more to get them together. It’s not something they could probably want to do every quarter.

But what do you think would be the optimal? Because working with founders is one thing. They’re busy, they’re doing their thing, we get together, and we mastermind. But we are not managing them as teammates, as employees versus an actual team that’s working together in a startup. What’s your take on optimum cadence, face-to-face?

Tracy: One of the reasons why it went from four to three was because we talked to the founders in the first batch, four retreats per year meant more time away with their family, more time away from their company. It’s different when it comes to say a team because maybe four retreats per year or whatever you choose, it’s not technically time away from your company. You’re still working on your company while you’re at those retreats. That’s the biggest difference between retreats for founders who work in a company versus a TinySeed if TinySeed was 80 people.

I think it’s really important for companies to have those in-person experiences, and those are the kind of things that don’t necessarily take away from work. Instead of working on the nitty-gritty day-to-day, it gives you that time you should be doing as a company anyway to think high-level, what’s the next three, six, whatnot months? That’s something that depends on the company and how remote they are. If you are very international, every three months would suck. Every year I think is doable.

Rob: If you’re going to get your team together, we’re talking about founder stuff, but if you have a team at a start-up and you’re going to get them together, I found a really nice cadence is to have about half the time be work and half the time be not. It’s even like 2/3 not work where you have a work session in the morning maybe through lunch or early afternoon, then you have an afternoon fun hang-out, and then you have a fun dinner hang-out.

Usually, if you can, have a fun dinner hang out the night before because everyone gets in and it’s like, oh man, I haven’t seen you in a while. You’re a lot taller than I thought you’d be. You have all that weird stuff and you’re chatting. And then by the time you get to the work session the next morning, you have some type of agenda.

We do masterminds but that wouldn’t make sense if you’re a team of 5, 10, 50 people. But you do have an agenda of these are the things we’re going to hammer through, and then there is space for other things to crop up. Then again, after you leave that in the early afternoon, usually that’s then a bunch of time to continue that conversation and let it go wherever. That’s where it goes naturally. That’s the best part.

Tracy: The spontaneity, the little things that you don’t expect.

Rob: Tracy Osborn, thank you so much for joining me today. You are @tracymakes on Twitter and tracyosborn.com if folks want to keep up with what you’re up to.

Tracy: Yeah, and if you are looking to pick up some design skills, I have a beginner design book that is being published through No Starch called Hello Web Design. If you google for that, you’ll probably find it on the internet. It’s a republished book. I originally self-published it, it was successful. I was able to sell it to a publisher. That’s how you know there’s a stamp of approval, it is good work. If you’re looking to add design skills on top of your current stock, check out my book.

Rob: Awesome. Thanks again for joining me.

Tracy: Thank you, nice being here.

Rob: Thanks again for joining me today. I got a five star review. “One of the best podcasts for SaaS founders.” It’s from onlyoneda. “Thank you, Rob. Loving the podcast. It’s motivating me to keep going.” We have 906 worldwide ratings, 397 worldwide reviews across 47 countries. If you haven’t left us a rating, that would be awesome. I’m on a drive to get to a thousand. I want four figures of five star reviews.

I really appreciate you listening all these years every week since 2010. We’ve been talking about mostly bootstrapping, building ambitious yet capital efficient companies that change our lives. I hope you join me again next Tuesday morning.

Rob: Welcome back to Startups for the Rest of Us. This week, Mike Taber joins me to update us on the status, so we can hear about his decision making around whether to launch a freemium plan, whether to do an AppSumo deal, how his potential partnership/merger is panning out and what would a Mike Taber episode be without a discussion about Google audits.

For those who are newer to the show, Mike Taber co-hosted this podcast with me for the first 448 episodes, and now he is known as the co-host emeritus. He is doing a lot of work on his startup Bluetick at Bluetick.io, which is a SaaS app that does personal outreach at scale for all your follow-up emails.

We’ve established in prior episodes that Bluetick is not supporting Mike full-time. It hasn’t been growing for the past year or so, as he has switched his focus to focus on this potential partnership/business deal/merger with another SaaS app that is further along. With that, let’s dive into my conversation with Mike.

Mike Taber, thank you for joining me again.

Mike: Hey, how’s it going?

Rob: Pretty good, man. Listeners, it’s only been two months since you were on the show, episode 543. I still am getting tweets and emails about it. It was the April Fool’s episode. Two days ago, so it’s like, I just caught up and I’m listening to the April Fool’s episode. Spider-Man, Spider-Man would have won. Then he sent me a picture of a graded Secret Wars 8 with a black costume. That was fun. Did you have fun recording that?

Mike: I did. It was a good time.

Rob: After we stopped recording on that one you said, I could have gone for a lot longer. I was like, dang it, I didn’t know that. You were like, I had Wikipedia articles I was going to quote. You really prepared, man.

Mike: I did. That’s probably unfortunate for you because I knew what we’re going to talk about, so I did prepare. I probably hustled you a little on that one.

Rob: Yeah. It’s all fair. It made for some good radio. The last time we heard an update from you was in February, which was about 3 ½ months ago and that was episode 535. In that episode, we ran through for the first time you let folks know that you were evaluating a pretty deep integration/partnership/potential merging of Bluetick with this other Saas app. I think the quote that I took away from that was, “Everything’s on the table.”

You guys are exploring all types of strategic partnerships and such. You also were evaluating, potentially launching freemium with Bluetick, potential AppSumo deal, we talked a little bit about a Google security audit, and everyone’s taking their shots right now. That was about it. Those are things I think we can circle back on. I must call out since we’re on video today that you have a Dungeons and Dragons fifth edition player’s handbook over your left shoulder, and then you have the lanyard from every conference you have ever attended up on a bulletin board.

Mike: Yeah. It’s funny because every single one of those lanyards is from MicroConf.

Rob: Is it?

Mike: Those are the ones that I kept. You probably can’t see, there’s a whole stack of D&D books over there, and in the background, there’s a small handful of miniatures and stuff like that. I ran it out of the Abyss campaign. I naturally went out and bought the giant mini-figures that are probably 4–6 inches tall, painted them, and pulled them out on the table when they were not expecting to get into trouble, and they did.

Rob: Roll for initiative. We’re going to search for traps, roll for initiative. The best part is that if this episode gets boring, we’re just going to do an actual play. You’re just going to get mini’s out, I have my dice right here, we can roll it.

Mike: Cool.

Rob: Before we dive into our actual play, which we’re not going to do, that’s a joke. I don’t want anyone to be disappointed, to get to the end of the episode and be like, you didn’t do it.

Mike: They’re going looking for that after-show episode with us playing D&D.

Rob: Yeah, we got to do that at some point, right?

Mike: Now you just committed us. I’m blaming you for that, I said it.

Rob: As long as your DM, I’m all about it. The lead is this partnership. I expressed some concern last episode about how you had been working together with this founder of an app that is doing ten times the revenue of Blueticks. It’s a much larger app that’s been around longer, it’s further established.

I think the concern I expressed was—you’re essentially working on it. You’re running the engineering team, I believe running product as well, making a lot of product decisions. My concern was how long do you want to do that without having something formal in place? Without knowing where this is headed. Where do you stand with that today?

Mike: Yeah. Still nothing overly formal in place. Everything’s kind of, I’ll say head nod, head shakes mode at the moment. I’ve known the founder for five or six years now. It’s not like we don’t know each other. There is a certain amount of trust there for that. I’m not really worried about getting screwed over or anything.

In terms of everything being on the table though, I would say there have been some conclusions for some of that. Like for freemium, for example, I’ve kind of pushed that to the back burner, probably not going to be a major thing that I’m exploring right now too much. There’s just a bunch of other stuff going on.

Rob: There are costs. The freemium thing was a big concern, and I get that because again when we were still bootstrapped doing freemium with Drip—Bluetick is a complex app, there are costs to it. There are server costs, there’s scaling, and there are things that make freemium maybe not a no-brainer if you don’t have buckets of money in the bank. If you really wanted to do it and try it out, I would say, cool. And not wanting to do it, that’s fine. I think there are other opportunities that are probably better there.

Mike: Right. Along with that, I decided against doing an AppSumo deal.

Rob: Did you?

Mike: Yeah. And I kind of came to that conclusion based on the same things that I looked at for freemium because with AppSumo, I’m going to get some level of money but then I’m going to have to support these customers forever. I had probably half a dozen different conversations with people who have done AppSumo deals. It was just a recurring theme over and over again that (a) it was difficult to get them to upgrade once they purchased the AppSumo deal, and (b) supporting them was just an ongoing cost, and not even just a little bit of support.

One of the founders I talked to, he’s like, yeah 80% of my support calls come from this group of AppSumo users and they’re contributing 0 moving forward. This was three, four years later. He still got 80% of support volume from those AppSumo users. I’m just like, that’s terrible.

Rob: That’s really surprising because normally users need a lot of support up front. Three or four years later they know the app and they don’t need it. That’s interesting. That’s the first I’ve heard someone run into that.

Mike: Yeah. I would say that’s more of an extreme example, but certainly not the only person who said I’m still answering support emails from that group of users. Their expectations are wildly out of whack with what they paid. Not one person I talked to really said, hey, this was exactly the target market that I wanted to get it. It added users, added visibility, but at the end of the day, that stuff only goes so far if it’s not paying the bills.

Rob: Yeah. I think AppSumo deals are good. I think there’s a time and a place to do them. In fact, I sat down a couple of months ago now with Ruben Gomez, who obviously did it for a doc sketch. It was a successful thing, he has no regrets, both the money and the users. But he has some pretty specific criteria of when to think about doing a lifetime deal like that. It was at MicroConf Remote. That was just a couple of months ago. If folks want to check that out, then go to microconfremote.com. I think the videos are still available for sale there.

That’s interesting then because I think the reason you were even thinking about freemium is because you were saying if I’m going to have effectively free users, which is kind of what AppSumo is. You get your $20,000, $30,000, $40,000, or whatever it is upfront, but then they’re effectively free users after that. You were saying I’m thinking about freemium from there. My memory was, I was probably a little discouraging of like, I don’t know that I would do freemium with Bluetick. I don’t know if that’s the way to go.

The AppSumo deal I see potentially more reason to do it just because it will get you users. You don’t have momentum right now. You don’t have growth if I’m understanding correctly where it’s at. I mean, Bluetick’s revenue is still where it was maybe a year ago because you’ve been focused on working on this other app, the partner app. Which again, you’re essentially running an engineering team. It’s a day job.

Whether you do the AppSumo thing or not is fine. I could see going either way on it. It’s a risk. I was actually just talking to a TinySeed founder a couple of weeks ago who’s also evaluating AppSumo. He was right on the fence with it, and he also decided not to do it. For a lot of the same reasons you’re saying—just the risk of it and the lifetime nature of it just didn’t make sense for him.

How are you feeling then? Because again, I struggle with you working a day job in a sense and not having equity in it. That’s not true. Actually, if you came and you said, hey Rob, I’m going to get a day job. That’s the decision because it’s simple, it’s easy, and I get a W-2 at the end of the year. I clock out at 5:00 PM, can you imagine that? But if you said that and that was the decision I’d be like, cool, that’s your choice, and you know what you’re getting into.

Mike: It’s funny that you put it that way because over the past couple of months, I’ve been trying to refinance my mortgage, not because of the interest rate per se, but because we want to basically overhaul our kitchen. We have contractors already assigned to it and everything. We’re like, oh well, we have a ton of equity in our house, not very much money left on it. We’ve got like seven years left on the mortgage. We can refinance, go to like a 15-year mortgage or even a 10, still.

Basically (because of the way the interest rates are) we could just add it on. We’re adding a couple of years, our payments don’t change—no-brainer. It turns out that if I were a W-2 employee this would be so much easier, but instead, I’ve had to go through the wringer for three months now. I’ve learned so much about the mortgage industry in the past three months that I hate that.

Rob: None of it that you wanted to know. You didn’t want to learn any of it but you know it.

Mike: None of it that I wanted to know. Surprisingly they say that I have a negative income, which is bizarre.

Rob: Really?

Mike: Oh yeah. My tax return very clearly says that I have positive income and they’re like, oh yeah, I won’t name the numbers, but it was over six figures. They’re like, oh yeah, this counts for zero. I’m like, what? And of course, they won’t take a profit. They just use a profit and loss statement to baseline, but they won’t use it. It’s like counting for anything. I’m just like, you’ve got to be kidding me.

Rob: Yeah, it’s tough. The mortgage world doesn’t understand 1099. They often don’t understand startups. Even investors, there was chat in the TinySeed Slack and a couple of founders, someone had their mortgage lender back out on them 20 minutes before their close. He had to go to Silicon Valley Bank because they understand founders. They know what 1099 income is, and they know all this stuff. They will say, have you raised funding? That’s actually something they’ll pay attention to at least you have a viable situation.

Mike: Anyway, over the past week or two, I’m just like, man, I would kill for a W-2 employee status right now, even if it’s just for a month. I mean, I would go so far as to pay somebody to put me on W-2 for like a month. I don’t care.

Rob: I totally get it. You only need a couple of months of pay stubs. That’s actually early on, when Derrick was working on Drip, he was a part-time contractor, and then he was a full-time contractor. At a certain point, he’s like, I’m going to buy a house. Could you make me W-2? I was like, sure, let’s do that. That was it, he needed like one or two pay stubs. Then it was instant. It was so easy to get approved, but without that, they wanted two years of history and all this stuff. At that point, he was young and didn’t have it.

Similar to me, when we went to buy this house that we bought three years ago, I had left Drip and Sherry had her consulting and all that, but I didn’t have a job. We went to all these lenders and they were like, yeah, you don’t have a job, bro. You don’t have the income to lend against. I was like, oh, eye-roll.

Mike: Exactly.

Rob: Cool. That was a good tangent. Where I’m coming from is, look, I know the person who runs the other SaaS app, the partner too. I mean, you guys are not going to screw each other. I don’t think that’s going to be the case. But is there a concern? Or I have concerns about you working on this without something in place. I’m concerned there might be mismatched expectations if you haven’t gotten down to brass tacks to say, hey, let’s merge these two apps, or let’s both focus on this one, and here’s the equity split.

Because I’ve done this before where I have an app and I bring someone on and we discuss equity, we put a partnership agreement together. These days, I would use a lawyer and I’ll say, 12 years ago, I wrote my own agreements, which is like the worst idea ever, but I was too cheap and didn’t really have the money to do it. What is the delay with that? Because you’ve been working on this for over a year now.

Mike: I mean the delay until after December and probably even after that until February was over. He had this other business that he had to sell. The pandemic pushed that off and he finally closed on it at the end of December, but it still took like a couple of months of offloading because it’s a non-trivial sale. He had several hundred employees, multiple locations for this brick and mortar business, and just wanted to get out of it.

It took a couple of months even after the close for him to kind of offload a lot of the work and the hand-off. It wasn’t like, here are the keys and I’m out the door the next day. Selling a business, it’s really not like that. You are essentially committed to sticking around through a transition period.

Then once that transition period has kind of gone, we’ve been having weekly meetings on Monday mornings for a month or two at this point. I think those are helping because they put us on firmer ground in terms of what our expectations are, how we’re going to blend to move things forward, and what we want to see out of the “partnership” or how we’re working together.

We have gone back and forth on do we work on Bluetick, or do we work on this other app? Do we collaborate on something completely different? All those things have kind of come up and been discussed to some extent.

Right now we’re working on a program for a done-for-you service for Bluetick and pitching it to their existing customers. Which I think has a lot of potential. That’s something that had originally been something we were going to do about a year ago, but because everything else was going on.

Rob: Just COVID and the sale.

Mike: Yeah, it just never really got to the forefront. Plus, we’re having a billion technology problems, which I think for the most part are more or less resolved. I mean, there’s always technical debt to take care of. But we’re in a position now where we can actually start doing that stuff. Now he has the time to start working on that stuff too. I think that that’s got a lot of potential, and it is something we’re going to be actively working on. We’re just in the very early stages of that right now.

Rob: Yeah. If the done-for-you service works because this other app has a customer base of a sizable, substantial—I don’t know what the term is for it, but there are enough customers that it could make sense and generate real revenue pretty quickly for a done-for-you service. If that works, that’ll be interesting. Because a done-for-you service is not cheap, right? I mean it’s basically a productized service. I would guess single-digit thousands per month to do it. You don’t need that many clients to get to $20,000, $30,000, $40,000 a month. Obviously, you then have the issue of hiring people to run outbound and all that. But these are solved problems.

We’ve seen Craig Hewitt do it with Podcast Motor, now Castos productions. We watch Brian Casel do it with Audience Ops and anyone else who’s in a productized service. If that works, I’m intrigued by it. If that doesn’t work, I got to be honest, I want to give you my opinion and I want to hear your take on it. What do you think? I feel like both of you should go all-in on the other app and shut Bluetick down.

Autopilot it, whatever, put it on the side and not focus on it. The reason I think that is because the other app is doing 10 times the revenue. The other app has traction. With the two of you working on it—you are development, product, and engineering. He is sales and marketing, and operations, I presume. I know he knows quite a bit about sales and marketing stuff. I mean, that’s a hot take for me. What do you think about that idea?

Mike: I think it’s interesting because you came to the exact opposite conclusion that he and I came to.

Rob: That’s funny.

Mike: The reason for that is that the growth for that business is stagnant, and it’s been stagnant for a while. There could be any number of reasons for that, but it just hasn’t grown. Right now there’s a struggle to try and find what channel or channels to tap into in order to get it to grow any further. We actually both came to the conclusion, probably separately, and together in our discussion that Bluetick probably has better growth potential than that product. Even though there is a wide discrepancy in the revenue, that doesn’t mean that couldn’t be addressed through a good solid sales and marketing effort.

That’s what I would say to it. I don’t think there’s a right or wrong answer to it, but that’s the conclusion that we had come to. I don’t know where to go from there. But I think we need to give it a little bit of time just trying to figure out how things work out.

We do have one customer who was basically (I’ll say) beta testing the done-for-you service, so we’re going through that process right now. They’re already onboarded. We’ve got the emails set up. They’re written to basically be plugged into Bluetick. The founder of that company is out this week and he’ll come back next. There’s one small feature that I have to implement in order to get things working for them. But other than that, next week we should be able to get started with it.

Rob: Got it. Just as a reminder, I realized in the last episode that you are on, we mentioned the other app we keep saying is a CRM for field sales reps. We can call it the CRM instead of the other app, the partnership app, or whatever since you’re being all coy about it. But that’s interesting. Both of them are stagnant. In my mind, neither of them is growing. I keep saying it’s 10 times. I think it’s more like 15 times. It’s substantially bigger. It has a team working on it including you and more customers.

I mean, they both seem like CRM for field sales reps. That’s a big space. It’s a space you should be able to get some type of traction. Just because you have marketing channels working now, (we talked a little bit offline) but it’s like there’s outbound linked in and email. There is a G2 crowd and Capterra. There’s content, there’s […], all these things to do. You’ve spent the last year-plus fixing a bunch of technical debt.

That app is in pretty good shape to do it, it’s full-featured, and has (again) a substantial customer base. A sizable customer base enough to be generating a good amount of revenue. That just feels like the basis from which you can really build on versus Bluetick that still feels pretty nascent, I think.

The question I used to ask you was, do you have product-market fit? How are you different from the other 5 or 10 apps that kind of do the same thing the Bluetick does? If you get a done-for-you service working and you are pulling from the CRM’s customer base—not pulling, but you are selling to them—what happens when you get through all those customers and you convert 10% of […], 20%, or whatever? So then Bluetick has more revenue, but now it’s stagnant again because you still haven’t figured out how to market, sell, and grow Bluetick.

Mike: Sure. There are two things I’d probably bring up. The first one is your point about the revenue difference between them I think is probably closer to 15X. That is accurate, but at the same time revenue—you know as well as I do revenue and profit are not the same things. And if you’re talking about profit, I think profit-wise, Bluetick actually has more profit, which is a hard pill to swallow. I think that’s kind of a big contributing factor. There are just a lot of moving parts, there are hundreds of thousands of lines of code. There are hundreds of customers.

The types of support issues that we get are things like (I told you this offline) somebody said, hey, your app isn’t working you need to reload it. It’s like, okay, well, clearly you’re not a developer so we’ll just let that slide. Can you send us a screenshot of what you’re seeing?

They sent us a screenshot, and in the background, you can see the app, in the foreground you see the Chrome waiting for web browser window where it basically shows that message when it’s locked up. The message we got with the screenshot was, it’s been like this for three days. What gives? It’s just reloading your browser man.

Rob: Yeah. Command + r.

Mike: Yeah, exactly. Something along those lines. The person just didn’t reload their browser because they’re like, oh, I’m just waiting for this web page. It’ll eventually get there. They have no concept of time-outs or trying again.

Rob: Right. It’s customer pain, I’ve talked about this. Competitor pain versus customer pain. That makes sense. I mean, you and the founder of the CRM are much closer to this than I am and have spent more time thinking about it. That’s my hot take or my assumption that if I had these two apps and knowing what I know about them, I would double down on the one that’s larger that has had that. But we don’t need to definitively agree on anything on this call.

I think that the thing I’ll ask you before we get into the Google security audit discussion is do you have a timeline in mind? The next time we talk will be a month, two, three months down the line. Do you feel like things will be settled by then?

Mike: I think we’ll have some sort of a definitive idea of where we’re going because I mean really, it’s only been about like the past two months or so where we’ve really started to dive in. And honestly, I’ve been somewhat distracted because of my mortgage debacle and several other things. There’s that, there are taxes, there’s all this other stuff.

I feel like I’ve jumped from one major fire or fiasco to another over the past six months. It seems like it’s nonstop, I don’t know why. I’ve mentioned it in FounderCafe. I put in this long thread the other day about the part of why I’ve been absent for the past couple of months. I just listed them all out.

I think things are starting to close out on some of that stuff. We’ll see how it goes. I really think that he and I will come to some sort of conclusion about what the direction is from here moving forward over the next month or two. I think that partly because we are meeting every single week, we are having pretty in-depth discussions, we have a couple of different calls each week with the team. There’s a marketing call and a couple of other things we do. We’re in constant communication.

I think something will sort itself out. I don’t know what that is. I have a good feeling that that’s going to at least move forward in some way, shape, or form. I just don’t know what the outcome looks like.

Rob: I wish you and he the best of luck in figuring that out for sure, and I’m curious to hear an update once that’s all settled. Google security audit.

Mike: One painful topic to another, man.

Rob: I mean, these are the things that we talked about last time. I’m just touching base. Is that all done? I mean, I think everyone in the audience is like me. They both like hearing about it and really don’t like hearing about the security audit. But it was the second time and you had to have done it already. Was it a lot easier? I know they weren’t going to charge you more for the second year, which makes no sense because it’s way less work to do. And you were negotiating back and forth, I believe at the time. I don’t even think you started any of the technical stuff, but catch us up there.

Mike: How much dirty laundry do I want to air on this one?

Rob: I don’t know.

Mike: You want me to just throw it all out there?

Rob: It’s up to you. It’s your call man.

Mike: Sure. I did not do it. After getting the price quotes, looking at everything, and evaluating whether it made sense to do it or not—based on what Google was telling me was going to be the outcome of that—I decided against doing it. Right now, if you log into Bluetick and you go to add your email account and it’s a Gmail-based or G Suite-based, you have to go and see your G Suite account and you have to whitelist Bluetick.

You just go in, I’ve got documentation on how to do it. You just search for it, plug in Bluetick, save, authorize, whitelist, and you’re done. Then you can add your email accounts in and everything’s fine—nothing changes. The only thing that not having the audit does for me or counts against me is if you have an actual gmail.com account, you have to use IMAP authentication, you have to enable that in your account, and you have to create an app password. It’s a little bit more complicated.

Rob: I’ve had to do that before.

Mike: Yeah. But Bluetick really isn’t aimed like gmail.com users. It’s aimed at business users who use their business accounts for sending out those emails. The conclusion I came to was that it didn’t seem to be worth the money for (I’ll say) the paper-thin-veil of security that is supposedly offered.

Because last year I went through it and they came back with some pretty ridiculous things. They’re like, oh, (I’m going to misremember the details on this, but it was something like) you should protect this port, make it HTTPS instead of HTTP. I’m like, that’s not even my server. It was a Dreamhost server for something, I forget what. They’re like, well, you have this listed in one of your DNS entries. I’m like, that makes no difference, whatsoever, it’s not connected to anything. They put up a fuss about it.

I pulled it out just to appease them and get the documentation, but they’re looking at some really stupid things. Given the background that I actually have in security, I can point at those things and say, yeah, this is a dumb thing that you’re looking at and it doesn’t make sense. But they’re like a bank, and if they have their own policies around certain stuff, then they’re going to say, hey, this is enforceable and you have to do it.

The other thing I found, and this is where the dirty laundry gets in, I’m going to start throwing people under the bus. The first piece is that when Google said that they were going to do this, essentially all of the existing accounts would still work as they were supposed to, nothing was going to change there. I did proactively go out to my customers and say, hey, you go whitelist Bluetick, and a bunch of them did.

I did not notice any accounts that have gotten disconnected since the deadline passed and Google emailed me and said, hey, you are in violation of such-and-such terms. You are no longer going to be authorized to do this. But everything else seems to still be working properly the way that it’s supposed to do. Nothing made a difference at all. Hasn’t impacted sales, hasn’t impacted anything else.

At the end of the day, was it really necessary? I don’t think the answer in my case is yes. If I were running something where people were authorizing the Gmail accounts and we’re using that, then it would be a problem because then I literally couldn’t do what I’m supposed to do for them.

The other piece when I was talking to the three different companies, one of them, basically let slip that Google came to them and said, you are required to charge at least this much money. Apparently, they get copies of the invoices, which to me seems like a violation of the NDA that I had previously signed, but apparently, Google gets copies of those invoices.

Rob: Seems monopolistic too. Was it—what’s that thing?

Mike: Anti-monopolistic. Anti-competitive behavior, racketeering is the charge. If you search for racketeering on Google of all places it basically says you’re organizing to extract money from somebody for your own personal gain. The only reason that this whole thing doesn’t fall under that umbrella is that I have to pay a third-party company in order to get this audit done.

But because Google is dictating what that is and they’re saying you have to charge at least this much money or you couldn’t possibly have done the audit, which I disagree with, but that’s an aside. They’re forcing it.

Rob: Yeah, I didn’t understand. It didn’t make sense to me why they would enforce a minimum. You just corrected that in my head. If they say, you have to charge at least this much, then somehow Google has the confidence that they spent enough time, that it was worth that much or something? They’re doing it so that they think that a real audit was done so that I can’t come out with Rob’s security audits and come and try to charge you a $100 and say, oh, I audited them.

Mike: Well, you can’t do that anyway because these are the only three companies that are authorized to do that.

Rob: Three companies.

Mike: I see what they’re trying to do. What they’re trying to do is say, well, we don’t want those three companies to be bidding against each other and then lower the amount of services that they’re offering to the point that they’re basically skipping all these things that they really should be doing.

The problem with that stance in that argument is that Google is outsourcing this specifically because (a) you would want to avoid a federal racketeering charge, and (b) Google’s not a security company, these other companies are. Why are you dictating to them what constitutes a security audit instead of letting them decide? Because they’re the ones who have to sign off on it. They’re the ones who do all the tests and everything else.

Something feels really shady, it really, really does. I’m sure I’m going to get emails from somebody who works at Google at this point. I’ve thought about taking all the information and data that I have, all the notes, and just putting them in a zip file and sending it to the state attorney general and say, you deal with this because I’m done.

Rob: The opinions expressed by Mike Taber are not the opinions of Rob Walling or this podcast.

Mike: Exactly. I mean, you could look at it in a bunch of different ways like, oh, this is just one more thing that Mike Taber’s ran into. I’ve had to stress about this for a long time, and it sucks. It sucks that I have to deal with this.

Rob: Yeah, we know. We’ve lived through with you, Mike. Was it all for nothing? Do you regret doing it last year? Was it just a waste of time and money?

Mike: I think so. Yeah.

Rob: That sucks.

Mike: Yeah, it really is. I mean, I blew five-plus figures easy getting this stupid audit done, and it murdered my profitability. Then they doubled the price the following year and I’m like, forget it, I’m just not going to bother. I’ve had zero problems since then. Not to say that somebody from Google isn’t going to hear this and then go invalidate all the tokens. But that just comes down to retaliations like, oh we did something terrible, and we’re going to cover for it. We’re going to drive your business into the ground. Could that happen? Sure. It hopefully won’t happen.

Rob: But the idea that you can work around it by whitelisting because you’re right, if I have a Gmail account, I’m not the optimal fit for Bluetick. I’m going to have a G Suite. You support G Suite, Microsoft Office, Outlook, or whatever.

Mike: Honestly, anything that supports an IMAP connection.

Rob: IMAP, okay. You’re on all the platforms, and Google has been the most painful one.

Mike: They’re the jerk hippo in the rooms, that’s what that is.

Rob: I don’t know that reference.

Mike: I guess the elephant, whatever. Elephant, hippo.

Rob: The jerk elephant in the room, I see. I both feel bad for you hearing that, but I also feel good that you didn’t do it. I’m happy that you made the decision not to and that it hasn’t had adverse effects. Now, going forward, you’re just kind of shoulder shrug. I mean, are most of your customers using Google inboxes, is it the majority?

Mike: It is, yeah.

Rob: Okay, interesting. I guess it is one of those super popular—I mean, G Suite is so popular especially with startups.

Mike: It’s very easy to get on and very easy to start. Once you’re there, you’re probably not going to switch my email providers anytime soon. I mean, it makes sense to have that stuff. I really feel like the way Google has gone about this whole thing has been extremely poorly implemented.

Their communication is terrible. You can’t get answers. You can’t talk to anybody. Their policies were extremely heavy-handed, and they don’t make exceptions for anything, really. Then when the one place where you could feasibly get around this whole audit, they kind of really downplay that whole option for doing it.

Because had I known that, I wouldn’t have paid the money in the first year. I would have just avoided it. Hey, if I could just have people whitelisted and get around it, then why would I bother? Why would I pay all that money? After going through the audit, they found almost nothing. The few things that they did find were extremely ridiculous. Some more requirements, okay, I get this, I understand that.

I would say the things that they came back with, there were maybe two, possibly three that it was actually an issue that I looked at and said, yeah, I really should fix this and I fixed it. But otherwise, there was a handful of stuff that they’re just like, you should do this and that. It’s like, no, that doesn’t make any sense.

Rob: And right here, I want to play an audio clip from the last episode where Mike was angry about the Google security audit. We can hear his rant. I want to compare the two rants to figure out if you used similar verbiage or whatever.

Mike: Similar swear words, profanity.

Rob: Similar swear words. We haven’t had to bleep you this episode yet. Well, sir, that’s the end of my list for today. Is there anything else you feel like we should chat about that’s been going on the past few months?

Mike: I don’t think so.

Rob: Very good. If people want to keep up with you, you are a prolific tweeter, @SingleFounder. I think your last tweet was about the time the last podcast episode went live three months ago. But no, if they want to keep up with what you’re doing Bluetick.io, that’s it.

Mike: That’s probably it. I don’t really pay attention too much on Twitter anymore. I don’t even remember the last time I actually logged in. Occasionally, I will find things where it’s like click on this and you go see the tweet or whatever.

Rob: It’s not a bad thing.

Mike: Yeah. Mostly, I’ll just post random stuff my kids say on Facebook and that’s about it. I don’t even read it for the most part.

Rob: That’s not a bad way to do it. Cool, man. Well, thanks again for taking some time to join me today. I know folks like hearing from you, and I like catching up as well. Until next time.

Mike: All right, take it easy.

Rob: Hope you enjoyed that conversation as much as I did. I always enjoy having Mike back on the show. It’s just easy chatting because we’ve known each other for so many years and spent so many guests, literally hundreds of hours talking about this kind of stuff. It’s good to have him back on the show. I’ll be sure to have him back again in the next couple of months.

What I do with Mike is I’ll text him and say, hey, do you have anything to report? Is there anything interesting to update folks on since last time? Last year in 2020, there was a seven-month gap where just nothing really was happening that he was able to talk about on the microphone. This time it was about three months. We’ll see how quickly things sort themselves out, and I’ll get him back on the show just as soon as I can.

Thank you so much for being a loyal listener and a subscriber. As always, 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. 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?

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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.

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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.