Episodes

Rob Walling: It’s another episode of Startups for the Rest of Us. I’m your host, Rob Walling. And in this episode, I talk about the future of SaaS in an AI world. And this topic has been floating around the internet as people are talking about SaaS being dead or asking if SaaS is going to exist in five years. And I’ve actually received multiple listener questions and I’ll read one of those in a second that’s asking this exact question. Before we dive in, I have a couple quick MicroConf announcements. First, Early Bird tickets for our next MicroConf are officially on sale. We’re heading to Austin, Texas, April 18th through the 20th of 2027 for three days of world-class talks, meaningful conversations with other founders, and some great excursions around the city. If you’re thinking about joining us, now’s the time to grab your ticket. Early Bird is the lowest priced ticket tier we’ll offer and the prices will only go up as we get closer to the event. 

Plus, producer Sonya gave me the promo code Rob50, that’s Rob50, which gives listeners of this podcast an additional discount at checkout. MicroConf events consistently sell out and I expect Austin to be no different. Head to microconf.com/us and reserve your spot. Also, I want to let you know that if you’re a MicroConf Connect member, we’re going live next week with Harris Kenny, who you may remember from TinySeed Tales season five. Tracy Osborn is sitting down with Harris for a fireside chat and they’re going to talk about mindset and bias toward action, what that actually looks like day to day, how to know when to push through versus change course and the small habits that can pull you out of a funk. It’s the kind of conversation that you will not find anywhere else. And if you’re not a member, we’d love to have you. It’s at microconfconnect.com. 

MicroConf Connect is the year-round version of our hallway track from our in-person events. It’s our vetted online community of founders having the kinds of conversations you can’t have with just anyone. These are the wins, the struggles, the, quote, “Am I the only one dealing with this?” moments. And live sessions like this one are just one of the perks. If you’re interested, microconfconnect.com to apply. 

Let’s dive into the future of SaaS in an AI world. This question was a simple reply to my robwalling.com email. So if you go to robwalling.com/emails, you can sign up to receive a weekly email from me. And a reader responded and said, “What’s the future of SaaS companies now that AI makes it easier than ever to build and copy a product?” And this, as I said at the top, is a variation of questions I’m seeing all over the internet. And I have received other versions of this on this show. And so I really wanted to sit down today and try to give as much of a definitive answer as I can to this question. So what is the future of SaaS now that AI makes it easy to build and copy SaaS products? I’m going to start by giving a short answer in four words. 

The future of SaaS is SaaS. And now I want to show you why. But before I do that, one rule for how to listen to anyone on this topic, including me, is to be very careful with anyone who tells you something is dead because we have heard this song before. In 2000 after the dot-com crash, the media told us the internet was done, over. Nothing left to build. They said this on the internet. I don’t know if you weren’t alive then or weren’t paying attention, it was so pervasive and just a given that the internet was never going to be worth anything. And then mobile and iOS were going to kill the web in, I don’t remember, ’08, ’09. It was going away. That didn’t happen. Then blockchain and Web3 were going to kill everything. I lost track of exactly what it was going to kill, but it didn’t happen. 

Maybe the web, I don’t even remember. No code was going to kill software development. Everybody’s going to build their own apps. Nobody needs engineers. It didn’t happen. There are other examples. And now AI, the new technology is going to kill SaaS. So it’s the same song. It’s a new verse. Here’s the thing I see about people saying it. Most of them, not all of them, but I would say the vast majority, 80, 90 plus percent of them have never built a SaaS company. And actually, I wouldn’t be surprised if 95% of them have never built any company. Saying X is dead is a way to get free clicks. It’s a way to get eyeballs for declaring something outlandish and nobody comes back to check if you are right or wrong. So just be very careful. If you hear this message every day from some new chucklehead on the internet, they’re still a chucklehead. 

Just because a lot of people are saying it doesn’t mean that they’re right. Calibrate accordingly. It’s social media. Pick who you’re going to listen to. Usually things are not dying or dead, but to be fair, there’s a real version of this argument and I break it down into four separate claims that I’m going to talk through individually. The first one is that everyone is going to self-host their own custom app that they either vibe code or build with AI. The idea here is that in addition to, let’s say you’re a SaaS company and you pay for SaaS subscriptions, that you’re going to vibe code or code all of those apps, custom host them. And maybe that the dentist down the street is also going to build their own practice management software and self-host it. So that’s kind of argument number one. Point number two is that any app can be replicated in a day. 

I’ve heard people say in a week, in a month, in some short timeframe so that there’s no moat and that copying an app is free. The third claim is that agents are going to replace everything, that they’re going to do all the work and so we won’t need SaaS apps anymore. And the fourth claim is that AI is going to mean infinite competition, that everyone can build an app now. So there’s going to be 10,000 different email service providers and 5,000 different CRMs because everyone can vibe code one and that you’re actually going to have infinity competition so that you can’t possibly compete. And I’m going to take all four of those in order and talk through them and talk through why I don’t believe any of them is the death of SaaS and even why all combined they’re not going to kill SaaS. So let’s start with the custom app and self-hosting your own tools because I feel like this one’s relatively easy to knock down. 

At MicroConf and TinySeed, for example, we pay for, and I’m going to just take a wild guess, 50 subscriptions, 50 SaaS products, Dropbox and Google Workspace and whatever else. Maybe it’s a hundred. It doesn’t really matter, but it’s a lot. Who in their right mind is going to AI code and host 50 SaaS apps? The idea that we would rebuild all of these ourselves is fucking insane. It would be a catastrophic use of our time. And that’s not just because we ourselves are not a software company. If we were a SaaS company, even if we were building software and that’s literally what we do, it’s still a catastrophic use of your time because you should be making far more money specializing in what you’re good at than reinventing 50 tools that already exist and work. I’ve said this on the show before. There are only two legitimate reasons to build your own versions of an app, like to vibe code it. 

One is to save money and that’s only if it’s really expensive. Let’s say something is $10,000 a year, 20 grand a year, and you think you can cut that by 90% or 95%. The second one is customization. No app on the market does what you need it to do. So I want to talk through the saving money. It almost never holds up if you’re growing because you’ve heard me talk about this before and I’m about to record a voice sample that we can just copy paste into future episodes so I can stop saying this like a broken record. But if you are growing as a SaaS company by $1,000 of MRR in a month, we take that multiply by 12 to get the ARR growth, so 12,000. And if you were to sell at a 5X ARR multiple, that’s $60,000 of net worth that you created in a single month from $1,000 of MRR growth. 

And if you sell at a 10X ARR multiple, which is ambitious, I will say that’s high, but I’m trying to give you the idea here. That’s $120,000. So ask yourself, should you spend 20, 40, 60, 80 hours coding something to save you $5,000 a year or $10,000 a year? Or should you put that time and energy into growing your SaaS top line by a thousand MRR to create that 60 or $120,000 of enterprise value? It’s not even close. Building to save money is a rounding error. It’s a bad decision next to just building your actual business. The only time I can think of when this might be worth it is if you’ve been flat for a very long time, your business isn’t actually worth that much and you really are kind of milking it for cash. Some people will do that. That’s the thing. Each of these times I’m going to say, oh, some people will do that. 

And we don’t know how many some is. Is that 2%, 5%, 10% of companies? It’s a small number. This is not 80% of companies. So when we talk about building to save money, there’s going to be a small subset of companies that should do that. In addition, if we talk about building for customization, there will be a small subset of companies that do that, but not that many companies are going to want to build something and maintain it. That’s super customizable. I’m seeing some people do this with CRMs. Maybe that is a particular product category that gets hit really strongly, but is that going to happen to your email service provider? Are you going to really gear up all of the sending infrastructure to replicate an ActiveCampaign or a Drip or a Mailchimp? If it’s sending SMS messages, if it’s doing any type of just the complexity of all of this, it’s like, this is a bad decision. 

(10:29): Don’t do it. And then the last piece of this is in this example, I’m talking about a lot of SaaS companies doing this and we know how to build software, but what about the construction firm and the dentist and the YMCA down the street or the gym, the martial arts dojo, the real estate agent, the psychologist or mental health clinic, the manufacturing company, the beverage factory? These are all examples by the way. Everything I’ve just said are examples of companies that TinySeed portfolio companies serve. Imagine those companies vibe coding and hosting their own app. They get to keep it secure. They get to keep it updated. They get to host it. They get to back it up. They get to own it forever, maintain it, add features. Do you think they want to do that to save, again, what’s the number? Five grand, 10 grand, 20 grand a year? 

They don’t. So that is my rebuttal to the self-hosting fantasy. I think a lot of us on the internet who are technical think a lot of people are going to do things that they really don’t want to do. Claim number two is that anyone can clone your app in a day. And here’s the dirty secret about copying an app. People could always clone your app. This isn’t new. With Drip, we had competitors from, I don’t know, month five after we launched. Every app that I’ve ever built has been copied. In fact, almost every company I’ve built has been copied, including MicroConf and TinySeed. Cloning the software was never the hard part. Getting someone to know you exist, to trust you with their business, to switch off what they’re already using and to stay for years is the hard part. AI writes the code. It does not write your distribution. 

It does not do your marketing no matter what people on the internet think. It does not build your brand. It does not build your reputation. It does not build your customer relationships. A clone with little or no distribution is a folder on someone’s laptop. It always was. The moat was never the code. It was everything you added to the code. I’ve been saying this on the show for 16 years. AI has just made the obvious part the lowest risk part of building. It’s made it faster. So notice what that means. The founders who are panicking are the ones who thought their code was the moat. I hope you don’t think your code is the moat or have ever thought it was a moat. I literally called this out four years ago in The SaaS Playbook and I said false moats in SaaS are features, meaning code. 

They’re false moats. You think they’re a moat, but anyone can replicate your features. AI just allows them to do it a little bit faster. So the founders who were panicking are the ones who thought their code was the moat. They were already in trouble. AI did not create this problem. It just exposes it and maybe makes it a little worse for those folks who aren’t willing to learn how to market and sell. Claim number three is that agents will just do the work. So this one’s more interesting. And the honest answer for me is that agents are going to do some of the work. We come back to this some. How much is that? Is it 2%, 5%, 10%? Agents are not going to do 80% of the work on their own. Some workflows will get absorbed into agents. That’s a real thing. If the product was the workflow, meaning a thin layer moving data from A to B, an agent might eat it. 

So there is a class, a category of apps that is probably going to get absorbed by agents. Now people are going to pay for agents. So if we say SaaS is dead, but agents, which are just software, are going to now be something that you pay for on a recurring basis, that still fits my definition of SaaS. My definition of SaaS is subscription software where software provides the bulk of the value and an agent is still just SaaS. So it’s literally like taking money from one bucket, putting it in bucket B, but those two are still in bucket C. They’re both all contained in a bigger container. That’s how this looks. People will still pay for that. They don’t want to build all their own agents. In addition, agents are only going to eat some of these workflows. I believe most workflows will not get absorbed. 

And the reason is because agents have to act somewhere. The dentist’s agent still needs a system of record, patient data, scheduling, billing, insurance, compliance. They want it to be durable. They want it to be secure. They want it to be accountable and they don’t want to lose data or break the law. And an agent floating in space is useless to them because it needs a backend to act on. So agents aren’t going to kill SaaS. They need SaaS. They actually increase the demand for good APIs, whether it’s CLIs, MCPs, however we want to look at it. Yeah, I get it. There’s some uncertainty these days. But underlying those is still going to be a lot of SaaS that has structured data that’s a reliable system of record. So for a whole category of SaaS, agents are actually going to be a boon, going to be an accelerant, not something that slows them down. 

The future to me is not agents instead of SaaS, it’s agents on top of SaaS. And there are going to be a lot of SaaS founders who are going to build agents into their own SaaS. So it just becomes part of the SaaS subscription. I think it’s going to be a very common model. So if I owned an email service provider, I should probably let other agents interact with it, but should I also build one inside of my own SaaS and potentially charge for it, include it in my subscription, whatever I do? Yeah, probably. And whether they’re using my agent with my product or an external agent, somebody still has to own and run the thing underneath and that’s SaaS and that someone is going to get paid. The fourth claim is that there’s going to be infinite competition. So why should I even start? 

So everyone can code an app now and there’ll be a thousand email service providers or 10,000. Why should I start one? How do you even compete? Two answers of course are it was never about building. It’s always been about distribution, which I’ve already said in point two above. The winners are always the ones who figure out how to market, sell, et cetera. But the second part of this is that I don’t know about you, but the vibe coded apps that I see, the competitors who come in on the, I’ll just say it’s like a get rich quick thing of like, oh, I can vibe code an app, so I’m going to vibe code an ESP because there’s a lot of them. They just seem to drop off the face of the earth very quickly. The people spinning up an app over the weekend with no idea what they’re doing on the tech side, they’re the least experienced entrepreneurs. 

They’re the least experienced people in the market. They don’t know how to get traction. They don’t know how to sell. They don’t know how to support customers. And the vast majority of them I think are going to quit the moment it gets hard because they’re doing it because they think it’s easy. So that’s not the competition I would be scared of. It’s the competition that I think is going to evaporate. More apps getting built is not going to mean more companies getting built because those are two different things. So I’m not here to tell you that nothing is changing. That makes me the mirror image of the doomers. The extreme everything’s dead, everything’s going to change or nothing is going to change. Neither of those extremes make sense. Some things genuinely are going to get squeezed. Consumer and prosumer apps specifically I think are going to take a big hit because consumers and prosumers are so cheap and they’ll blow a weekend coding something, vibe coding it to kill what, $100 a year subscription. 

And that of course is one reason I never focus on B2C. It’s more true now, not less. In addition, I think simple single feature utilities are going to take a hit. They’re just easy to vibe code. The app that someone pays nine bucks a month or 50 bucks a year or even nine bucks one time to convert a PDF to a JPEG or turns a ZIP into a RAR, or I had an SEO keyword tool called HitTail that was kind of, it was like one feature with a few screens. I think you could build that in three or four days now. If your entire product is one feature, I think you’re exposed. And I’m sure there are some specific categories of apps, maybe it is CRMs that take a big hit for whatever reason because they’re overpriced and because you want your own data. That could be a thing that happens. 

But I do not see this happening across the board the way some people are claiming. In fact, here’s the part I think that the pundits or whoever’s mouthing off about this, the doomers, the keyboard warriors get backwards, like precisely backwards. They seem to think AI is going to kill all SaaS or that it’s going to kill the little guy. I think it’s the opposite. The real SaaS apocalypse is the big companies, the big incumbents. They’re the ones who have raised their prices so much, maybe a little too much because they have to grow every quarter for Wall Street. So they have bloat, they have legacy, they have a customer base that’s probably quietly resentful about the last three price hikes. Those are the companies that people are now motivated to replace and AI just lowered the cost of building that replacement. But in my opinion, if you’re a bootstrapper or small SaaS or an upstart, you don’t have that baggage. 

You don’t have the bloat, you don’t have the legacy, you don’t have to grow forever every quarter. You don’t have a code base and a board demanding you to do stuff. You can move fast. You can price fairly and you can go straight at an overpriced incumbent that’s lost the plot. That’s not a threat to you. I think it’s a huge opportunity for early stage bootstrappers. I think it’s honestly one of the biggest opportunities in years. So I think that the haircut isn’t coming for the new startups. I think it’s coming for the big slow moving overpriced incumbents. And startups are actually, if anything, have better tools these days to get to market and compete with the big incumbents. So as I said at the top when I first started this answer, what’s the future of SaaS now that AI allows you to build anything in a weekend? 

The future of SaaS is not fewer companies. It’s a higher bar and SaaS doesn’t need to become something else to survive it. Doesn’t turn into agents, doesn’t dissolve into everybody’s weekend side project. It stays what it is. The future of SaaS I believe is SaaS. And I do think that table stakes features are going to be commoditized faster than they ever have been. You can’t coast on a feature list anymore. You never really could, but it could buy you time. What’s non-copyable these days is what it always was. Owning a market, a brand, a distribution channel, and the trust that you earned by being there for years and keeping data safe, answering support, building a customer base that loves you. If your only asset has been code or features, be nervous. If you’re a commodity, your code just got cheap and so did your competitor’s code. 

But if you are building a company, as I talk about on this show and have for 16 years, this is one of the best times there’s ever been to do it because the stuff you can’t copy, reputation, relationships, your network, your marketing channels, maybe even your audience matters more now I think than it ever has. And the incumbents who forget that are frankly about to find out. So the internet was not dead in 2000 and SaaS is not dead in 2026. The future of SaaS in this day and age is still SaaS. It just belongs to the people who are building real companies all along. So thanks for that question to all who have asked it. And I guess my hope for this episode is I hope you’ll listen to it and absorb it and use it as something to help quell some of the fears that you might be feeling and also to share it with someone the next time that they tell you that SaaS is dead and you ask them for their source and they say, “Oh, it’s some clown who’s never built a company.” It’s like, why would we listen to them? 

Or they say it’s the public markets and we say, “Why would we listen to them? We’re not public SaaS companies.” And frankly, the public markets can be wrong. They are betting on the future, but they can be wrong. And I think that the bootstrappers are in a great position to take advantage of this. If you want to share this episode, obviously you can come to startupsfortherestofus.com and search for episode 842, or you can go to YouTube and search for it. And it does not include full video, but it is an easily shareable link. There are a lot of things that are changing and that scares some people. And when things change, some people think, “Well, that just means everything is dead and we’re just paving over the old and moving on with the new.” And I genuinely do not believe that’s the case. And it’s not just because I’ve been doing SaaS for almost 20 years now. 

Because if there is a new thing, I’d be well poised to jump on it. And especially if that new thing is software that people charge subscriptions for, whatever it’s called, you know that I’m going to be talking about it and you know that I’m going to be paying attention and trying to bring everything that I learn about it to you on this show. So thanks for listening to me today, talking about the future of SaaS in an AI world. I appreciate you listening this week and every week. This is Rob Walling signing off from episode 842. 

Rob Walling: This is Startups for the Rest of Us. I’m Rob Walling. In this episode, I answer your listener questions, some really good listener questions today about one-time payments versus subscriptions, the positioning and pricing of a Shopify bundle, a question about a step two business, and more. I’m really excited to get back on the microphone today after an almost three-week break, as my wife, kids, and I went to Japan. We had a great time. It was our first trip there, and this is my first episode back recording. Before we dive into the episode, I want to tell you about TinySeed’s SaaS Institute. You’ve heard me say that being a founder means making hard decisions with incomplete information, but for most founders, you’re running a company this size for the first time. And as the decisions get bigger, so do the consequences. That’s where it helps to have a sounding board. 

Someone who can tell you whether you’re on track or about to waste six months on the wrong thing. And that’s why we’ve built SaaS Institute. You get a dedicated coach who scaled B2B SaaS to eight figures, a mastermind of other founders at your stage, and direct access to experts in growth, sales, product, and finance. Everything you need to help break through your next plateau. Just ask James Rose, the founder of Content Snare. Here’s how he put it. “When I joined, we were at around 10 people, and the biggest problem was just trying to work out what was next. When you’re so close to the business, it’s easy to get stuck in your ways and develop blind spots, so I needed fresh eyes. My coach helped me solve that. Every month we’d work out the next most important thing, and when you’ve been going at it alone for a long time, it’s amazing to have a peer group whom you can ask questions of who’ve already solved this exact problem before.” 

If you’re doing a million or more, and whether you’re B2B or B2C, we’d love to work with you. If you’re feeling a bit stuck like James was, head to saasinstitute.com to learn more and apply if it’s a good fit. 

Let’s dive into my first listener question from James [VERIFY: “Gafer” – unsure of spelling]. James actually responded to an email that I sent out to my list, robwalling.com/emails. If you’re interested in getting a mostly weekly essay on thoughts that I have, a lot of which don’t appear in the other formats, don’t appear on YouTube, don’t appear in the podcast. It’s just deeper thought pieces around aspects of building, launching, and growing a startup. It does have a B2C element, but if you listen through it, you’ll realize why I decided to answer it. James says, “Hey Rob, longtime listener of the pod. I love it, and I’ve learned so much. The biggest problem facing me these days is determining how far to take my current business. I run a Discord bot called Apollo, which helps online communities organize events, and that’s at Apollo.fyi. In a lot of ways, this has step two written all over it. 

B2C/prosumer, with perhaps a handful of businesses using it. Freemium, relatively high churn, about 6%, and a low price point, $6 a month, soon to be $8 a month. Despite all that, COVID was kind to my business, demand for online events was way up. I get about 200 people adding the app to Discord a day, and the app has strong virality built in.” He put that in quotes. If you read SaaS Playbook, I talk about strong and weak virality. I appreciated the nod. James says everyone who signs up for an event is interacting with the app, and that’s the viral loop. He tells me his MRR. I’m not going to disclose it here on the show. Suffice to say, it is more than a full-time income in the United States. Usually that mark I put at $10,000 a month, and he is a bit north of that. 

And he says, “With a price hike next week, it should result in another 30 to 40% increase in MRR, as I am raising on my existing customers.” Price increases for the win. James continues, “I have more ideas for growth. I believe there is a market for a higher tier plan at $25 a month, and I know what I want to build for it. Expanding into ticketed/paid events is another idea. Reducing the value of my free plan is another. At the end of the day, I’m making more money than I would in a day job, and I’m primed to increase that even more, thanks in no small part to your excellent advice on navigating pricing. But there’s a not-so-quiet voice in the back of my head that’s always whispering to me about platform risk, consumer churn, and the fact that this vertical is never going to be a massive business.” 

“In other words, it’s not B2B. I think a lot of this comes down to managing my own psychology,” which he also put in quotes. Sometimes I like it when people quote me back to myself. Other times it’s unnerving, when I’m like, “Oh, did I say that?” But James continues, “I think a lot of this comes down to managing my own psychology, and there’s a good chance I’m experiencing a lot of ‘grass is greener’ elsewhere, but it still weighs on me. Thanks so much for taking the time to answer this.” James and I had a little back-and-forth via email, and I got his permission to use his name and the app name on the show. Normally I would anonymize it if he and I hadn’t spoken about it in advance. Here’s the reason I wanted to answer this on the show: I have a pretty strong opinion about it. 

A lot of the B2C/prosumer questions I get are about how to market it, and it’s things where it’s just like, don’t, just don’t do it. But James is onto something here. And so I wanted to take just a minute and give him, and you, my thoughts, so you can hear how I would think about this as a founder. Building something that gets traction is hard. If you’ve never done it, it’s really hard. If you’ve done it before, you forget how hard it is to get something into market and get new customers. Getting people interested from a cold start, no matter how much experience, backing, interest you have, it’s still hard, and it’s harder than you remember. So if I had something that had momentum, even if it was a B2C prosumer business, it was growing, and I still had more ideas, and that was the key sentence in this entire email, James says, “I do have more ideas for growth,” and then listed three ideas that I think are all perfectly possible, perfectly viable, that they might be able to grow this business by 50%, 100% in the next six to twelve months. 

Every idea he mentioned, I was like, “Yeah, I would probably try that too.” So since you have those ideas, that’s the direction that I would lean. As always, you have to make your own choice based on the information you have, but it does feel to me like you want to keep going on this. I guess the worst case, there’s a couple of worst cases. One is you try all three of those things, you spend the next six to twelve months giving it your all, and it doesn’t grow a lick, and it just is flat, and then you get to choose what to do next. That doesn’t sound that bad. To me, that has asymmetric upside, because if they do work, you’re going to grow, and you are going to significantly increase the enterprise value, be generating more profit, have a more stable business that you can then use, if you decide to, to go start or acquire that step three business. 

The other worst case, I think, is that platform risk bites you, and overnight you go to zero. Again, I would just evaluate the likelihood of that, and if it’s extremely low, then that’s a risk that I would learn to live with. So thanks for that question, James. I hope it was helpful. My next question is about one-time payments versus subscriptions, and Rory writes in. “Hey Rob, a longtime listener. I’ve been thinking a lot about pricing strategy for an MVP and wanting to get your take. I’m planning to launch a new product soon, and instead of going straight into a SaaS subscription, I’m considering starting with a one-time payment. The goal would be to test demand, gather real customer feedback, and better understand what users actually need before committing to ongoing delivery and a recurring model. Do you see merit in using a one-time purchase as a validation step before transitioning into a subscription later on? 

Trying to avoid locking myself into a model that requires constant new value before I truly understand usage patterns. Also curious about your thoughts on offering both at the same time. Is there ever a good stage where a one-off option and a subscription can coexist without confusing positioning or cannibalizing revenue? Would love to hear your perspective if this makes it into listener mail. Thanks for all your insights over the years. The show has been hugely helpful.” I used to be extremely black and white about one-time payments, and it was basically 100% a hard no, because, A, I think a lot of early-stage entrepreneurs use it as an excuse. It’s much like a free plan. “Well, I’ll make a free plan just so people will use it and I can get feedback,” and that’s usually a big mistake. One-time payments, when you’re building a SaaS product that does in fact need ongoing delivery, and it is recurring, and it needs to be hosted, and maybe you need to build new features, maybe not, but ongoing support and all that, it just doesn’t make sense. 

My definition of SaaS from seven or eight episodes ago was subscription software where software provides most of the value. This is not subscription. So the desire for founders to do free plans, to underprice their product, hey, nine bucks a month for something that should probably be a hundred bucks a month, and to try to do one-time purchases in the early days, I think, is a crutch. And so my reaction to this has usually been 100%, just don’t do it. The only time I would consider it is when there’s some other benefit to it, like you’re doing an AppSumo deal. That’s a one-time payment, but you get the marketing push and the explosive nature of that email list. I forget how big their email list is, hundreds of thousands. It’s a lot of people, and you can in fact do an AppSumo deal and learn from it. 

You get a big chunk of cash from it, a big chunk. It can be tens of thousands of dollars, and you then get to have folks use it and get feedback. Ruben did this with SignWell, and as far as I remember, he does not regret it, and he had a ton of learning from that. But he didn’t just go out and do one-time payments and post on Twitter and build a launch list and do it himself, because there was no other benefit. So that’s been my traditional stance. However, I have, over the past several years, as I like to do, taken in new data. I’m not a politician who needs to never change their mind because they get called a flip-flopper. I take in new information as it comes, and I try to adjust my thinking based on what I’m actually seeing in TinySeed companies, in MicroConf companies, in listeners of this podcast, and in the broader, mostly bootstrapped ecosystem. 

And I have seen examples of this working. Youform.com. I sat and watched Davis Baer and his co-founder start Youform as a one-time payment and build it into a successful subscription product. And they still have a free plan and a $29 and an $89 plan, and I was skeptical at the start, and then they made it work, and I was like, “Well, good for you.” And maybe there have to be rules of thumb. You know when Ruben comes on the show and talks about his rules of thumb for when freemium might actually work, right? When it might be a good idea. There are probably some around this, and I just haven’t done enough one-time payments, or had enough exposure to them, to know what the “rules of thumb” are for when you should probably use them. But I think one of them might be that it’s kind of like freemium, where you probably should have a huge market, probably should have some virality built into it. 

And likely, this is the third one I’m a little iffy on, I’m coming up with it on the fly, but I feel like if you’re already in an extremely competitive space, which Youform of course is, it’s a form builder and there are hundreds of these, so that one’s maybe, maybe not. But I do think of a one-time payment, if you think about it, it’s kind of like a free model. You just happen to get a payment upfront, and then you have free users for the rest of your ever-loving life that you’re supporting, which is one of the reasons I don’t like it. What if you could go from an idea to your first real user in 30 days? Not a prototype, not a promise, but an actual working app. Today’s sponsor, Designli, will put that in writing. Here’s their CEO, Keith Shields. 

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Rob Walling: As I look through the reasons that Rory mentioned for doing this, Rory said the goal would be to test demand. Maybe, but can’t you do that with a subscription? It feels like you can test demand with a subscription. Gather real customer feedback, which, can’t you do that with a subscription? I did it with Drip. Most people do it with a subscription, right? And better understand what users actually need, which I still think you can do with a subscription, before committing to ongoing delivery and a recurring model. But you are committing to ongoing delivery in a recurring model, not a recurring payment model, but ongoing delivery. This has to be up next month, or else you’ve scammed those people. So just because they paid you once doesn’t mean you can shut it down in three months and be okay with it. I tell you what, it’s more kind to the users if they’re paying you monthly and suddenly you disappear, because at least then they haven’t paid you for a year’s worth of usage, or two years, or whatever you wind up charging for that one-time fee. 

So those reasons, I don’t agree with. And if you have a launch list, which, look, most people don’t, because they don’t actually listen to the advice that we give, the grizzled, jaded SaaS veterans talk about, “You should do this,” and at least consider doing this, and go B2B, and raise your prices. And we write books, and do podcasts, and just, the amount of… and learn marketing, and do sales, and the amount of new folks coming in who just don’t listen, is extensive. It’s the vast majority. And so it’s unlikely you have a launch list. But if I had a launch list of 500, or 1,000, or 5,000 people, I would have a really tough time doing a one-time purchase model. Why not go recurring there? But Youform made it work, and I’m sure they’re not the only one. Now, is Youform survivorship bias? 

Are there 99 others that tried one-time payments and never got anywhere? Well, maybe, I don’t know. And we can’t run a split test to say, “Would Youform be better off today if they hadn’t done the one-time payments?” We don’t know that. But I do know that they made it work, and it’s an interesting approach in the early days. I like doing things sometimes just to experiment. There’s a reason I did a book Kickstarter for The SaaS Playbook. A lot of people said, “Why are you doing a Kickstarter?” Almost nobody does nonfiction books that way. Very rare. I think Eric Ries has done two on Kickstarter, but very few examples of folks making it work. And I wanted to see what it was like, if there was asymmetric upside to it, if it would expand my audience, et cetera, et cetera. It was a fun and interesting experiment, and we did it for the exit strategy as well. 

And I think for my next book, I’m probably not going to do a Kickstarter. It’s still in the works, but I think I’m going to just do pre-orders. But I learned what I wanted to from that experiment. So today, if you were to ask me, if I was launching a product, would I do one-time purchases? No, I would not. I would build something that had value that was ongoing, that I could charge people on a recurring basis, monthly or annual. Maybe they could prepay for something, but I want to gather that real customer feedback from people who are paying me on a recurring basis, and I want to test demand from people who are paying me on a recurring basis. And that’s probably a harder way to go in the early days, but I think you’re going to learn so much more, and so much faster. 

With that said, Youform made it work, and I have seen other examples of folks specifically who offered both at the same time, which was something Rory proposed: one-time and subscription. And I’ve seen, I think we’ve even had some TinySeed companies come in and apply, and we told them the first thing was like, “You’ve got to get rid of that one-time deal.” They had a lifetime deal. We’ve had a few, and they had learned what they came to learn, but they left the one-time deal on. And we were like, “You’re already at 5K MRR, 10K MRR. By the time you get there, cut the lifetime, cut the one-time deal.” But it becomes addictive, because it’s a lot of cash, because you’re getting your whole lifetime value upfront. So I have seen folks do it and make it work. If I had a launch list of 500, or 1,000, or 5,000, and I was thinking about this one-time payment, I would maybe consider offering both, meaning one-time and subscription. 

And the model that I think I’ve seen was, if it’s monthly $20 a month, then your lifetime is like two years, so maybe it’s $500, maybe slightly more, maybe it’s like one to two years. I’d have a tough time charging one year, for like $240, for a lifetime deal, but you get the idea. That’s just what I’ve seen in a handful of examples of this. So would I lean towards it? Would I advise entrepreneurs to do it? No, I think it’s probably an excuse, or a reason not to just do the hard work upfront. But as I said, I like to update my mental models. I’ve seen examples of this working, and I think it’s interesting today to think of it as a potential path, given how hard it is to get things off the ground and get noticed in the age of AI slop apps being slung out there by indie hackers all the time, and not just indie hackers, but just anyone AI-slopping and vibe-coding apps and throwing them out there. 

It’s intriguing to think that this might be a tactic that could be an advantage. So thanks for your question, Rory. I hope that was helpful. And for my next question, comes from Robbie. Robbie asks, “I built a SaaS app that in most cases requires some custom development work to implement. What’s your recommendation in terms of pricing strategy and positioning? Do you, number one, position the app as the high-priced, premium, customized solution? Number two, cast the wider net and be the lower-priced solution anyone can use, and offer a consulting service for implementation? Or number three, some mix of both?” And Robbie actually did a good job of providing a bunch of context. It’s specifically a Shopify app, and he kind of summarized it with these questions. So I do have a bit more context, and even some proposals that Robbie gave. He said, “My gut instinct was to charge $49 a month across the board, which is what I’m doing now, and then charge a separate quoted project fee based on the specs if the client wants a custom front end. But I’m thinking about potentially using a higher-priced model, like $249 a month, and it’s more of a consultative selling proposition. 

Like you said in your SaaS Pricing 101 section of the SaaS Launchpad course, SaaSLaunchpad.co. That way I can justify more cold outreach to agencies and merchants, and position it as a higher-end, more custom solution. Or I can provide two options, like one developer tier, $49 a month for just the tool, and an enterprise or agency tier at $249 a month. But I worry there isn’t enough differentiation between the two tiers, especially if I’m doing the front-end work as a quoted project fee.” So really it’s, do you do $49 a month and have the upfront fee, which, usually if it’s one-time work, I’m charging $500 to $5,000, some kind of mostly fixed price? Or I guess maybe you could also do custom quoted project fees, and if it’s one-time, then you do that, and then you have the price of the product. I will admit, though, I like this idea of having a $49 and a $249 tier. 

Of course I do, because that 249, it’s a bit of a dual funnel. It’s not… normally dual funnels I think of the higher end starting at, say, a thousand a month, so that you can justify cold outreach, because at 249 a month you cannot. But my rule of thumb is about 300 a month is the minimum for a one-call close, and somewhere around, what is it about, it’s about 800 a month, it’s about 10K ACV, is my minimum for thinking about cold and warm outreach. And so obviously neither of these are going to work for outreach, but to do one-call closes and more of, as you said, a consultative selling process, that 249 feels interesting. So I think my default would be to charge a consulting fee upfront, a separate quoted project-based fee, and also have that 249 tier. And the thing is, if you’re going to be doing custom quoted project fees for a $49 a month product, A, that needs to dramatically improve retention, which it probably will because it’s a custom design, but B, I want to be making good margin on that project fee. 

Typically, with consulting services built on a SaaS, I’m fine to break even if I’m charging enough on the monthly recurring. If my annual contract value is $5,000 a year and up, and I have net negative churn because of the work I did upfront, am I willing to do a thousand dollars of work for $1,000? Yeah, I am, because I want to build the recurring SaaS revenue, and that’s where the real value in the business is. But if I’m selling a $49 a month product, I have a really hard time doing project work at breakeven. I want to probably double or triple my money. Meaning, if I were to pay a reputable contractor who I’ve worked with, who’s doing really good work, so they’re not some $10-an-hour resource, and if I’m paying them $500 to do a project, yeah, I want to charge between $1,000 and $2,000 for this, because there’s project management, and there’s client expectations, and there’s all the headache that goes along with this, if it’s for a $49 a month plan. 

When I start thinking about your agency tier of 249, I’m a little bit more like, well, that’s decent money, it makes me more willing to do things a little cheaper, I guess. So, all things being equal, I really like having the 49 and 249 plans across the board, and figuring out a way to differentiate the two tiers, just whatever it is, through talking to customers and seeing use cases. And for every feature you build, think to yourself, “Should I only put this in the agency tier, the 249 tier,” and lean towards yes, unless you really need it as a kind of baseline product feature. So I like that. That’s just the business that I would want to build in this case, and then I would have the front-end work quoted as a project fee. Just having it at 249 with no $49 plan is also an option. 

You do seed the bottom end of the market to folks, and in the early days I would be curious as to, well, do they churn at outrageous rates? Are they a pain to support? Do they need a lot of support? Is it worth it? I would be willing to experiment and try for a month, or three, or six, until I had enough data that I could make a decision to be like, “This is for the birds, I’m done with this.” Given it’s a Shopify app, I haven’t heard of many, and I’m not super versed in the ecosystem, but to start at 249 feels like a chunk of money in Shopify specifically. And so I don’t mind that lower-end plan of 49, as long as it’s not cannibalized by your 249. That’s a big if. 

And as long as it’s something I’d be willing to cut if no one’s upgrading from 49 to 249, and the churn of the 49 is high. And if I deem that it’s just not worth it, I need to be able and willing to just cut it, and then I have a 249 and a 499, right? That’s what the business becomes. So I think you’ve got my general gist of how I’m thinking about it. I really appreciate you sending that question in, Robbie, with all the context. Hope it was helpful. So that’s it for another episode of Startups for the Rest of Us. Thanks so much for joining me as I get back on the microphone after a couple weeks on the road in Japan. Obviously the podcast kept going, because we ship every Tuesday since 2010, 52 shows a year, and I just had to record ahead a little to keep those in your earbuds every week. 

Thanks for listening this week and every week. This is Rob Walling, signing off from episode 841. 

Rob Walling: The two reasons to vibe code something are probably to save money or because you need it highly customized. And if I was growing, I wouldn’t be doing anything to save money because I would just want to add more revenue and not be messing around with internal software. Welcome back to another episode of Startups for the Rest of Us. I’m your host, Rob Walling, and in this episode I’m going to rapid fire through a handful of listener questions. I have about 10 queued up and we’ll see how many I’m able to get through. Some are earlier stage, some are text questions that have been hanging around for quite some time and I just wanted to give them their chance. Before I dive into those, I wanted to let you know that I’ve been writing again. So after starting as a blogger from 2005 until about 2011, 2012, I stopped writing essays and I moved to podcasting, YouTube, and writing books. 

Rob Walling: But over the last six months, I’ve published several essays. It’s maybe 12 to 15, and I’m sending those exclusively to my email list. If you go to robwalling.com/emails, you can sign up for that list as well as get a sample chapter of The SaaS Playbook. I’ve been doing a pretty good job of sending one email a week with brand new content. Some of the concepts are things I’ve mentioned on YouTube or I’ve talked about on the podcast, but these are concepts, frameworks, thought processes that I’ve never put into writing. So you won’t find these in other blog posts, essays, or books that I’ve written. One of the fan favorite topics seems to be task level, project level, and owner level thinkers, and I’ve gotten a lot of questions about that particular email, so much so that I added another one with basically me answering questions of how do you find these folks? 

Rob Walling: How expensive are they? A number of other things. So robwalling.com/emails if you want to take advantage of that and stay in the loop. And with that, let’s dive in to my first listener question. The first one is from Taryn, and they’re looking for a more opinionated take on the 5PM framework. And Taryn writes, hi Rob. I made the call this year to start something of my own. I’m in the midst of evaluating startup ideas and I found your ideas and frameworks very, very useful. You very much embody the kind of philosophy that I want to carry forward into the business or businesses I start. I’ve listened to episode 628 many, many times over the past couple of weeks, and for me, there were some parts that were difficult for me to pinpoint what exactly made a good or bad idea. And breaking in here for the listener, 628 is when I described the 5PM framework for the first time. 

Rob Walling: Back to the email: for example, when you talked about pricing, you talked about firstly whether this can work as a subscription versus one time, and that one’s clear that subscription is what we’re looking for, but when you talk about estimating the average revenue per account, it isn’t clear what’s good or bad. You also talk later about whether it’s monthly, annual or usage based, but it isn’t clear what is good or what is bad. Market is also not so clear. You mentioned that size matters a lot less for bootstrap startups versus venture backed. It wasn’t super clear if size mattered at all. After reading more of your material, I think the point is it’s got to be big enough, but it doesn’t have to be VC big. My opinion is that the podcast could have been clearer if you mentioned explicitly that size is important and maybe some guidelines as to what a good size is. 

Rob Walling: I think the other Ps and the M were super clear on how to use it as a valuation criteria. No notes there. I’m not asking for anything specific. I think from consuming more of your material and other podcast episodes, I think I’ve come to fill in the gaps in my understanding. I wonder if it’s a good time to drop any new thoughts about the 5PM framework, given that it is two years old. So thanks for writing in with this, Taryn. Yeah, it’s interesting that first episode kind of happened off the cuff. I think I invented the 5PM framework like 20 minutes before that episode. It all just kind of came pouring out and I realized, oh, this is really something. I was trying to outline a podcast episode about evaluating ideas, and I thought, what would be the things that I would want to look at? 

Rob Walling: So a couple of things. Number one, I am finishing up my next book, and I believe it addresses everything that Taryn has asked for. And the next book is called SaaS Launchpad. You’ve heard me say SaaS Launchpad over and over because I have a course by the same name, saaslaunchpad.co. And while there will be a decent amount of overlap between the course and the book, the book is what really started it all. I had a decent manuscript, we needed a course and we adapted the book into the course. Since then, I’ve added another, I think 30-40% to the book, tweaked it, actually pulled stuff back from the course to make the original book manuscript better. Ultimately, the course is going to remain kind of the source of truth. It has so much more information, so many more interviews, more depth and all that. 

Rob Walling: But the book is going to be a nice 200-225 page treatise on early stages, right? SaaS Launchpad is about how to get your business off the ground, how to come up with ideas, validate and all that. And so in that book, I did go deeper on market sizing. I talk about pricing, what’s good. I mean, the thing I struggle with is you’re asking for, if monthly, annual, or usage based, what is good, and it does kind of depend. In a perfect world, obviously you do annual, but you don’t need that to make a great business. I’ve seen monthly plus usage based businesses be incredible, and similar with average revenue per account. I mean, I built an awesome lifestyle business with 10, 20, 40, and $80 price points, and the average revenue per account was probably between $30 and $40 maybe. 

Rob Walling: And it was such a great business, but it was never going to be a multimillion dollar business. It just couldn’t. The churn was too high, the price points were too low, et cetera, et cetera. But then Drip started at $50 a month and did, what was it, like $51, $100, $149 and then call us, I think, and that even these days feels pretty low. And yet we built a multimillion dollar business. Most businesses these days that get into TinySeed do have price points in the single digit hundreds kind of as their low end. That’s not always the case, that’s not 100%, but it maybe is 70 to 80% of companies. So I guess I could have said all that in the episode, but here it is for your ears today, and if you’re interested in that book, I’m planning to do pre-orders in the fall, and you can head to robwalling.com/emails. I’ve already mentioned it in this episode, and you’ll definitely hear from me on that list as well as maybe some concepts that I’m batting around in advance of pre-launching the book. Get on the list and you’ll be the first to hear. So thanks for that question, Taryn. 

Rob Walling: My next question is not a question but a topic, and it’s something I emailed to myself, and the question is what tools should you build with vibe coding and which tools should you not? And what I was thinking of is if you are a founder of a SaaS app, and let’s say you’re doing $10K a month or you’re doing $500K a month, should you use vibe coding to build things that are not your core product? I mean, I think it goes without saying that you should be building internal features, like product features, with AI augmentation, but I hear some people talking about, oh, I’m going to go build tools that we use internally. 

Rob Walling: Instead of having Airtable, I’m going to build Airtable, right? Instead of having Notion, I’m going to vibe code Notion. That type of thing. I haven’t heard anyone say those specific examples, but you get the idea. And in my thinking, there are two reasons to vibe code something. One is to save money, and one is because you’re building it because you need something extremely custom that serves your exact needs. So let’s look at number one, saving money. If you’re growing, I would not mess around with saving money. I think it’s a waste of time. I would focus on growth because you’ve heard me do this math before. Every $1,000 of MRR you add is $12K of ARR, five times multiple, $60K of enterprise value, or of net worth, if you own the whole company. To me, spending time vibe coding something that’s going to save me $5,000 a year or $10,000 a year is probably not worth it. 

Rob Walling: I should instead be focused on growing my MRR by $1,000 that month. Now, what if you’re not growing? If you’re flat, do you build some stuff? Do you have anything better to do at that point? I mean, I would be putting my time into trying to grow, but if say you’ve been flat for 12 to 18 months, you really don’t know what else to do, you don’t want to sell right now, and you’re kind of pulling money out, really trying to just take profit out of the business. I mean, maybe that is a case where I would look at my most expensive things and see if we could vibe code them, realizing that you vibe code this, now you get to maintain it. Now you get to keep security updates, you get the patches, you do all this stuff. So it’s not just vibe coding as the cost. But that is one case where I could feasibly see considering it. 

Rob Walling: The thing that I did think about is I would never build something like an email service provider or anything with complex deliverability requirements, like really sending emails and SMS. There’s so much headache that goes along with that and the moving parts, I just don’t think you want to be worried about keeping things out of the spam box. I also at one point would’ve said, I don’t think you should build your own CRM because of the complexity and because of how many are available out there, but I have heard of some folks doing this. I think if your CRM is extremely expensive or it doesn’t do what you want it to do, right back to my first point, then maybe. I just have a tough time thinking that’s the right choice unless you really need deep integration into your data in a way that just doesn’t work with the connectors. So I think that’s probably the summary of my thoughts. The two reasons to vibe code something are probably to save money or because you need it highly customized, and if I was growing, I wouldn’t be doing anything to save money because I would just want to add more revenue and not be messing around with internal software. 

Rob Walling: My next question is advice on how to grow and market an event-based B2C SaaS. 

Steve: Hi Rob, my name is Steve and I’m a solo founder of a freemium trivia platform that lets people create and host game show style trivia games for events, classrooms, team building sessions and game nights. The business is currently around $15K MRR. We offer a monthly and annual pro subscription at $12 a month and $99 a year, but about 99% of customers choose the monthly option. The main challenge is that the product is very event driven, meaning most customers subscribe for a specific event and then cancel soon after. So the average customer sticks around for about two months, which means LTV is roughly $20 to $25. Growth so far has come mostly from SEO and word of mouth. I’ve tested meta ads in the past, but with such a low LTV, paid acquisition has felt like maybe not the best avenue for a good ROI. My question is where should I focus next to grow this business? Should I try paid ads again? If so, where? Lean more into recurring use cases like pub trivia hosts, corporate trainings, et cetera, so more into B2B land? Or would you avoid paid ads and double down on organic channels like SEO? I love your thoughts on marketing an event-based B2C SaaS where customers are willing to pay but often only need the product for a short period of time. Thanks. 

Rob Walling: So I appreciate the question. I think the thing that I struggle with, Steve, is I really don’t give advice on B2C or two-sided marketplaces, and it’s because these businesses are very difficult to grow. You mentioned trying paid ads. I don’t know of B2C businesses where that works. I know some direct to consumer businesses that are selling physical products where ads work, but to have a lifetime value of $20-25-30, you don’t have any money to market it. The only ways you can market a consumer facing business that I know of are virality, word of mouth, SEO, the free stuff, because you can’t afford to spend or invest any money on marketing. And that’s one reason why B2C is so hard: high churn, high customer support, non-technical users. I mean the list goes on and on and on. Honestly, my advice is don’t. I would look for: is there a Startups for the Rest of Us for B2C apps? That’s what I would look for. And if there isn’t, there’s probably a reason for that because B2C apps are brutal. They’re like eating glass. Two-sided marketplaces are as well. So I wish I could help you out more with this, but what you’ve tried is about what you can do, and B2C apps are just not in my wheelhouse. I had one back in the day and the economics were so bad that I swore I would never do it again. And in fact, Patrick McKenzie and I at the very first MicroConf each gave a talk on some B2C elements. He had a bingo card creator, and I had Wedding Toolbox, which was like a wedding website thing for consumers, and we both said, never do B2C again. 

Rob Walling: So wish I could help you on this one. Thanks for the question. The next question is from Michael. Michael says, hey Rob. I’m a founder who built a small tech startup outside Silicon Valley. It didn’t scale and it failed. What followed wasn’t a pivot or an exit, but burnout, financial collapse, and exile. That’s interesting. Why were you exiled? Most people who fail in Silicon Valley, that’s kind of a badge of honor, and unless the founder does something negligent or incompetent or illegal, that’s usually not a big deal to fail in Silicon Valley. But let’s continue with the email. I had to rebuild from zero without funding, without a network, and without the usual startup safety nets. My question is how do you think about rebuilding a startup career after failing, when you’re outside the Silicon Valley ecosystem, older, and starting again in a new country, not in theory, but in day-to-day decisions: what to keep, what to drop, and what not to chase anymore? 

Rob Walling: Love to hear your perspective, especially for founders who don’t have access to capital, hype, or a second chance backed by a brand name. Thank you for the work you do for founders like us. I mean, it’s an interesting question. I still don’t understand the exile thing. Financial collapse and burnout, I mean, I’ve been through both of those, and a lot of Silicon Valley companies go through these things, but that part still doesn’t make sense to me. I think I’ll just answer the question. If you’re building a company when you don’t have access to capital, hype, or a second chance backed by a brand name, you’re a bootstrapper. I would build it the same way that I built all my companies. I would either stair step it, which is what you hear me say a lot on this show, or I would just build at nights and weekends while I worked a day job. 

Rob Walling: You can do it without funding, you can do it without a network, and you can do it without any safety nets. Now, I would during this time try to build my network, not my audience. I’d be interacting in the communities that I was interested in, to be around other founders. I said this a couple of episodes ago when I talked about the TinySeed kickoff and the value of being in person with other founders, but also being in online communities: Indie Hackers, MicroConf Connect, et cetera, and that’s what you do. Thousands and thousands of businesses are built every year by people who are exactly in your position. They’re bootstrapping, they don’t have capital, they don’t have hype, they don’t have a brand name, and they hustle and they figure out where the gaps are. What’s the product that needs to exist that customers are clamoring for? 

Rob Walling: You have some idea how to build, market, and sell, and that’s really what this show focuses on. Every episode is usually focused on this exact concept. It requires a bunch of hard work. I mean, I think that’s the thing: hard work, luck, and skill, right? There’s going to be a bit of luck. Let’s throw that out because I’m not counting on luck. Skill is going to be the things that you’ve learned already and the things that you’re going to have to learn to bring this to success. And hard work is the key component. You hear me talk so much about grinding and doing the things you don’t want to do. Having access to capital is a luxury that allows you to not do a lot of the stuff you don’t want to do. But in this case, if you’re bootstrapping, you are going to have to grind, whether you’re doing it nights and weekends around family and a day job or whether you’re doing it full time. But you still have to do the things you don’t want to do that move the needle. You probably won’t be able to do freemium because you can’t kick your revenue super far out into the future, and you need to charge enough that you don’t have to find a million customers to make $10,000 a month or whatever you need to live on. 

Rob Walling: That would be my number one goal: how am I able to get to that number such that I own all of my time? And then the race really starts. That is the new starting line that I’d be going after. I’d be putting every modicum of brain power, time, attention, and energy into getting to that magic number, $10K a month, and maybe your number is slightly different. Once you’re there, you have the freedom to really start growing. So thanks for that question. 

Travis: Hey Rob, I’m Travis and I run fitplum.com. FitPlum is a piece of software that helps SaaS companies reduce churn, increase retention, increase word of mouth. It does so by running a process, kind of coined the product market fit engine. It’s something that the Superhuman team has talked a lot about, and Sean Ellis kind of famously coined the product market fit survey, and so I built a software product that productizes that process, which I’ve found very effective in other ventures. And my question is really around go-to-market and positioning for this first batch of customers. I’m still kind of in search of my first couple hundred customers, and I am trying to figure out whether it’s better to start with people who are already solution aware, who maybe have read the blogs from Superhuman and Sean Ellis on First Round Capital about the product market fit engine approach, or if that’s too specific and niche and I’m better off just going with the promise of attacking churn and getting you to the next stage of product market fit and increasing word of mouth. It’s essentially a customer research platform that delivers you a focused roadmap and some segmentation around who your ideal customers are. So I might experiment with the super, super niche, super narrow targeting to start with and just go manually find those people, but let me know if that sounds like a trap or if you have feedback about how to approach that and find those people since it’s going to be so niche. Appreciate your feedback. Thank you. 

Rob Walling: This is an interesting question. In a perfect world, I would start with this smaller, tighter niche. You really want to find solution-aware people, and I would put in a month or two looking for them and then evaluate if that is too small, if it is too niche. But I would at least give it a try first because if I’m having to educate people not only on what this does, but how it does it. I guess that’s when I look at your H1. The H1 is “find product market fit with confidence, zero busy work.” I guess the question is, they could be solution aware without really knowing about the product market fit survey. No, on second thought, if they were solution aware, then they would kind of have the idea that a piece of software could help them find product market fit, and I don’t think most people are going to know that. 

Rob Walling: So at best they’re going to be problem aware unless they know about the survey that you’ve talked about. So with that said, yeah, I think my initial gut instinct is where I’d go: I would try to find people that are solution aware, they’re going to be so much easier to sell to, talk to, and convince that this is a thing, that it actually works, that it’s viable. And if I tried it for a month or two and I couldn’t find people who are solution aware, then I would switch to problem aware. Look, if I had time, I would do both at the same time, if I’m honest. But if you have to focus on only one, I’d probably start small and expand if the initial approach didn’t work. So thanks for that question, Travis. I hope it was helpful. 

Rob Walling: My next question is anonymous, and it’s actually a comment I received via my email list. robwalling.com/emails if you want to sign up for that. In my email, I said: respond and let me know the number one problem you’re facing, and this anonymous respondent said, I constantly feel like I’m falling behind. The moment I come up with an idea, someone else launches it with a larger budget and faster coding velocity. It’s discouraging. I start feeling like my work isn’t good enough. I get to about 80 or 90% completion only to abandon the project. This has happened roughly eight times, and I can’t seem to break through that barrier. Well, I’ve learned a lot. I haven’t managed to make that final leap forward. And so I wanted to offer this as an example both to listeners, but also as a response to this person. I did email them directly as well, but I said, my sentiment is that it sounds like your natural inclination is to start things but not finish them. 

Rob Walling: Some people are really good at finishing things, and then it takes heaven and earth to get them to start a new thing, and other people are great starters and don’t finish anything. So I would look internally to fight against this. To me, this is a mental hurdle. I would either look internally through therapy, through a coach, I would find a co-founder who can keep me accountable. I would join a mastermind group and ask for accountability. What you need is an outside sanity check. If you can’t get over this blind spot yourself, a blind spot is just a weakness that you haven’t identified yet, and it’s something that will keep biting you until you realize, oh, this is my natural inclination. I probably need to fight against this. I think that you should ship things even if someone else launches something similar. It sounds like you might be looking for excuses not to ship because that feels scary, right? Shipping feels scary and pulling it and not doing anything is less scary. This is not an uncommon problem, and I don’t see a silver bullet fix other than trying a bunch of things to see what works. Is it self-accountability? Is it mastermind accountability? Is it a co-founder? It’s very much a mindset thing. It’s a common early stage entrepreneur kind of trap to fall into, and I think many of us do fall into this. To me, the way to get around it is to try a lot of things, and you’re kind of trying to trick your own psyche into doing what’s smart and getting you towards results rather than your natural inclination. 

Rob Walling: And my next question is about resources for early stage SaaS founders. 

Caller: Hey, how’s it going? So I’m reading The SaaS Playbook and you say that you decided to focus the book on topics that’ll help a business with some semblance of product market fit take its company to the next level. What recommendations, reading or otherwise, do you have for a brand new SaaS that’s trying to get to that point, trying to get some semblance of product market fit, trying to get to the point where The SaaS Playbook would kind of take over? Thanks. 

Rob Walling: What’s funny is I did not plant this in this episode. I dragged over just a slew of questions and I didn’t really read them in advance, and I’m realizing that of course, saaslaunchpad.co is the course that I created with the help of Producer Ron at MicroConf, and that is exactly what it’s designed to do, as well as my new book SaaS Launchpad, which as I said earlier in the episode, I will be taking pre-orders for hopefully this fall of 2026, and you can go to robwalling.com/emails if you want to hear about that. 

Rob Walling: And my next question is about how to get enough traffic to start validating an idea. And this person wrote in and said, my number one problem I’m facing as a founder right now is finding out how to validate our new product. Google traffic is too expensive. General Facebook traffic doesn’t convert well. How can we get enough eyeballs on the product to see if people want it? I have a couple thoughts here. There are two ways to do it. There’s a landing page and driving traffic, but there’s also having one-on-one conversations. These conversations don’t need to scale. You don’t need to have a high enough lifetime value in order to have 20, 30, 40 conversations by pinging people on LinkedIn, by announcing on your social media, by scratching and clawing and doing whatever it takes to get in conversations and trying to find out if people want it. It’s customer development, right? Customer conversations. So that’s one way. I tend to do both ways, which is have those conversations cold one-on-one, warm one-on-one, and also put up a landing page and generate traffic. 

Rob Walling: When I’m doing that, I don’t worry about making money. I actually don’t think Google traffic is too expensive. I think if Facebook or Instagram traffic isn’t converting, I would probably spend more time trying to optimize those. I don’t need to make money on the Google traffic, even if I’m overpaying. I mean, unless it’s some outrageous amount, like paying $1,000 for each email or something. But I am really just trying to find people who want to solve the problem that I am solving. But then there are a bunch of other ways. Go through the 20 B2B SaaS marketing approaches that I list in The SaaS Playbook and ask yourself, which of these could be done before I have a product? Maybe I just have a landing page, maybe I have a landing page plus a blog, maybe it’s a full marketing website but it’s just a coming soon. 

Rob Walling: So the big five SaaS marketing approaches: SEO, yes, you can do that without a product. Pay-per-click advertising, yes, you can do that without a product. Cold outreach, warm outreach, yes, you can do that without a product. Integration marketing, which is where you do integrations, you can’t do that without a product, but what you could do is partnerships, like a joint venture partnership, which is integration without writing any code. If you know people in your industry, this is where I say build your network, not your audience. You go to your network and you say, which of you has a product or a list of customers or an audience, and can help get me in front of them to help generate this traffic? That’s a partnership. That’s what I’d be thinking about. And content marketing, which really a lot of that turns into SEO, but it could be putting up YouTube videos and going more with the founder-first, audience-first approach. 

Rob Walling: Then we have other still important marketing approaches. Affiliate marketing: you’re probably not going to do this without a product, but this is where if you have a great network of people who could be affiliates, what they might do is kick you a favor and say, look, I have this product I’m trying to validate. Can I come on your podcast? Or will you mention it to your audience as something interesting? Like, hey, my friend is launching X, Y, Z thing. Go check it out, to drive some traffic and to see if folks come and sign up. There are in-person events and trade shows: not cheap. Can you do it without a product? Absolutely. You could go there to learn. Free tools, engineering as marketing: absolutely could do this without a product. I believe Ruben Gamez built several signature tools before SignWell existed and was generating traffic with those. 

Rob Walling: Then there are hangouts, these are where your ICP, your customer type, hangs out: forums, private Slack groups, Facebook groups, and subreddits. There are Q&A sites like Quora, Stack Exchange, if any of these still exist after AI, and on and on. I go through even more: display ads and other people’s audiences, and most of these actually work without a product. The question you have to ask yourself is, if I can’t generate traffic today, if I can’t find people who will buy it today, how will I find them once I actually have a product? It’s a question I always ask myself. So thanks for that question, anonymous. I hope it was helpful. 

Rob Walling: And for my last question of the day, Quentin emails and writes, hi Rob. I’m a bit of a wantrepreneur. I’ve been running a B2C SaaS for about five years, and I’m starting my next venture, this time B2B. How does one run cold outreach for a self-service product? Couldn’t seem to find any videos where you touch on this. Do I just say, hey, this might be useful to you? I’ve been burning cash on Google Ads, which is working, but at my current CPA, I need to find another channel. So this is a nice piggyback on the last one. I like it when things line up. Almost seems like I am doing this in a calculated manner, and I really planned this, but I did not. But this is kind of a double click into the question that I had just answered. So number one, you can’t do cold outreach for a self-service product and make money. The minimum annual contract value for making cold outreach work, making the economics of that work, is about $10,000 US. It used to be $7,500. Well, it was about $6,000 to $7,500. I remember when we first started TinySeed, that was my rule of thumb. Since then, not only has it gotten more crowded, but inflation has literally impacted numbers. So it’s about $10,000 a year. I don’t know of a single self-serve product that is $10,000 a year. So you’re not going to do this in a way that’s actually scalable, meaning in a way where the economics work. So if you’re trying to actually do this in an ongoing, scalable way, it just won’t work. 

Rob Walling: And that’s why low price products are hard to market: because of all the 20 B2B SaaS marketing approaches, if you have a price point of $50 a month, I think you can do four or maybe five of them. If you have a price point of $500 a month, you can do between five and ten of them. And if you have $5,000 a month, you can do all 20 of them. And cold outreach is one where you need at least, well, not $5,000 a month, but you need, let’s say, almost $1,000 a month to make it work. But if you’re just doing this for customer development and to get in conversations, and you don’t need to make money and you’re trying to validate the product, then you do cold outreach and you do demos. You literally say, do you have this problem? I can talk to you about it, and you do demos. I won’t say it’s a waste of time, but it’s not the best use of time if you’re selling something for $20, $30, $40 a month. But if you’re doing it for learning, it can make sense. If you’re truly trying to scale it, that’s why these days I just wouldn’t start. 

Rob Walling: If I wanted to build a seven or eight figure SaaS company, I shouldn’t say I wouldn’t start one that has a lower price point, because Drip started at $50 a month, but I would want to make sure that on the top end, we had plans that are $1,000, $2,000, $3,000 a month. And realize this does also depend on your goals. I mentioned earlier I had a product that was $10, $20, $40, and $80 a month. Those are the four price points, and I turned that into an amazing $30,000 a month lifestyle business. It was self-service, it was great, but I didn’t do cold outreach for it. I just couldn’t. I had to go after the marketing approaches that worked for it. And so if you are looking for that great little lifestyle business of $10K a month, $20, $30K a month, $40K, whatever, you get the idea, you can have these low price points. Once you get into the millions, it’s very, very difficult to do that because your churn is so high, so much customer support, blah, blah, blah. It’s the same things I always say about lower price points. So thanks for that question, Quentin. Hope it was helpful to you and all the listeners. 

Rob Walling: Thanks for hanging out with me for another 30 something minutes today. I really appreciate being in your earbuds, and I take that honor very seriously. Hope I provided some entertainment and a little bit of education, insights, inspiration, and ideas for you today. Thanks for listening this week and every week. This is Rob Walling, signing off from episode 840. 

Rob Walling: Welcome back to another episode of Startups for the Rest of Us. I am your host, Rob Walling, and in this episode I have the pleasure of interviewing Nick Francis, the co-founder of Help Scout. Help Scout has long been one of my favorite support tools. We used it back in the day at Drip and when Nick and I recently met in person for the first time, I jumped at the chance to get him on the podcast. Nick is a bootstrapper at heart, but he and his co-founders did raise money with Help Scout and they have grown it over 15 years to $35 million in ARR. It’s a really interesting story with a lot of ups, downs, and gutsy decisions. I think you’re going to enjoy the conversation. Before we dive in, a quick reminder that MicroConf Europe is happening in Reykjavik, Iceland from September 21st through the 23rd of 2026. 

Rob Walling: We have an incredible lineup of speakers, some great excursions planned, and obviously we’re all looking forward to getting in the same room with about 175 to 200 other like-minded founders. Ticket prices go up on July 2nd, so they’re the cheapest they will ever be. And if you’re thinking about bringing your team or your mastermind group, we’re running a group discount right now. If you buy three or more tickets, you get 10% off. Maybe your co-founder or your CMO always wonders why you’re so revved up after coming back from MicroConf. This is your chance to show them. Plus, getting everyone in the same room is much, much more valuable than another Zoom call, and you’ll be in Iceland, so that doesn’t hurt either. Come up and say hi to me if you wind up making it. You can head to microconf.com/europe to see the speaker lineup, get all the details, and to grab your tickets before the price goes up. This event will sell out, so if you’re thinking about going, go ahead and head to microconf.com/europe. And now let’s dive into my conversation with Nick. Nick Francis, welcome to the show. 

Nick Francis: So happy to be here, Rob. 

Rob Walling: It’s great to have you, man. We ran into each other at MicroConf of all places in Portland a couple months ago, and you came up and I was like, Nick Francis, this name is familiar. And you’re like, I’m the co-founder of Help Scout. And I was like, what? You guys are awesome. I love Help Scout. A bunch of TinySeed companies still use Help Scout, a bunch of people at MicroConf. I mean, Drip back in the day used Help Scout. It is really cool to have you. 

Nick Francis: I was so honored. It was great to show up at MicroConf and have such name recognition. Every time I talked to somebody it was just like, oh, Help Scout. It was really, really nice. 

Rob Walling: Yeah, that’s cool. So we were chatting there and I realized I wanted to get you involved, assuming you wanted to, in this whole ecosystem we have. So you’ve since become a TinySeed mentor, maybe teasing something we haven’t announced yet, but let’s just say loyal listeners, I may or may not have invited Nick to speak at a future MicroConf, tell the story of Help Scout. And I wanted to have you on the show to really live through the story, to go back through the painful memories and the beautiful ones as well of the past, what, 15 years I guess, of Help Scout? 

Nick Francis: Yeah, 15 years. But I’m such a big fan of what you are doing, the community that you’ve built. MicroConf has been a force of nature for so long. It was really great to be there with people. It’s with kindred spirits, people with shared values. I think that’s a really special event. 

Rob Walling: Thank you. Appreciate that. It’s definitely your people, right? I think of you as a founder who has that opinionated taste that I admire. Ben Chestnut of Mailchimp, the Basecamp guys, these other founders who really, even Postmark — 

Nick Francis: Natalie and Chris. Yeah, they’re legends. 

Rob Walling: Wild Bit, right? 

Nick Francis: Yes. 

Rob Walling: And it’s this opinionated take on, I don’t just want to build a company, but I want to do it in a certain way that I believe in. And for you that was — I think of you mostly as a bootstrapper. I think of Jason Cohen, to be honest, mostly as a bootstrapper, even though he has raised a cajillion dollars, he just has that mentality. He thinks capital-efficient, and you’re one of the same, even though as we’re going to get to in your story, you raised $28 million in funding. I just want to start that off. As people are listening, it’s like you are that bootstrap founder who has now gone down this path and I kind of want to hear about your thought process along the way. I think to kick us off, I have a nice little timeline here that producer Ron put together for me. And all the way back in April of 2011, you launched out of Techstars Boston, and is it true their terms were $18,000 for 6% of your company? I’m going to change the TinySeed terms. I want to buy companies at that valuation. Holy moly. 

Nick Francis: I know. Wasn’t that wild? And this was before Techstars was doing a convertible note and all this additional capital. Back in the day, startup accelerators were much more profitable. It was truly, they gave us $18,000 and that was literally the money that we lived on for the next three months. We shared an apartment, I slept two feet from one of my co-founders for three straight months just grinding and trying to build that product and bring it to life. And so $18K, and we ended up returning about two and a half million dollars on that investment. 

Rob Walling: Wow, that’s a nice little lift for them. And so you had this idea of a shared email inbox that was invisible to customers, right? No portals or ticket numbers. And in fact, I want to take just a moment and read your H1 today: “Businesses that run on relationships run support on Help Scout.” Does that still land? Tell me about the original vision. Was no one else doing this? This sounds obvious now, but I don’t know that anyone had done this, right? It was like Zendesk and a bunch of — sorry, my words. 

Nick Francis: That’s basically the case. Yeah, so I’d been working with my co-founders for six years and we had done the playbook that so many successful bootstrap companies had done at that time. We start by doing client work and building things for clients, and then on the side we start to build products. So we work on our craft and learn to build things for the web and try to get paid for it. And then on the side, we’re grinding away on software products. And so the dream was always to do that. And so we had spent six years building together and one of the products that we had built didn’t make a lot of money, but it actually got a lot of traction. It had like 200,000 active users, this little product that we built, and it was enough such that we had a customer support problem. 

Nick Francis: And so I wasted two weekends trying to set up Zendesk. I just thought it was far too complicated for the business that we were trying to run. I tried a bunch of other products. I actually ended up thinking about this space for a couple of years. For some reason I was just obsessed with this particular set of problems around doing customer support, and I just felt like, man, there’s got to be a better way to do it. And basically I just wanted to remove the system in the middle. A lot of ticketing systems or customer support systems always had this system in the middle that was assigning a ticket number and basically removing all of the humanity from that interaction. And I’m like, man, I know that the technology exists so that we don’t actually have to have all this system in the middle and remove the humanity. 

Nick Francis: We can make it so that every customer support email is like you’re getting an email from a friend. There doesn’t need to be a ticket number. There doesn’t need to be all of this cruft. And so we just decided to remove that, and also build a product that added this really light collaborative layer on top of email. That was the goal: email is really not built for teams. I think that you could add this collaborative layer on top and it would be an extraordinary tool, not just for customer support, but for all these other really interesting use cases. And so we did design and architect it for use cases well beyond customer support, which ended up being a very good move for the business. 

Rob Walling: People often wonder how a tool like this that becomes an eight-figure ARR SaaS company, how it starts, what those early days are like. And I’m wondering if you remember, do you remember how you got your first 50 customers? Were you doing content marketing, outreach? 

Nick Francis: The way I describe our time at Techstars is that we knew how to build what we believed to be a great product, but we had no idea how to build a software business. And so Techstars was really that process of three months grinding away learning how to build a software business. And so what that meant for us in terms of initial traction is, one, we were obviously using the heck out of our own product. But Techstars actually operated in a space in Cambridge, Massachusetts called Dogpatch Labs. And at the time, this was a big incubator space, so there were literally 30 ideal customers in the same space — all these people trying to build companies. And so I would literally just walk around with my laptop. I would be that guy that sort of tapped you on the shoulder and was like, hey, what are you guys doing for customer support? 

Nick Francis: Would you be interested in answering a few questions? Can I show you the product that we’re building? Would you be interested in trying it? If so, I’m right over there if you have any questions. And that was sort of how we got started. So our first customers were not only some of our colleagues in Techstars, but they were people that were in this broader office space that we were in. And I got to learn a lot from those folks. And something else that we did was every time somebody signed up, we would require a phone number and I would call every single signup just to understand — I wasn’t there to sell. I was actually just there to be like, why did you sign up? What problem were you trying to solve? Just some really high-level questions that really helped us understand our ICP early and often. And so that was really the early phase: just trying to be extremely close to the customer and the problems that they were trying to solve so that we could start to finish their sentences and design a product that met those needs. 

Rob Walling: And you had two other co-founders, so there are three of you total. What was your role? 

Nick Francis: Yeah, so Denny is an extraordinary engineer and Jared is an extraordinary designer. And so I sat between them. I guess you would call me the product person. I’m passionate about the brand and the go-to-market as well. I grew up coding and so I was coding the front end and building a lot of the components, but Jared was really responsible for a lot of the design and user experience. Jared didn’t know how to code at the time. Today he’s a way better coder than me. So that’s kind of how it all fit together. 

Rob Walling: And just to cut to the end of where Help Scout is today, you stepped down as CEO about eight months ago, I guess late 2025, and became chairman of the board. And can you talk about where the business is at in terms of revenue, or where it was at that time? 

Nick Francis: Yeah, today it’s well north of $35 million in revenue, so we’re really proud of what we achieved over the course of those 15 years. Every day was always harder than the last, but I enjoyed every minute of it, absolutely building that business. And I still think there’s a lot of really great things to come for the company. 

Rob Walling: And I want to touch on that a little later. I want to get into raising funding, which maybe is the next topic as well. As a mostly bootstrapper at heart, which I think we have a quote on: you announced on Medium in March of 2015, “I’m a bootstrapper at heart,” but you raised a $12 million Series A from Foundry Group. That is a very large amount of money. What was your thought process there? What made you decide to raise? 

Nick Francis: I actually want your take on this too, because we were building horizontal SaaS at the exact same time you were building Drip. We were building Help Scout, and I remember having a conversation with you at MicroConf where you were just like, man, it was such a grind trying to reach that next level of growth. I just never felt like I could fully capture the opportunity. And I felt exactly the same way. The company was growing like gangbusters. We were profitable. It took us about 18 months before we were profitable, but then we sort of maintained a profitable business where we were just hiring as fast as we could, deploying all the profits as fast as we could to try to keep growing the business. And about four years in, I had a friend that had taken money from Foundry Group, based here in Boulder. 

Nick Francis: Brad Feld is an absolute legend. Their firm is absolutely legendary in so many ways, and I just felt a sort of alignment with the way that they operated. They were not hands-on, they were pure capital, gave founders a lot of freedom and respect. And so Foundry Group just felt like, if we were going to go chase a much bigger opportunity, which is effectively what we were signing onto, it was like, hey man, is there potential for this to be a hundred-million-dollar business? If we think there is, then we owe it to the business. Even if that’s not my default operating model or default operating mode, raising money — if I feel like the business’s potential is to be a hundred-million-dollar-plus business, then I have to lean in even if it feels uncomfortable. So that was the calculus: look, we were in a good place as a company, but we were really able to take the company to another level. I think between 2015 and 2018, we 3x’d the company. We were certainly able to put that capital to good use. 

Rob Walling: The bootstrapping purists who are like, never raise money and all funding is evil and all venture capitalists are evil. I’ve never liked that tone. I think that the extreme on either side, I should always bootstrap, I should always raise money, I think both of those are unhelpful opinions because they don’t give the nuance of what money can do for you, as long as you know what strings are attached, what game you’re playing. Now, if you raise $12 million bucks, you’re not playing the same game that you were six months earlier. The exit valuation, all of that. You went on over the course of the next several years to raise total, I have $28 million is what I have listed. And at a certain point, I think it was 2021, I have a note that you had an opportunity to actually de-risk financially. To explain to folks what that means: you can sometimes take secondary out, you sell your shares as a founder, such that of a $15 million round, a portion of that goes to the co-founders. They actually just sell some of their equity. But my question for you is, you raise a lot of money, the business is doing well. Would you do it differently? If you could go back, would you still raise? Would you raise as much? 

Nick Francis: I would do it differently. That’s kind of hard for me to say because along the way, we did business with extraordinary investors. I actually have no complaints with the investors that we worked with. What I, to use your words, signed up for, because I absolutely signed up for that journey. But now that I’ve seen that side of it, now that I leaned into the discomfort and I got an understanding of what it is to run a business like that, where there’s never an amount of growth that’s enough. If you double the business, you look up, I got to double the business again. I mean, the growth expectation is — and I was really trying to do my best to lean into the tension between trying to craft something really beautiful. I’m not really motivated by the size of the revenue number. I think of success in a much broader sense, but investors don’t, right? It’s not actually their money that they’re deploying. They have a job to do. And I was trying to lean into that tension and I thought that it would bring out my best and the company’s best, and I think in many ways that it did. But for me personally, looking back now on a 15-year journey, I would’ve done it differently. I wouldn’t have raised money. 

Rob Walling: That’s crazy. So just the early hard days of bootstrapping, you would’ve just ground it out and kept doing it? 

Nick Francis: Sometimes I look around and I sort of laugh to myself. I’m like, damn, those 37 Signals people, damn, Jason and David, they were always right about this stuff. As much as I wanted to stress test and really push against their way of thinking about this, that we’ve all been inspired by over the years, I just think that they had it right. And I still think that. 

Rob Walling: We’ll get back to the conversation in a minute. If you’re running a B2B SaaS company doing between two and $25 million of ARR, you’ve probably had some buyers show up in your inbox, maybe a private equity firm, maybe a competitor, maybe some random aggregator. And the questions are always the same. Is this a real offer? Is it any good? Should I even respond? Here’s the thing, the buyers who cold email you are not the ones who are going to pay top dollar. They’re hoping you don’t know any better. Discretion Capital exists to fix that. In Einar Vollset runs Discretion Capital, he’s also my co-founder at TinySeed. They have a proven system for finding the right buyers and maximizing exits. If you want to know what your company is actually worth, not just what someone is willing to lowball you, head to discretioncapital.com and book a call. And something that you mentioned right before we hit record that I had forgotten about, I said at Drip we were Help Scout users. I loved the tool, and you reminded me that Help Scout was a Drip customer, one of our early biggest customers. 

Nick Francis: Absolutely. 

Rob Walling: You backed up our queue and maybe took us down once or twice with a big send. It’s impressive. 

Nick Francis: Yes, dude, I was so psyched about Drip because it’s a very similar thing: when you’re in this massive space with a lot of products that are way too complicated and they’re not really focused on the user experience, that’s what you’re focused on. With Drip, you actually built a wonderful product. It was really good to use, reliable, and I just instantly connected with Drip myself. I was the one that signed up and started to use it, and I just felt like what Help Scout is in customer support, Drip was in email marketing. 

Rob Walling: That’s a big compliment. 

Nick Francis: And I just felt like we were kindred spirits in that way, and I took a lot of joy in breaking your tool so you guys could make it better. 

Rob Walling: Totally. You broke it all the time with your big list. And shout out to Derrick Reimer, my co-founder with Drip, because he was far ahead of me in terms of UX and design. And the reason, if it felt very elegant to you and it met your standards, which are very high, I’m sure, of design taste, that was Derrick. He and I ran product together and decided what to build, but his fingerprints were all over the elegance of that. And he runs SavvyCal these days, which is — 

Nick Francis: I’m a happy customer of SavvyCal. 

Rob Walling: Okay, and isn’t the UX really elegant? It’s that whole — 

Nick Francis: It’s outstanding. It’s one of those things where, yeah, there’s a hundred tools. I don’t care. That’s the best one. 

Rob Walling: Ah, that’s great. What a testimonial. I want to ask you about this public benefit corporation, and I have the note: in 2018, Help Scout converted to a public benefit corporation and eventually earned a B Corp certification. I have never heard of a SaaS company doing that, especially not a funded SaaS company. What is the story there? Maybe you can start by explaining, a lot of people won’t know what those terms mean, define them, and then talk about why you made that decision. 

Nick Francis: So Eric Ries just came out with a book called Incorruptible that’s about all of these kinds of concepts, and he says it so much better than I do. But as a founder, you often don’t realize what you’re signing up for when you start a corporation in America. You don’t really realize that corporations are legally designed to serve only the shareholder. There are no other stakeholders. So when we talk about a broad definition of success that I have, legally corporations don’t have a broad definition of success. Shareholder value is the only thing that matters, and that’s always felt incongruent with my personal values and the values that we espouse as a company. And so, believe it or not, I got to give our friends at Foundry Group a lot of credit here. Our investors sent every CEO a book on what a public benefit corporation was. 

Nick Francis: It was the B Corp handbook, back in the day before public benefit corps were a thing, and I read it, I loved it. And basically the concept behind a public benefit corporation today: instead of a C Corp, it’s a PBC, and you can do it in Delaware just like you would do a C Corp. And effectively it just says, hey, instead of there being one stakeholder, the shareholder that you serve and that you exist to make happy, there’s a variety of stakeholders. There’s customers, there’s employees, there’s the broader community at large, and there’s also shareholders. I just think that that better aligns with who we are. We don’t just care about shareholder value, we care about other aspects of the business as well. And we think that in the long term, those interests and those stakeholders serve shareholders. 

Nick Francis: So we decided, and we were very early on remote work, so we founded the company fully remote in 2011 when people thought we were crazy. I’m used to doing things that sort of go against the grain. And being a public benefit corporation specifically as a software company was just another way for us to differentiate and make a statement as a brand about who we wanted to be, to our customers, to our employees, to the broader community. And so we went through that process and I got to give the folks at Foundry credit because they were very cool with it. Our investors were very cool with it. It helped us kind of sign the paperwork and ensure that we could get B Corp certified, which is the next level. So think of a B Corp certification similar to if you have a food company and you want to get fair trade or organic certified. This is that for a business. And so we went through that B Corp certification as well, which was really interesting. Some of the first ones were Patagonia and Ben and Jerry’s and all these companies that we’ve admired for a really long time. And I’m like, well, why aren’t there any software companies here? I think I want to be one of the first. 

Rob Walling: That’s a cool story and it really does feel aligned with your values and who you are. I want to ask you about AI. As AI came out, ChatGPT and everyone’s talking about how you have to integrate it into your product, and then how it must be this, and then it’s going to kill SaaS and all this stuff. When you were inside Help Scout in 2022, 2023, and 2024, as you’re thinking, everyone’s asking you, what’s your AI strategy? Investors, I’m sure, customers, I’m sure, and internally, your team members. What was your approach? How did you use AI? There are a couple obvious ones, right? I want AI to scan through stuff and create a first draft of the ticket response. Did you do that? Did you do more than that? Just talk me through how that played out. 

Nick Francis: Yeah. So before LLMs were a thing, there were several AI hype cycles in customer support. Customer support is traditionally seen as a cost center. And for that reason, there’s a lot of people that have tried to build tools that make it so that you don’t have to have as many humans involved because humans are the biggest expense in that cost center. And so, look, back in 2017, there were AI chatbots, right? But they were built on these machine learning models where we actually did the math. We investigated these tools, we tried to build some of these chatbots, and we realized they were really poor customer experience. And ultimately less than 5% of our customers had enough data for a machine learning model to even be useful to them. And so it wasn’t the right time for us. So when LLMs came along, I was psyched. 

Nick Francis: I mean, Rob, you and I are builders, right? We love to build software. And for that reason, I was psyched about these new tools because I’ve never had so much fun building in my life. I had no idea what was to come. But basically when we first learned about ChatGPT, which I think was in late 2022, we did a hackathon, much like a lot of other companies, just to explore these tools and see what was possible. And so right away we built a tool to summarize conversations. We built a tool to draft responses, and then we ended up making an acquisition along those lines. But we built six things over the course of two weeks. We had a little working group, and I was in the details working on these products myself as well. And we had a lot of fun building with those tools. 

Nick Francis: And I think that that was sort of the beginning of what became our AI roadmap. But I think of AI as a tool. At the end of the day, we design our products for the optimal customer experience. Not our customer, their customer. We optimize for the user at the end of it: what is the best possible experience we can create for them? And so that’s actually a different perspective. I don’t think any of our competitors actually think that way. We are optimizing for your customer’s experience at the end of the day. And so that perspective allowed us to do a lot of building and have a lot of fun with it, but the outputs look different, and I still think that they do today. So we’re always going to make a human more available in our tools than pretty much any of our competitors. 

Nick Francis: And we take a lot of pride in that because there’s a lot of companies out there, especially small businesses, which is what I’m so passionate about, that look, they win on better customer experience. Maybe they can’t win on features, maybe they can’t win on the most funding or whatever it might be, but they can win on a better customer experience. And that makes your brand what it is. That’s your most effective marketing is a great customer experience. And so if we can help our customers deliver that, then I think it’s worth more than the price of admission. 

Rob Walling: I have a note about a pricing overhaul in November of 2024, you guys moving from seat to per contact. That feels like a really bold, big move after 13 years with thousands of customers, and then you’re like, we’re going to do it by contact. Talk me through: were you the first to think about this, had other competitors done it, why you made that switch, and if it worked or not? 

Nick Francis: We were always thinking about pricing and packaging from, I’d say, 2017 on. We had a team, and I was on that team, of people that were always thinking about pricing and packaging, always optimizing and testing and moving the ball forward with regard to that aspect of our strategy. And so very early on, as I mentioned, we were building a lot with AI. We realized, wow, we’re going to be able to create a lot of value for our customers that doesn’t tie back to a seat. And generally you could sort of see: hey, if you fast-forward this ten years, my sense is that a lot of businesses that are per seat today are not really going to make a lot of sense per seat tomorrow. I felt like if you’ve read any Clayton Christensen, I felt like we were about to live an innovator’s dilemma where the incumbents were going to be at a strategic disadvantage. 

Nick Francis: They weren’t going to adopt this new technology fast enough. And there was going to be an opportunity for a little guy. Help Scout still like, yes, you could say tens of millions in revenue, but we’re actually still the little guy. There’s an opportunity for us to outmaneuver the competition. And so I felt like it was, yes, a massive swing, but I felt like customer support is moving away from seat-based pricing. It’s just not the correct value metric anymore. So we did a bunch of research, but at the time it was just like, there’s no research that’s going to tell you to do something this crazy. So we did the research, we saw all the data points, we talked to all the people, and at the end of the day, I made a call to test it and just say, look, we have to test a fully usage-based pricing model. 

Nick Francis: And for us, that meant pricing per contact. So if somebody reached out five times over the course of a month, we just charge for that one contact. And so one thing that we noticed in our pricing research is that people have various definitions of what an AI resolution is. So the way Intercom, for instance, defines an AI resolution is not the way 98% of the market actually defines an AI resolution. And so it’s like, what if you just didn’t even have to worry about an AI resolution? Because I think that’s a funky metric. The person could literally reach out via email the next day, and that’s not resolved. So we felt like a contact was a really clean way to capture value, but not have to worry about all the semantics and details. It wasn’t going to be that complicated. And contacts are a very familiar metric, at least in other industries, the one Drip was in. 

Nick Francis: And so we felt like it was generally acceptable. People would understand it. And so we tested and we iterated on three different variations of pricing and packaging over the course of 12 months. Long story short, it wasn’t there. Even when this new usage-based business model would benefit a customer, even when they would pay less, they just didn’t want to do it. So there’s a perception that people have more control over their costs when they pay per seat, and yeah, technically they do. The problem is that our pricing per contact was actually 30% less variable than per seat. It was actually more consistent, more predictable, but that’s not the way that people saw it. They saw the status quo and the way that people bought this software, and they wanted to do it that way. So we ended up landing on a hybrid, which is kind of where the whole market has now landed, which is seats plus you pay for AI resolutions, which is what we wanted to avoid. But I think that’s what the market clearly told us they wanted to do. So in summary, I would say we were too early. I still think that somebody’s going to come along with a highly disruptive pricing model because look, the secret of per-seat SaaS particularly is that 20% of those seats shouldn’t be paying for anything because they’re not even using the tool. And so I wanted to go directly at that and try to win it against our competitors. And if there’s just not willingness to accept that business model, then I have to live to fight another day. 

Rob Walling: What a bold move. I mean, these are the types of big swings that you take that have asymmetric upside, right? If they work, they’re a huge business-changing event. And if they don’t, it’s probably pretty painful along the way. Was it brutal? Was it tough? 

Nick Francis: Absolutely. At the end of the day, I feel like I just lost confidence from some of our stakeholders, and that ended up being like, hey, I’m not the guy to lead the company anymore. I mean, that’s really kind of what led to it. And I have no regrets. I’m an entrepreneur. I was built to make these kinds of swings. And in terms of leaning into that tension, we raised $28 million. As you mentioned, I’m trying to build a hundred-million-dollar-plus company here when all of my competitors have raised ten times the amount. So I’ve got to do something different and really lean into that tension and that discomfort of the pressure of growth and say, well, hey, if I’ve got to grow, I’m going to swing for the fences. That’s what this model is all about. And so had we been bootstrapped at the time, maybe a $20 million business, we wouldn’t have made that move. But when you accept that kind of capital, you’re swinging for the fences. And I felt like we had to at least try it. And so for eight, nine months we tried it and we ended up pivoting away from it. But I’m an entrepreneur. That’s what I’m built to do. 

Rob Walling: And then you already mentioned it: in late 2025, you stepped down as CEO, you became chairman of the board. It sounds like it was time. I was going to say, why did you decide to leave that role? 

Nick Francis: Upon reflection, I was having a really tough time leaning into that tension and trying to thread the needle between being a bootstrapper at heart, really being committed to building products in a certain way and operating businesses in a certain way, and delivering on an outcome that would make my stakeholders very happy. So trying to thread that needle for 15 years, really like 11 years funded, was incredibly challenging for me and draining. And so I sort of picked my head up and I said, what if I’m just not the guy anymore? What if the journey from $40 million to a hundred million, it’s just somebody else. And when I asked myself that question, I’ll be honest with you, Rob, a weight lifted, and I was like, well, then that would enable me to actually go do what feels true to me as an entrepreneur. Just no compromise, no tensions, what feels absolutely true to my core and my values. I still have another rep in me. I still have more time to build one more thing. This is the opportunity to go build that thing and not have any of those tensions. I’ve experienced it. I’ve seen that side of it. I’m not doing that again. So I really felt like it was just the right time. 

Rob Walling: I was going to ask, you got another startup in you. Have you started working on it? Is it in stealth mode still? 

Nick Francis: Yeah, I am working on something. The weird thing about what I’m working on is that it’s not necessarily something I can just put my head down and build. So I can’t talk about it yet, not because I’m holding any secrets. I haven’t figured it out, but I have been working really hard. I’ve got all the energy in the world. I feel like as an entrepreneur, I still have unfinished business. I can promise you this, Rob: it’s going to be bootstrapped. No institutional capital. 

Rob Walling: What a great end to that story, man. I’m excited to see what you build next. And if folks want to keep up with you on the internet, your H1 is “I help founders become exceptional CEOs.” So you’re now helping coach entrepreneurs and founders. 

Nick Francis: I will say one of the absolute joys of stepping away from the company and having an opportunity to just kind of pick my head up has been like, oh wait. I have all this experience and I have all these things that I’ve learned over the years. It’s time for me to put on the other hat. So many people have given me their wisdom and advice over the years. And so I’ve started to work with some founders. I’ve started to work with other CEOs. I’ve built a CEO group that I’m really excited about. So I spend maybe a quarter of my time just trying to help other founders, and I just absolutely love that work. But I’m not ready to do it full time. I still want to be an entrepreneur too. 

Rob Walling: And if folks want to reach out to you, they can go to nick.francis, so it’s Nick Francis but with a dot before the “is.” 

Nick Francis: Yeah, that’s the Icelandic domain, I think. Is that what it is? 

Rob Walling: Icelandic? Yeah. And they can read your writings. You have a get-in-touch link and more about what you’re up to. Thanks so much for coming on the show, man. It’s been really great having you. 

Nick Francis: Oh, it’s my pleasure, buddy. Good to see you. 

Rob Walling: Thanks again to Nick for joining me on the show this week. And Nick is doing a great job giving back to entrepreneurs. He’s ahead of so many folks and has so many learnings from his journey, and I just really appreciate his earnest sharing and his willingness to give back to the MicroConf and TinySeed ecosystem. Thank you for listening this week and every week. This is Rob Walling signing off from episode 839.  

Rob Walling (00:00): For example, if you’re 5x underpriced what you could be charging, you will build a $250,000 business at best when it should be a $1.25 million business. And frankly, if you’re that far underpriced, you’re probably not going to have the money to market and sell it in the way that it needs to be to be a successful business. Underpricing, bad value metrics, pricing that’s overly complicated: there’s a bunch of different ways to do it wrong and there’s only a few ways to do it right. It’s another episode of Startups for the Rest of Us. I’m your host, Rob Walling. And in this episode, I talk about six things that I took away from our recent TinySeed batch kickoff. We did it just a couple weeks ago in New York City, and in these small group settings, I always notice struggles that many founders are experiencing and other things that I think would be helpful for you as a bootstrapped or mostly bootstrapped founder. 

Rob Walling (01:16): But before I dive into those, I want to let you know about the SaaS Institute. It is our premium coaching for seven and eight figure SaaS founders. We have B2B founders, we have B2C, and we are growing. We’ve recently added two new coaches, Julian Marzuk and Ryan Angley. SaaS Institute is for founders who want community, who want coaching one-on-one and in a mastermind setting, and want advice from mentors like myself. If you go to tinyseed.com/mentors, you can see the stable of mentors that you can tap into as a SaaS Institute founder. We also have a couple of in-person events each year that are very small, like 10 to 15 people. And the founders in SaaS Institute are executing at a very high level. It’s an amazing group to be part of. So if you’re a seven or eight figure founder and you’ve been looking for community, mentorship, advice, coaching, masterminding, head to saasinstitute.com. 

Rob Walling (02:19): And with that, I want to dive into six key takeaways that I pulled from our TinySeed kickoff. A couple weeks ago, I sat in a beautiful conference room in an amazing hotel that producer Sonya picked for us in the Chelsea district of Manhattan. Einar Vollset and myself and Alex Craig and producer Sonya hung out with about 15 TinySeed founders, brand new. It’s our batch 19 or 20 probably. It brings our total number of companies funded to 217 and my total up to 241 investments in SaaS companies. We spent a pretty incredible two and a half days together. We had some dinners, we had some walks around Manhattan. We had some activities, you could call them team building, but it’s just fun to meet the new founders and to build that camaraderie within the batch. 

Rob Walling (03:21): We found that these kickoffs and these in-person events are so crucial to forming the cohesion that will have the batch really help one another. Because TinySeed is such an amazing network now of mentors, investors, and founders, having a smaller group that you can belong to, like your batch, is super important. It’s like your high school class or your college class. When you enter the room the first night it’s kind of awkward and you don’t know any of the founders around the table. And by the time we all leave two and a half days later, all of us feel like we know each other and like we’ve shared so much experience and I know their businesses so much better than the day we arrived. During the work sessions, which we have a solid one each day, we did some masterminding. 

Rob Walling (04:13): We went around the room to all the founders and said, “What tactic or strategy are you using with sales and marketing that is really working for you now?” And I love it. It’s one of my favorite parts of the event because I hear things that you don’t see out in the wild, you don’t see people talking about on X/Twitter. I don’t have them in my book. People are being super creative and they’re coming up with new and innovative ideas to find new leads and close new deals. And then we have our famous pricing reviews, or pricing teardowns, where Craig Hewitt, Einar Vollset, and myself go through every founder’s pricing with a fine-tooth comb. We spend about 20 minutes per company, which doesn’t sound like a lot, but you can really dig in. We are pattern matching based on hundreds and hundreds of examples. 

Rob Walling (04:57): We’ve seen bad pricing from folks that we haven’t funded. We’ve seen good pricing from folks we funded, but most of the pricing we see has some issues. About 80% of any batch has an issue with their pricing. Sometimes they need to raise it. Sometimes their pricing is just too complicated and they need to dramatically simplify it. Other times their value metric is off: they’re not measuring the right thing. And through conversations with the founders in the room, everybody’s in the room at once and we just go around the room 20 minutes at a time, really informative. Folks can start seeing our rules of thumb, the ways that we think about and evaluate pricing. And we dig into it this early because if your pricing’s off, it’s the biggest lever in SaaS. 

Rob Walling (05:44): And if your pricing’s off, it can be very hard, not impossible, to build a great seven or eight figure business. So that was the general course of events over those few days. Now I want to dive into my six takeaways. The first one is the importance of asking why. It’s the importance of finding a root cause, and you don’t even need to do the five whys. You may have heard of the five whys. Oftentimes it’s just one why. I see folks on X/Twitter saying, “I’ve plateaued. What should I do?” And my question is always, “Why are you plateaued?” There’s a reason I wrote an entire MicroConf talk delineating the seven and only seven ways that a SaaS app can plateau, so that you at least have a menu to choose from. Because once you know that, “Oh, it’s not enough new leads. I’ve tapped out my entire market. I’ve lost product-market fit,” there are all these different reasons. But once you figure that out, then you can at least come up with a plan. 

Rob Walling (06:37): Or if you’re struggling with churn, which a couple of the new TinySeed companies are, my first question is: why? Why are they churning? How bad is churn? Who is churning? Is it a certain ICP, or non-ICP, that’s churning, and why? You have to get that information in order to begin to troubleshoot it. There was one founder struggling with activation due to a demanding onboarding process. A lot needs to get done for their customers to get value from the software. And so the first question I asked that we dug into is: why is the process what it is? Are there two or three components? Which part are they falling off on? Are all of them absolutely necessary? Can any of them be automated with AI? Can one of them be handled by a customer success person that you hire? 

Rob Walling (07:23): Once we got into the nitty-gritty of what was actually going on and why people aren’t finishing the onboarding process, that really helped us as a group, in a mastermind setting, think it through. And this isn’t hard or complicated. There’s not a huge framework around this. On almost every advising or strategy call that I do with a founder, I usually wind up asking a lot of “why is that happening?” questions. It’s gotten to the point where most founders will say, “I’m sure you’re going to ask me why.” And I’m like, “I am.” Because without that, we’re just guessing. I’m struggling with churn or I’m plateaued, what should I do? I can make some things up, but that’s not helpful until you know why. 

Rob Walling (08:09): Founders who succeed are the ones that do ask why. They think about it logically, they think about what’s going on, and then I can help you brainstorm or pattern match on what I think will have the most success. But I can’t do that unless we know why. Takeaway number two is that new customers and new revenue fixes everything, unless you have high churn or your pricing is bad. High churn is the death of SaaS. You can’t outrun it. The thing I want to call out is that pricing is the biggest lever in SaaS. And if it’s messed up, for example, if you’re 5x underpriced what you could be charging, you will build a $250,000 business at best when it should be a $1.25 million business. You’ll build a $400,000 business when it should be a two million ARR business. And frankly, if you’re that far underpriced, you’re probably not going to have the money to market and sell it the way it needs to be to be a successful business. 

Rob Walling (09:57): Underpricing, bad value metrics, pricing that’s overly complicated: there’s a bunch of different ways to do it wrong and only a few ways to do it right. I’ve heard some folks giving founders advice and saying, “Well, there are no right answers.” Would that imply that any answer is equally good? Because that’s not true. There may not be one correct way to price your SaaS, but if there are a thousand different ways to do it, there are probably two or three that are really, really strong. Then another six or seven that are so-so, and then the rest are probably garbage. And there’s a reason that we see so many founders not succeeding: they are underpricing or mispricing their product. New customers and new revenue can fix everything, unless your pricing is screwed up. 

Rob Walling (10:59): Takeaway number three is that pricing is the biggest lever in SaaS and I think positioning is number two. I’ve been saying “pricing is the biggest lever in SaaS” since the first TinySeed batch in 2019. I saw across a swath of companies, I think we had 10 in that batch, that the pricing advice we were giving them and folks either increasing their prices or going upmarket or changing their value metric, whatever it is that they corrected, seriously changed their business. And that has just played out over and over as we’ve funded more and more companies. And I’ve always wondered, what’s the second biggest lever? And I think it’s positioning. This is the first time I’m saying this. I’m trying this on for size. 

Rob Walling (11:48): The difference between succeeding with Drip, which started as email marketing and became “lightweight marketing automation that doesn’t suck,” the difference between success and failure was finding our positioning. We positioned ourselves against the simpler email service providers that are perfectly competent and good tools: MailChimp, great tool. AWeber, others that at the time didn’t have any type of automations. And then we positioned ourselves against the bigger incumbents as much less expensive, less complex, with less onerous sales processes compared to Infusionsoft (now Keap), Marketo, Pardot, Silverpop. Once we leaned into that positioning and built the feature set to defend it, we could enter a market with a bunch of hated competitors. Our pricing was the biggest lever and our positioning was the other reason we succeeded. 

Rob Walling (12:47): When I think of positioning as a bootstrapped founder, it’s about carving out a corner of the market: why are you different? If you just build mostly a clone of an existing successful tool with a brand name, you’re just not going to win. Could you just be cheaper? Well, if you’re half the price or a fifth of the price of a big hated incumbent and you can still make really good money at that price, that could be your positioning. But I don’t like being the low price leader. The lower your prices, the higher your churn, the higher your support burden. 

Rob Walling (13:40): There are other ways to position. “Lightweight marketing automation that doesn’t suck” implies it’s much lighter weight, probably pretty easy to use, and doesn’t suck. That reinforces the idea. You can see this with any successful product if you go read their H1. The H1 on SignWell, founded by Ruben Gamez, is “eSignature solutions built for simplicity.” The H1 for SavvyCal from Derrick Reimer is “the fresh way to find a time to meet.” The H1 of Senior Place, a TinySeed company, is “HIPAA compliant placement software built for professionals.” Think about every word in those H1s. These are all successful companies by any measure. Those H1s position the product for professionals, for simplicity, for being a fresh way to do something. 

Rob Walling (14:49): If you want to learn more about positioning, you should watch the MicroConf talk by Anthony Pierri on SaaS founder positioning. I actually interviewed Anthony on this very podcast in episode 72: “Highly Effective Framework for SaaS Positioning.” The talk on YouTube is better because there are visuals. If you want to dig into positioning, that’s exactly where I would start. 

Rob Walling (15:39): What if you could go from an idea to your first real user in 30 days? Not a prototype, not a promise, but an actual working app. Today’s sponsor Designli will put that in writing. Here’s their CEO, Keith Shields. 

Keith Shields (15:52): Thanks, Rob. We’re hearing from a lot of founders right now who are avoiding parts of their codebase because something might break. And honestly, that’s the sign that your product isn’t ready to scale yet. AI development leaves behind hidden security issues, fragile architecture, and features way more tangled than you’d expect. That’s not a knock on AI, it’s just reality. So we built the engineering intensive. In just two weeks, our senior engineers do a deep audit of your code, stress test your infrastructure, uncover vulnerabilities, and hand you a prioritized roadmap to get scale-ready. Get full clarity on your product’s health with a money-back guarantee. So if you want to keep your AI tooling but add professional oversight from senior software experts, book your engineering intensive at designli.co/for-the-rest-of-us. That’s D-E-S-I-G-N-L-I.co/for-the-rest-of-us. 

Rob Walling (16:32): Takeaway number four is a quick pricing test. One of the quickest ways to test whether your lowest plan is actually doing you any benefit: usually your lowest price plan, if you have three tiers plus “call us,” has the highest churn. I’ve seen a TinySeed company that had a $19 plan with 11% churn, and then a $99 and up plan with net negative churn, around negative 4%. Those are just two entirely different businesses. One quick way to test whether that bottom-end pricing plan is doing you good or harm is to just hide it. 

Rob Walling (17:26): Just hide a div on your pricing page and watch your numbers. This works for lower-touch signups, not sales-led or high-touch funnels. Do you lose a ton of those lower-end customers, or do they start migrating up to your middle plan? Then dig into your numbers: have people who signed up for your lowest plan in the past upgraded to your middle and up plans? If there is an expansion path for them, then that lowest plan, even with high churn and likely more support, might just be worth it. But if it’s causing headaches, high churn, more support, and almost no one upgrades from it, it’s probably time to hide it for a test and do a poor person’s split test: hide it and see what happens in the coming weeks. 

Rob Walling (18:23): My fifth takeaway is that AI SEO is a thing, and so far it feels quite a bit like non-AI SEO, with maybe slightly more emphasis on Reddit. TinySeed companies, as well as TinySeed itself, MicroConf, this podcast, and Rob Walling are all getting referrals and traffic from LLMs: ChatGPT, Claude, and others. Some folks are paying for ChatGPT ads. It’s like the Wild West there. There are TinySeed founders paying for ads, there are folks creating content to get LLM mentions, sometimes programmatically, sometimes by hand. As the world moves away from 10 blue links, AI SEO is a thing and it will continue to be. 

Rob Walling (19:32): When we think about Google SEO over the past 20 years, every six to 12 months Google releases another big algorithm update. That means Google SEO has always been a moving target. But what Google is trying to do is find the right search results for your query: the most authoritative, the one that answers your question with the minimum amount of effort. That’s essentially what LLMs are trying to do too. They’re also looking for authoritative resources, maybe in a slightly different way, but as these algorithms improve, there is a ton of overlap between traditional SEO and AI SEO. The folks I know who’ve done really well with Google organic rankings generally seem to be doing all right with the LLMs too. 

Rob Walling (20:35): It’s not across the board. I’ve seen counter examples where folks who gamed Google SEO are now losing traffic, because LLMs may care less about links and more about certain mentions, like Reddit. But if I were a startup founder today, this is where quite a bit of opportunity lies: in these Wild West, unknown territories where you can really latch onto something and kickstart a great business. 

Rob Walling (21:31): My sixth and final takeaway from the TinySeed kickoff is to be around other people who are doing what you’re doing. I think back to myself getting started as a bootstrapper, building and launching my first thing on the internet around 2002 or 2003. I didn’t know a single person talking about it, thinking about it, or doing it the way that I was. It was all about venture capital and it was hard because I didn’t know if it was possible. I had to make all my mistakes myself. Then I found Joel Spolsky and Paul Graham, not about bootstrapping, but just about startups. Then I started blogging and found Patrick McKenzie and Peldi Guilizzoni and later Jason Cohen, who I think started blogging around 2009. 

Rob Walling (22:20): One of the reasons I started this podcast and MicroConf with my co-founder Mike Taber at the time was because we wanted to be around other people who were doing what we were doing. It goes beyond being the average of the five people you hang around with. It just gets lonely and you make a lot of mistakes if you don’t look at prior art, if you aren’t in some type of small mastermind or community where people are trying things and you can all learn collectively. If you’re not doing that, you’re going to make a ton of mistakes that you don’t need to, you’re going to burn out, and you’re going to be super lonely. And to see the energy created almost out of nothing by getting those founders in the room a couple weeks ago was just electrifying. 

Rob Walling (23:16): I think a little bit of friendly competition goes a long way. John Lennon and Paul McCartney talked a lot about how one would write a really good song and then the other would say, “Well, now I’ve got to go write a really good song.” That friendly competition drove the Beatles to be the best band of all time. Being around other founders who are doing what you’re doing and having that friendly competition, thinking, “Well, they’re making it work, I’m motivated now to make it work too. It is possible to do this.” As you look around and see other bootstrapped founders doing seven and eight figures, and there are a lot of them. I haven’t mentioned this on the show recently, but of all the TinySeed companies we’ve backed, something like 22% are now doing seven or eight figures of ARR. 

Rob Walling (24:02): It’s a significant number of companies. And being around that kind of momentum and that kind of community is invaluable. I wished that I’d had that opportunity when I was getting started 20-something years ago. And that is one of the reasons TinySeed is structured the way it is, with batches. It would be so much easier if we were just a venture fund investing here and there: less travel, less time, less effort. It would be a simpler business. But Einar and I, when we started TinySeed, we didn’t believe in that. We knew that community was a huge part of it. We want to provide mentorship, advice, guidance, and funding, but without community, you’re losing a huge portion of the benefit of this type of program. 

Rob Walling (25:00): Those are my six takeaways from the TinySeed kickoff here in May of 2026. Thanks for joining me today. I hope you enjoyed those takeaways. Thanks for listening this week and every week. This is Rob Walling signing off from episode 838. 

Rob Walling (00:00): Welcome back to another episode of Startups for the Rest of Us. I’m Rob Walling and in this episode I have fan favorite Ruben Gamez back on the show and we answer some listener questions. In this episode, I actually earmarked five questions that we were going to run through and we only made it through two because we went so deep on these. First question was about optimizing a trial funnel, when to add friction, when that works, when it doesn’t, because Ruben runs two different SaaS companies, Bidsketch and SignWell, and different levels of friction work differently for those two companies. So he has a lot to say on the topic. And then we dive into a question about the core four SaaS skills: dev, sales, marketing, and product. And someone asked me, how do you learn product? So we spend, I don’t even remember, 10, 15 minutes talking through how we learned how to make product decisions. 

Rob Walling (00:54): I think it turned out to be a great episode. Before we dive in, I want to let you know about the SaaS Institute Cancun Retreat we’re having in early December. It’s going to be a two-and-a-half day high-level knowledge sharing event exclusively for seven and eight figure SaaS founders. I know how hard it is for founders at your level to find a group that is at or ahead of them, and this event will be that. You’re the average of the people you spend time with and the SaaS Institute Cancun Retreat is going to be filled with ambitious people who are executing. It’s a small group retreat focused on founders sharing real behind-the-scenes knowledge on what’s working, building relationships, and taking a step away from the day-to-day to figure out the next big-picture move. 

Rob Walling (01:41): It’s going to be at one of the top resorts in Cancun, close to the airport, December 5th through the 7th. And as I mentioned, while this event will be focused on SaaS Institute founders, there is a chance we might open a limited number of tickets to other qualified seven figure founders. You can email tracy@tinyseed.com if you want to get on that waitlist. It’s going to be a great event. I’m really looking forward to it. And finally, if your company serves SaaS founders, we have a few sponsorship opportunities open right now, including this podcast, at MicroConf Iceland, and in our MicroConf newsletter. It’s a great way to get your business in front of thousands of SaaS founders who are actively building and growing their companies. We’re definitely selective about who we work with. We actually turn quite a few sponsors away because we want it to be a strong fit for our audience. 

Rob Walling (02:28): And if you’re interested, reach out to producer Ron, who’s heading up all our partnerships, at sponsors@tinyseed.com. That’s sponsors@tinyseed.com and it’ll go directly to producer Ron. And with that, let’s dive into my conversation with Ruben. Ruben Gamez, back by popular demand. Thanks for coming on the show again, man. 

Ruben Gamez (02:59): Hey, thanks for the invite. 

Rob Walling (03:01): I always love recording with you. It’s fun and informative. So we are going to dive into some listener questions today. The first question, I love it when people do this. Ryan emails in and says specifically, “I have a question for the next time you have Ruben on the show.” And it’s like, anyone, if you’re listening to this, please do that for any guest. You know Derrick Reimer’s coming back. I can get Jordan Gal coming back. I can get Craig Hewitt. I can get Ruben. Anybody who’s been on, if you want questions for Laura Roeder, name someone by name and I will get them on. It’s a great excuse and a reminder because producer Ron told me you haven’t been on for, I think it’s been a year. I think it was June of last year and I was like, “Wait, that can’t be right.” And then I looked and it’s right. 

Rob Walling (03:45): It just goes quick, right? So it’s a good excuse to have you back on the show. And so Ryan wrote in, or actually he sent a voicemail and we’re going to play that right now. 

Ryan (04:00): Hi Rob. I was listening to the latest episode of the Offsite podcast with Jordan Gal and Ruben Gamez and towards the end of the podcast they were talking about friction during the trial flow. Ruben mentioned that friction works pretty well for Bidsketch’s proposal software, but SignWell, his e-signature software, needs to be frictionless. With my own project management SaaS, I have about a two-week trial, but users often need a lot more time than that. And I’ve thought about ways of trying to accommodate this, but maybe it is better for them to contact me than to do a month-long trial or a freemium product. It would be interesting to explore the idea of friction a bit further and even better if you could discuss it with Ruben next time he’s on the show. Thanks. 

Rob Walling (04:42): So Ryan mentioned Jordan Gal’s podcast, Offsite, and he did that for a while but he’s not doing it anymore. He’s now actually on a podcast called The Panel. But he did mention you’re on Offsite and asked about friction versus no friction. So do you want to give folks a little idea of what you were talking about and maybe the difference in funnel, the difference in customer type between Bidsketch and SignWell that dictates what works better? 

Ruben Gamez (05:14): I have two businesses. Bidsketch is proposal software and SignWell, where I focus now, is eSignature software. And I was comparing both of the businesses and some of the differences between them. One of the biggest differences is just this idea of friction: it tends to work better for Bidsketch and not so much for SignWell. They have some similarities and from a product perspective you would think, and even customer-wise a little bit, but they’re very different businesses. So for example, for Bidsketch, we educate upfront. We don’t draw people off into the trial immediately. We do more lead nurturing and all this. I think it helps that business because it’s not just any friction, it’s the right type of friction. If we just added a bunch of form fields to fill out that have nothing to do with anything, or can’t connect to the product, it wouldn’t work as well. 

Ruben Gamez (06:13): But there’s a lot of anxiety around selling and proposals. What do you put into a proposal? How do you price things? So that combined with the time to value being longer on that product, meaning they get into the product and they have to customize it. They have to really think about it. They have to put their offering in there, their services, the things that are specific to them. You can’t guess this, you can’t generate it with AI. And so just that combination of things, with the anxiety, with them not knowing what to do, just lends itself really well to more of an educational, slow approach where we get them a little bit more confident about what they’re doing, why they may want to write things a certain way or price a certain way. 

Ruben Gamez (07:10): And that just works. And anytime we’ve tried to do that with SignWell, even if it’s educational in that way, it’s not worked. We’ve had drop-off because you typically have drop-off when you add friction, but the idea would be that you get more conversions from the people that do come through. For SignWell it’s like consistently we get fewer paid upgrades because of the people that we drop off. I think it’s just a different business because when it comes to document signing and agreements, people are already past that stage generally. If you think about how you get an agreement, you go to a lawyer, draft it up, you kind of scan it and you’re trying to get through it. You’re not that invested, and you don’t have the same anxieties. 

Rob Walling (07:59): I read every word. 

Ruben Gamez (08:00): I’m sure you do. Like the South Park episode about terms of service. Totally. 

Rob Walling (08:08): But that’s what you’re saying. You’re kind of past that and a lot of people are in a hurry at that point, right? 

Ruben Gamez (08:13): Yeah. They’re just in a hurry. They’re trying to get through it. The time to value is very quick as well. They have their contracts a lot of times. So I think that’s what I was talking about. But there are other examples of this. I like Jordan Gal’s example where, you remember when he was getting a ton of interest and signups in CartHook? He added a crazy amount of friction upfront by having an application that people would have to submit. That helped reduce the amount of people that weren’t a good fit, but it also had the side effect of exclusivity, sort of like what they do in courses and things like that. And it worked really well for his product. There has to be a reason for it and sometimes you just don’t know. 

Ruben Gamez (08:59): You just have to try and test some things and learn about your business. It’s not always 100% one way, but most of the time for SignWell, if we just eliminate steps and reduce the friction, it’s going to be better. 

Rob Walling (09:14): I guess you’ve kind of hinted at this, but is it that the time to value is so quick between the two? 

Ruben Gamez (09:20): Yeah. I think that has a lot to do with it for SignWell, and just where they are mentally, what they’re thinking about, what they’re trying to do, how they’re trying to get through it. Those things make a difference. Though I’ll say you can’t randomly add things. There’s something I used in both businesses that worked and was a little random. I learned this from Noah Kagan way back in the day when he was doing contests. You opted in, entered your email address, and then he had a random question like, “Do you like tacos? Yes or no.” Made no sense, totally what you would not want to have on a form. You’d think why add the extra field? Not just that, but why make it a required dropdown that you have to select that’s not pre-selected? 

Ruben Gamez (10:11): And he said it just increased their conversions. So I tested this on Bidsketch first, for giving away templates, and it worked. I have no idea why. And I did the same thing on SignWell except I didn’t make it completely random. I did something like, “Would you like a trial or would you like to hear about something relevant?” And it was better. It wasn’t a huge lift, but there was something there. 

Rob Walling (10:44): And that goes to show you that testing, if you can, if you have the volume, if you make the time, it really is ideal. Because even with all of your knowledge and all of your experience, sometimes you test and it’s just some weird anomaly like, I don’t know why that works, but it does. Can you give us an example? When I think about adding or removing friction I think of SignWell’s signup flow. I could imagine you have a signup flow that’s like: enter your email, and enter it again to make sure it’s correct, now enter your password, now enter it a second time, now we’d like to know your state, and you click next and then enter a credit card, and then you get into the app and there’s some onboarding that shows you stuff. 

Rob Walling (11:38): I’ve just described a very high friction process. What is the quickest path? I think you’ve removed a lot of friction. If I was going to try to sign up for SignWell today, what does that look like? 

Ruben Gamez (11:52): The main thing we have is a Google login button and you can click a link underneath it to sign up with a password, but I want to say like 95% of our signups use the button. It’s crazy. And then that’s it. That’s a really easy signup. And then we do have some questions we added recently, and we were very careful about this because we didn’t have those before. We open you up to the upload automatically because we know that’s what most people want, but not everyone. So we ask some questions to qualify people and put them into two different buckets: like what are you trying to do, whether they’re trying to sign their own documents or collect signatures. And then to understand what they’re trying to do first, like are you trying to set up a template, to direct them to the right place. 

Ruben Gamez (12:44): So that has worked, along with some other changes. But yeah, it’s a pretty minimal process. And then there’s a higher-friction version we’re testing for people with a lot of people in their company, which goes into an onboarding call and a different experience. The bet is that that’s kind of their expectation and they’d actually prefer it. But we’ll see. 

Rob Walling (13:14): But you’re just testing that at this point. 

Ruben Gamez (13:16): Yep. 

Rob Walling (13:17): To summarize: the low-friction signup is I click sign in with Google, there’s an OAuth screen, you pick your email, and that’s it. You’re in. It is literally two clicks. You don’t enter a single piece of information. And then the questions you added come after? 

Ruben Gamez (13:37): Yeah, super fast. So this is another thing with friction. You’ll hear some people say, “Don’t let people with Gmail sign up to your product. Force them to enter their business name.” And a lot of people actually get good results from this. They’re adding friction and getting good results. You think, “Why would you get results? You’re just eliminating the people on Gmail.” But some of those people do have business emails and they enter those instead. So we tried that, making them type in and enter a business email, and we had about 30% drop-off in signups and about a 30% drop-off in paid conversions as well. It mapped super cleanly. There was no benefit whatsoever. But I think to your point, I wouldn’t overthink it with a lot of these things unless you have volume. And in some areas where we don’t have the volume, we can’t go quantitative, so you kind of have to eyeball it, feel it out, and make an assessment. 

Rob Walling (15:13): I think that’s important for people to hear because people try to split test with way too little volume. I did a talk, this must have been about 10 or 12 years ago, it was in Boston, and I was giving a talk about how we improved our onboarding with Drip and how the numbers went up. And one of the first questions was, “How did you test this along the way to confirm the results?” And I was like, “Guys, at the time we were getting 150, 200 trials a month, credit card upfront. How do I test that?” 

Rob Walling (15:56): There was enough gut feel. And then the numbers did go up and I was like, “Cool. I think what we did worked.” At a certain point, in some instances, unless you have volume like SignWell does, you have to go with some rules of thumb, some gut feel. And sometimes you make a little tweak and you do a poor person’s split test where you’re like, “Well, the numbers did go up and maybe I can’t directly attribute it, but my gut feel says that was the right move.” You can’t over-optimize this, right? 

Ruben Gamez (16:26): No, no. Especially the earlier you are. If you have lower numbers, you’re probably earlier, unless you’re enterprise. The earlier you are, the less that stuff matters. You’re not trying to optimize, you’re trying to get really big, obvious wins. And if it’s roughly the same, if you don’t notice a difference, who cares? Do you like it better? Does it align better with your product positioning? Great, go with that. 

Rob Walling (16:53): Go and move on. Yeah. 

Rob Walling (16:55): That’s great. And then do you have any thoughts on Ryan’s second point? He says, “I have my own project management SaaS and I have a two-week trial, but users often need a lot more time than that.” If someone needs two or more weeks to get onboarded, based on what you’ve said, it feels like having a little bit of friction, especially if it’s medium to high touch, is probably the way you would lean without additional information. 

Ruben Gamez (17:33): Yeah. It’s always tough to say. If you have the volume, I would try to look at the data and try to segment out who are these people, what makes them different? But either way, you really just want to find out why. It’s kind of like trying to address the symptom versus the core fundamental issue. You always want to work at the core issue, otherwise you’re just guessing and maybe not solving the right problem. It does feel long. For a project management system, if they’re taking longer than two weeks, the first thought would be, “What’s going on? Why are they taking so long? Is it a product thing? Is it the way that we’re onboarding them, or the expectations they have about transferring all of their projects and their whole team?” Something’s probably going on there. 

Rob Walling (18:29): Love it. Thanks for that question, Ryan. And as I mentioned, if you have questions for Ruben or any other person who comes on this podcast, feel free to send them in at startupsfortherestofus.com or click “ask a question” in the top nav. My next question, I’m not sure where it came from. I either got it on X or someone asked in person because I sent myself an email to my own Trello board. So I’m going to read the question anonymously. The question was: how does one go about learning the skill of product? Because I talk about the core four SaaS skills you likely want on your founding team: development, sales, marketing, and product. Development, sales, and marketing, if you want to learn them, there’s curriculum out there, there are people, you can dive in. 

Rob Walling (19:21): But I think there’s a lot more intuition and gut feel in product. I think it’s harder to learn. So the question was, does product sense just come from experience? If you want to learn more about this, go to startupsfortherestofus.com and type in Brendan Fortune in the search bar, because he and I talked about product, since he helped run product at Drip with us. And Derrick Reimer and I have talked about this multiple times too. Product is also a bunch of other stuff: if you’re at a big company, there’s the politicking, the managing up, the communication to everyone. And there’s also how to build it in terms of where do we put it in the app, what’s the most elegant way to do this. We have these five feature requests that feel vague, we’re not building any of them, but oh, if we just build this one thing, it actually does all five. So there’s some science, there’s some art to it. 

Rob Walling (20:44): When you and I talk about product, to me it’s a very intuitive thing. I hate to say it’s just a gut feel thing, but there’s judgment and taste that I’ve developed over years. And I have a hard time telling people how I learned. How did you learn? You’re good at it. You know what to build. Did you take a course? Did you watch a YouTube video? 

Ruben Gamez (20:57): Yeah. It was a $500 course. No, I guess part of it is also, what do you mean when you say “product”? Because product is so many things. I’ve never really thought about it from, you’re right, it’s kind of like I just know it, it’s intuitive, but that’s not how I got there. Way back in the day, I sucked at product when I first started, same for you. I learned it over time. For me, I learned a lot about product at work, at the jobs that I had. 

Rob Walling (21:37): You were a dev and a development manager. 

Ruben Gamez (21:39): Yeah, I was a developer, but then I also was a dev leader and then ran the web development department. And really anywhere I worked, no one knew anything about product. They didn’t know anything about product marketing or much about marketing. So it was up to me to learn on the way, and it was a slow process. Whenever something came up I would learn and study those things. Like, at some point I got really interested in UX and read several books and then hired UX people who I could learn from and see how they approach things. 

Ruben Gamez (22:35): It was a daily thing: people requesting stuff, us having to weigh what do we have the time for and how do we prioritize this? All these different skills over the years were things I picked up. But then I also was at one point doing some design work, so I learned about design. Coding, design, also had to learn about marketing, like SEO, because nobody else was doing it. So I had to hire and then understand how it worked. That’s slowly over time how I gained those skills. I don’t think I’ve heard how you picked it up. 

Rob Walling (23:21): No, and I don’t know that I’ve talked much about it. When I think of the skills that a mostly bootstrapped founder actually needs, I kind of think these are the only two product skills I have. And so I did okay. I compare this to, if you’re at a big org as a product owner or product manager, you need probably 10 or 15 skills including how to manage up, how to justify your decisions to the rest of the org, how to communicate with the other departments. I don’t care about any of that for a bootstrapped company. The two skills, and they’re different, I’ve known people who are really good at one and not the other. 

Rob Walling (23:59): The first is figuring out, of all the feature requests, everything coming in from support and sales and from your own head, everything that you could build next, how do you figure out what to build? Picking that and having a decent gut feel, prioritizing, building that roadmap of what to build next. That is hard. The other skill is the UX, the design of features. And sometimes that includes, like I said, five feature requests coming in that are all a bit vague and you’re not building any of them, but then you realize: if we just added tags and workflows, it would do everything all five of those people asked for. 

Ruben Gamez (24:44): Yeah. How did that sort of filter down, like from a high level you say “these features make sense because of where we’re going,” but then within that you’re still ending up with a whole bunch of features you could build? I think it’s an underrated thing to manage that and understand how to end up with a good product because you can go into any category and there are products that have all the features and they suck, they’re hard to use. 

Rob Walling (27:43): Yeah. And that’s when it came to a real lean toward more streamlined UX and elegance and saying no to a lot of things, knowing our customers. That was the big thing. I would frequently ask, we’d get a feature request, I’d sit there with Derrick and Ian, one of our devs, and Anna, the customer success person who was bringing it to us. I’d say, “We know we can build this in a couple days, couple weeks, whatever. What percentage of our customer base, or our ICP, do we think will use this?” And we’d talk it through and it was usually a guess. “Is it 5% or is it 50%?” Gut feel. This is the hard part about teaching this. I really had a strong sense of that and I’m not sure why. 

Ruben Gamez (28:41): Yeah. No, we still do that and it is gut feel. You just have to know your customers, know their use cases, really talk to them and understand the different types of customers that you have and what they’re trying to do, how they use the product. But then outside of that, sometimes we build stuff that very few people are going to use because we want more customers of a certain type. We’re like, “We like this customer and we want more of them and we think we can get them.” And that generally has worked for us. It’s risky because it doesn’t mean you can automatically get more of those, but it’s something to factor in. 

Ruben Gamez (29:42): It’s like the two disciplines are UX and product management. Product management is about figuring out what to build. And I’d say you can look into product management communities, talks, videos, and books. But I would completely skip all of the managing up, getting buy-in, and stakeholder stuff. That’s a big part of traditional product management, but what founders are probably more interested in is about what to build, why, positioning in the market, all that. Then on the UX side, there’s very specialized UX, but then there’s also well-rounded UX where “what to build” is actually part of it as well. It’s a little less common, but good UX should entail that. I took a course about six months ago by Shreyas Doshi, I think is his name. I don’t know if you’ve heard of him. Really great product person who worked at Stripe and Google and a bunch of other places. He has great content aimed at product management but relevant for founders doing any type of product work. It’s called Product Sense and it’s a lot of hours, a couple thousand dollars, so it was more expensive. 

Ruben Gamez (30:50): I got it for our product management team and I thought maybe I’ll check it out as well. And I really, really liked it. I think founders would gain a lot from even just watching his YouTube videos. He’s got a lot of free content on YouTube and Substack I think. I like how he described it: you have to decompose it. It’s hard to just take something as broad as “product” and say, “How do I learn that?” You have to break it down. And even things like simulating product experiences, the ability to put yourself in the shoes of your customer, the person using it. You get so much out of that. You can know the concepts of good UX, but if you can’t do that simulation, you’re going to end up with something that’s not that good. 

Rob Walling (31:46): I appreciate that. That’s a really good recommendation. And you know what’s funny is if you were to bring me into a SignWell product meeting and you had a big list of feature requests and you turned to me and said, “What should we build?” I wouldn’t know. My gut feel hasn’t been trained on your customers and your use cases. You know those use cases in a way that I just wouldn’t. It would take me six months or more to get there. I think of it in a way, I’m going to do an analogy. Do you play an instrument? Guitar, piano, anything? 

Ruben Gamez (32:23): No, I’ve played a little bit, but not too heavily. 

Rob Walling (32:27): So I’ve played guitar since I was in college. When you first start out, you’re basically trying to read a chord. It’s like the G chord. You put this finger here and these fingers here and it’s just so hard to do. And then you play it and it doesn’t sound good. Then it’s like, all right, now switch to a C and you’re like, “How do I do this?” It takes you two minutes just to move your fingers. And then you go to a D and it’s just this agonizing thing. Well, you do that a thousand times and I can now literally pull up a guitar tab of any pop song and sight read it because G no longer means I have to think about it. G just means this. It’s muscle memory because I’ve played the G chord probably 10,000 times. 

Rob Walling (33:07): So the ability to sight read, I feel like if we were in a SignWell product meeting, you would sight read. There would be all the input going in and you’d just know. And I’d be like, okay, let’s think about this use case, I’m trying to figure out how to play this chord, I’m trying to understand your customer. So there’s a certain amount of repetition and understanding and practice. It can translate from app to app, but just because Derrick and I were good at product at Drip, I wouldn’t automatically be good at product at SignWell. It would take a huge learning curve, and I want people to understand that too. 

Ruben Gamez (34:07): Yeah. It can take some time, but it can actually go much faster than I thought before. I experienced this with a product person who had been a fractional chief product officer for many years, and had done his own startup and helped at some well-known startups. He came in to help us and it was really amazing to see how quickly he built his product sense for our product and our customers. There were no shortcuts. He went through so many feature requests one by one, reading the actual words, asking us questions. Very grindy work. But after going through all of that, it was a crazy amount of information to process, and I could just see, yeah, he started to give suggestions and ideas and I was like, “Actually, he’s pretty good already. He gets it.” So it can be done, but you need to have that repository of customer information. Otherwise you’re learning it as it’s happening. 

Rob Walling (35:31): I like this because I’ve never had to jump into a product cold and make product decisions. With HitTail I acquired it but there was an existing user base emailing me, and with Drip we built it from scratch from day one so every feature request kind of went through our heads and all added to the filter and the gut feel. Well, sir, thanks so much for joining me on the show. That’s all we have time for today. I have a couple listener questions earmarked for you, so I’d like to have you back in the next few months. If folks want to keep up with you, you are @earthlingworks on X/Twitter, and of course the best electronic signature app on the internet is signwell.com. 

Rob Walling (36:19): Thanks again for joining me. 

Ruben Gamez (36:20): Thank you. 

Rob Walling (36:22): Thanks again to Ruben for coming on the show and thanks to you for listening this week and every week. This is Rob Walling signing off from episode 837. 

Rob Walling (00:00): You’re listening to Startups for the Rest of Us. I’m your host, Rob Walling. In this episode, I talk with Einar Vollset about the five AI moats that SaaS acquirers are looking for in 2026. Einar effectively gives us a market report of what’s happening in SaaS M&A right now in the middle of 2026, how things have changed given the fear, uncertainty, and doubt being sown by the SaaS apocalypse narrative. And then we talk about moats that you can build into your SaaS to help protect the value of your company in this age of AI. Before we dive into the conversation, I want to tell you about MicroConf Connect. That’s our online gathering spot for SaaS founders. In Connect, we have focused discussions with other founders and SaaS experts. You have access to our MicroConf content vault, which is more than 400 talks from the last eight years of MicroConf events. 

Rob Walling (01:00): And we have monthly Connect Live sessions and AMAs with yours truly. My AMAs are once a quarter and our next Connect Live session is Jim Zardakis talking about how to build a user-friendly onboarding workflow. If you join before June 17th, you can attend that live. microconfconnect.com if you’re interested. And if you haven’t already, you should subscribe to the MicroConf YouTube channel. We’ve been releasing the talks from MicroConf Portland, including Jason Cohen’s keynote about breaking through growth ceilings. That was one of the top-rated talks at the event. That’s YouTube.com/@microconf. And remember, that channel is separate from the Rob Walling channel, which we renamed a few months ago. So YouTube.com@/microconf. And with that, let’s dive into my conversation with Einar Vollset. Einar Vollset, welcome back to the program. 

Einar Vollset (02:04): Thanks for having me. 

Rob Walling (02:05): We are here to talk about moats and really about the state of SaaS exits between two and 20 million ARR and the shifts that you’re seeing. And let’s date this. This is May 15th, we’re recording, 2026. And if we had recorded in 2021, you’d have been like, “Oh my God, money’s coming. Everybody’s buying everything. Mark it up.” And then if we recorded in mid-2022, sentiment shifted way, way down. 

Einar Vollset (02:35): Terrible. Yeah. Russian invasion of Ukraine, et cetera. It was rough. 

Rob Walling (02:39): Yep. And so in your role as the founder and principal at Discretion Capital, which is sell-side M&A advisory for SaaS founders doing between two and 20 million, you see a lot of deals, you have your pulse on the sentiment of acquisitions. You’ve in fact written a book on the topic. Remind me of the title. 

Einar Vollset (02:59): The title is, hang on. Let me just grab the book so that I can actually remember exactly what it’s called. 

Rob Walling (03:03): Can’t remember his own book title. It’s so long. Get ready. 

Einar Vollset (03:05): That’s how it goes. I’m not a professional author like you. 

Rob Walling (03:08): Buckle up, listeners. Here it goes. 

Einar Vollset (03:10): Are you ready? The Definitive Guide to M&A for B2B SaaS Between Two and 20 Million of ARR. 

Rob Walling (03:16): Wow. Is that a— 

Einar Vollset (03:17): And there’s actually a physical copy. If you’d like a physical copy, you can email me and I’ll send you a physical copy. 

Rob Walling (03:21): That’s the title for three different books, right? Because it’s very long. That’s the first chapter is what you’ve just said. 

Einar Vollset (03:27): If I stretch it out, you know, with my fancy three books, I don’t know. I just put everything in one. 

Rob Walling (03:34): And folks can get physical copies. You also have discretioncapital.com/guide if they want to read the whole thing. That’s your bona fides. That’s why folks should listen to you in this episode. And I wanted to kick off by having you share what you were telling me offline right before we started about how this acquisition market has felt since, let’s say, 2021. So talk us through it. 

Einar Vollset (03:57): Yeah. I think people understand pretty well that in the public markets there’s sort of a risk on, risk off sentiment. And that is also true in the B2B SaaS acquisition world. Particularly when I’m talking about this, it applies at pretty much every revenue range, but it definitely applies sub-20 million, because in that universe of potential exits there’s a lot of private equity. And so the public market sentiment is quite well expressed in terms of the way private equity works and how they’re feeling about the market. We’ve gone through a number of cycles since I’ve been doing this, because unbelievably I’ve been doing this now for nearly 10 years. I think back to even before 2021, like 2020, during COVID. Just that spring of 2020 seems kind of like ancient history now, although it doesn’t feel that long ago. 

Einar Vollset (05:01): It was complete risk off. The public markets were crashing. There were stories about population declining 30% globally, horrible time, not good. I remember in particular we had one deal going in diligence for Discretion. It was selling to a US Fortune 500 company. All of a sudden they went quiet and it was right around quarter end and we were like, “What happened?” And then we saw their quarterly report and they stated that they were suspending their M&A program, which is not great if you’re about a month away from closing. So terrible risk-off sentiment. Then, turns out, nevermind, it’s 2021 and money is everywhere. 

Einar Vollset (05:49): This is the time you should have sold: 2021. Really, if you had a one million ARR-plus SaaS business doing more than, say, 100% NRR, and I’m going to define what NRR is, then you could sell for a good multiple in 2021. Things were great. Thresholds were low. SaaS was the future, everything was great. The thresholds that private equity were using to filter were quite low. So like I said, 100% NRR. NRR is net revenue retention, or net dollar retention sometimes. It basically means: start of the year, what ARR do you have? Then look at that cohort at the end of the year. How much of that revenue do you still have, and you get to count upsells and expansion? 

Einar Vollset (06:44): So that’s why— 

Rob Walling (06:45): Yeah, expansion revenue contributes to NRR. I talk about net negative churn and expansion revenue on the podcast, but NRR is kind of the flip side of that. 

Einar Vollset (06:56): And actually there are two things to know. Private equity tends to worry a lot about retention. There are two defining metrics of how recurring your recurring revenue actually is. One is gross revenue retention, which is literally: January 1st, what ARR do you have? And then December 31st, what percentage of that revenue, not counting any upsells, do you still have? The maximum is 100%. NRR is that, but you get credit for upsells and expansion revenue. 

Rob Walling (07:29): And so in 2021, you used to come on the podcast and say, “Hey, if you’re north of a million you could sell.” And these days it’s two million. 

Einar Vollset (07:38): Yeah. There’s a reason my book and Discretion Capital focus on two to 20. It’s because right now it’s probably more like two million than one million. And then 2022 rolled around and it was a very different climate completely. Russia invaded Ukraine and all of a sudden private equity was not buying anything. They were unsure again about the market. And so all of a sudden it was like, okay, now not only do you need to be probably two million of ARR before we’ll start looking, and your NRR needs to be over 100%, but we also started to hear more about gross revenue retention being important. That’s usually how we can tell that sentiment has shifted: we hear more and more things being thrown up as filters. “We won’t look unless X.” That’s usually the signal. 

Einar Vollset (08:33): But then it recovered again, which sentiment tends to do quite quickly, and things have been good through 2023, 2024, 2025. The market came back in a pretty major way. Some of that has to do with the fact that these private equity companies have an awful lot of dry powder to deploy. But in general it was good times. And then probably last summer is when people started this whole narrative about the SaaS apocalypse: is AI going to kill all of SaaS? That sentiment intensified in the fall and particularly in the new year. It partly had to do with Claude Code, I feel like. People really started down this agentic coding, agentic doing-everything path. 

Einar Vollset (09:25): And I think a lot of the more influencer-type people, probably pretty far disconnected from SaaS in general, started talking about how all SaaS is dead and everyone’s just going to vibe code everything. You could see that in the public market ETFs that track public SaaS companies: way down. And that’s still true. It’s way, way down to the point where someone told me that despite growing significantly faster and being significantly more profitable, the price-to-revenue multiples of SaaS companies is actually less than industrials now, which is a little peculiar. But yeah, because of this, buyers have lately started asking: okay, there’s GRR and NRR, but how do we know this business isn’t going to zero because of AI? 

Einar Vollset (10:22): We really started seeing those conversations earlier this year. 

Rob Walling (10:27): Once the FUD, the fear, uncertainty, and doubt, and as you said, influencers who’ve never run a SaaS company are saying SaaS is dying. And it’s like, geez. 

Einar Vollset (10:34): I always thought it was weird. Look, and this is just my personal view. I think AI is amazing. I think AI is super impactful. But one of the funny things for me is: this is still software. I think people lose track of that sometimes because they talk to it, so they anthropomorphize it and think of it as somehow different to software. But look, it’s software. And if you’re very bearish on SaaS companies, then you’re sort of saying that the companies that are the best in the world at deploying software are going to be bad at deploying this particular kind of software. 

Rob Walling (11:12): That’s the thing. Whether SaaS goes by another name or not, it’s not like ChatGPT and Claude are going to do everything and no one’s ever going to pay for software ever again. As bootstrappers, we’re actually in a really good position as the market shifts. We don’t have these incumbent positions so to speak. 

Einar Vollset (11:31): It’s great. I actually think it’s a great time to be an early-stage software entrepreneur, just because there is so much uncertainty and the cost of developing software has gone way down. That’s definitely true. And honestly, I think we see that inside the TinySeed portfolio. We’ve invested in 200-plus companies and I’ve never seen the sentiment be so different between what we’re seeing internally in the Slack channels among founders, who are like, “Things are going super well, growth is accelerating, we’re adding features in three weeks that normally took us six months,” and what the public markets are saying. 

Rob Walling (12:11): And growing. 

Einar Vollset (12:12): Yeah. And same with most of the public SaaS companies reporting. They’re saying, “We’re not seeing any disruption whatsoever from AI, no additional churn.” But in the public markets, the sky is falling. It’s strange to me. 

Rob Walling (12:26): Sentiment versus reality is a thing. 

Rob Walling (12:28): And I want to cut in here. I want to get into the moats, these AI moats that you talked about. But before we do that, I just want to mention: if you’re a bootstrapper or mostly bootstrapped and you’re thinking, “Well, I’m never going to sell. Why should I care about any of this?” There are a couple things. Number one, everyone sells eventually, or you shut the business down. That’s basically it. And I’ve seen 100% of the people who told me they would never sell hit a point where they either get tired of it or realize they can sell for 10, 15, 20 million dollars, and something comes up and they’re just like, “I don’t want to do this anymore.” They have a family shift, they get a divorce, or they get married and have kids. It’s like saying you’re never going to do something. You can’t say never, right? 

Rob Walling (13:12): But the other thing is: if you’re a bootstrapper, you have an asset that’s worth a lot of money. Just knowing that, whether you plan to sell or not, paying attention to these markets means you can say, “Oh, today if I’m doing two million and I’m doubling this year, six months ago maybe I could have sold for 10 to 15 million dollars.” Today maybe that’s not the case. It’s just good to know. It’s like knowing the value of your house. You don’t need to know it all the time, but you should pay a little attention because there might be an opportunity or there might be a storm coming. 

Rob Walling (13:42): So what we’re going to dive into today are things that you called AI moats. You posted these in the TinySeed Slack for our founders and you said, “I’ve increasingly been seeing that buyers of B2B SaaS are requiring or favoring businesses with these AI moats.” I want to talk through all five. Before we do that, I talked in The SaaS Playbook about four types of SaaS moats, and I think there’s some overlap. I had integrations, especially custom integrations that are hard to get and that make you a core part of a company’s workflow. If your software is deeply integrated into their HubSpot CRM and HubSpot won’t do that integration anymore, that’s an interesting moat. Having a strong brand, where people buy Salesforce, people buy Zapier. High switching costs in general, which I think is one of yours. And then owned traffic channels. SignWell has really good SEO, for example. That’s a weaker moat, I’ll say, because you can lose an owned traffic channel. 

Einar Vollset (15:00): It’s interesting. I still think brand is a strong moat. I actually think owned traffic channels are also kind of a strong moat still. Is there disruption because of AEO vs. SEO? Yeah, but it’s correlated. Integrations, I actually think with an asterisk. I think integrations in and of themselves are no longer a moat just because it’s so much easier to build them. But to your point, if they’re harder to get because everyone is protecting themselves from AI, then it could definitely be a moat. 

Rob Walling (15:39): And then I had a false moat, even at that point, which was unique features. As developers, we think, “Oh, I came up with this new innovation and I built this thing that no one else has.” And I was like, “Nope, false moat.” 

Einar Vollset (15:51): That’s not a thing anymore. 

Rob Walling (15:52): That still especially doesn’t hold today. So getting back to your AI moats: in your Slack message, you said these moats vary a fair bit between buyers as in which ones they hold most important, but it might behoove all of you to think about how your product relates to these, and it might be a factor as you think about growing further and prioritizing product direction. And so the first one of five is hardware-software coupling. The product delivers superior performance, reliability, or economics through tight integration with a hardware layer. Replacement is not an API swap. It has physical downstream effects. Tell us more about that. 

Einar Vollset (16:31): This is the one I know the least about, to be perfectly honest, but that makes sense, right? If you have a hardware component that is tightly integrated into your product and it’s a key part of what you deliver, and it’s not just like an off-the-shelf hardware component with an open API that anyone can just vibe code into in an afternoon, then yes, I can definitely see that being a moat. 

Rob Walling (17:03): We have TinySeed companies that have hardware scales and digital scales at grocery stores. 

Einar Vollset (17:10): And EV charging. 

Rob Walling (17:11): Yep. Software that runs in the charger. We have a physical printer located at certain warehouse locations. Those are all moats, right? That’s what we’re talking about here. 

Einar Vollset (17:25): Those are all moats. And it’s funny because when we invested in those, it was kind of a minus. It was like— 

Rob Walling (17:32): Because it’s hardware. 

Einar Vollset (17:33): Yeah, it’s a hardware component. It’s going to be hard to scale. And now we’re like, yeah, actually— 

Rob Walling (17:37): That’s fine. 

Rob Walling (17:38): Number two is marketplace scale and two-sided network effects. The platform becomes more valuable as participants join each side of the market. More supply attracts more demand and more demand attracts more supply. Does this completely overturn my “don’t bootstrap a two-sided marketplace” advice? Talk us through it. 

Einar Vollset (18:01): I sure think it’s hard as hell to do. It’s hard to do, but hard to undo if you succeed at it. I think that’s true. 

Rob Walling (18:11): If you tried to bootstrap eBay or Uber or any two-sided marketplace we can think of today, you’re going to fail. But if you could do it, there’s a reason eBay has been around. They treat their sellers awfully. They’re hard to work with. But sellers don’t change because that’s where all the buyers are. It’s so sticky. 

Einar Vollset (18:32): No, I agree. And it’s not that unusual for folks to have a component of marketplace stuff alongside their core product. Before I was always like, “Yeah, this is great.” But now I’m like, “Actually this might be the moat, because the marketplace as it scales makes the software stickier.” 

Rob Walling (18:55): But we’re in agreement that it’s extremely hard. I say it’s approximately 0% chance you’ll pull this off if you don’t already have one side of the market and you’re bootstrapping. If you’re going to raise a big chunk of money, you can take a run at this. But I’ve known maybe two people who’ve bootstrapped successful two-sided marketplaces, and it’s hard. 

Einar Vollset (19:14): I don’t think I know anyone personally. 

Rob Walling (19:16): I’ve seen people chime in on Twitter threads saying, “Oh, I did this.” And I asked, “Was it great? Should people do it?” And the answer was, “It was like eating glass.” And I was like, “Okay, so we’re in agreement then.” 

Einar Vollset (19:31): Eating glass. But if you succeed at eating glass— 

Rob Walling (19:35): Somehow it’s worth a lot of money. 

Einar Vollset (19:36): The moat is that anyone else has to ask, “Do I really want to eat all this glass?” 

Rob Walling (19:41): Right. And when I say don’t bootstrap a two-sided marketplace, I always mean unless you already have access to one or both sides. Me bootstrapping a marketplace of founders and investors is different. Dan Andrews and Ian starting Dynamite Jobs, where you need people hiring and you need remote job seekers, they had access to one or both sides. Those are the exceptions. But let’s dive into AI moat number three: communication graph and relationship embed. The product becomes the system where people and organizations coordinate work, messages, approvals, shared context, and recurring interactions accumulate inside the platform. Talk us through that one. 

Einar Vollset (20:25): That’s one of those things where it’s a little bit similar to whenever we talk about pricing. One of the things you always say is: there’s got to be something else going on when you log in. You’re not going to sell 10 seats to a company if every single one of those 10 logins is the same. It’s related to that. SaaS buyers really want to deal with what we’d call system-of-record type systems, where this is where you run your business. This is where you’re sending messages back and forth, this is where the context is, this is where the coordination between people is happening. 

Einar Vollset (21:05): The various states of the conversation, all that kind of thing is on the platform, and that just makes it a lot harder to move off. I think that’s definitely, definitely true. 

Rob Walling (21:15): Slack is a perfect example of this. 

Einar Vollset (21:17): Yeah. We try to leave Slack, feels like every year, and then we come back and we’re like, “Please give me some more of that sweet, sweet Slack.” 

Rob Walling (21:24): Everyone’s still using it. Number four: proprietary data with closed feedback loops. The company captures exclusive, continuously refreshed data, and uses it to improve automation, decision making, and product performance over time. The moat depends on containment. Data flows in but does not leak out via APIs. 

Einar Vollset (21:48): Yeah. This is another one where the incentives are now for companies to not give you access to even your own data through an API. That’s the key difference, right? The data has to flow in but not flow out. Because if I can take the entirety of the data that’s in there and quickly export it including all the timestamps so that I can replicate the whole thing, then yeah, the moat is gone. 

Rob Walling (22:24): So examples of this. You think Crunchbase has this? 

Einar Vollset (22:29): No, I don’t think Crunchbase has it. Not really. That’s more like I’m in there by myself looking at data, and that’s a little more replaceable. I’m trying to think of— 

Rob Walling (22:42): BuiltWith.com? 

Einar Vollset (22:43): Again— 

Rob Walling (22:44): They’re scraping the internet constantly. It’s constantly refreshed. You can’t get all of it out. 

Einar Vollset (22:48): You can’t get all of it out. That’s true. Yeah. Those kinds of things are actually reasonably good examples. I’m trying to think of better ones. 

Rob Walling (22:55): Fiscal.ai. 

Einar Vollset (22:57): Fiscal AI is a good one. 

Rob Walling (22:59): TinySeed company. 

Einar Vollset (23:00): Yeah, TinySeed company. And DealForma is a good one, where data goes in and doesn’t necessarily just flow out immediately. And even if you took a snapshot, what good is that tomorrow? You still need the data next month, and the month after, and every single month. So yeah, those are good examples. 

Rob Walling (23:20): Let’s move on to our fifth and final, which is operational embed and switching costs. Switching costs are the time, risk, and expense of replacing a system. The product is embedded in daily workflows, integrations, reporting, and team routines, which makes replacement disruptive and costly. 

Einar Vollset (23:40): Yeah. That’s your classic system of record. You’re the finance team and everybody uses QuickBooks or some ERP to coordinate absolutely everything. Or you’re a warehouse and all your stuff coming in and going out, approvals, shipping, is all in one system. You could build something that does the same, but the risk to your actual business of that collapsing is high enough that it just isn’t worth it. And this ties a little bit with your moat around brand, because I think particularly technical people tend to overestimate how much time folks are willing to spend optimizing their software costs. For a lot of businesses, the cost of software just isn’t that significant and they don’t care. 

Einar Vollset (24:33): It’s much more important to people to be able to say, “I trust this brand, this company to do this job well, and I’m willing to pay for that.” And partly what you’re paying for is the brand and the brand trust. And honestly, being able to call someone up or email them and know that getting you back up and running is their number one priority. You’re never getting that with something you vibe coded at home. I think that’s a key, key part of it. 

Rob Walling (25:00): Yeah. That’s the thing. If you’re a business paying 10 grand a year for your system of record and someone comes along and says, “We have most of the same features and we’ll be eight grand a year,” you’re like, “No.” “We’ll be five grand a year.” Probably still no. Because it’s the switching costs and the pain and the retraining and what if stuff goes wrong and how do I trust that your software is actually good? Does it actually do what you say? Is it buggy? Are you going to be in business tomorrow? It’s not just about price. 

Rob Walling (25:39): It would maybe matter if someone came along and said, “Ours is a thousand dollars a year.” But now I think you’re not going to stick around. It’s this interesting conundrum. If you’re paying a hundred grand a year, obviously there’s more leeway, but cost becomes much, much less relevant because switching cost is risk. 

Einar Vollset (26:05): And I think cost is not that important for most businesses. And I also think a lot of technical founders hugely overestimate how much time people want to spend fiddling with their software systems. I sort of want to put all the influencer types who say AI is going to eat everything in a room and ask: how many of you are still running the open-source AI agent setup you were evangelical about two months ago? Because there’s a surprising number of deeply technical people who were super excited about it and then two weeks later I see them on Twitter saying, “I just can’t.” 

Einar Vollset (26:59): “It breaks all the time. I spend more time fixing it than getting productivity out of it.” And that’s just you, a technical person. Now apply that to a business doing millions in revenue with employees to pay. Why would I want a vibe-coded thing to save an inconsequential amount? The downside risk is just way, way too high. 

Rob Walling (27:28): And in the ensuing thread under these five AI moats, TinySeed founders were asking questions. And one of the things you said was: some of the buyers you’re talking to through Discretion, mostly private equity and perhaps some strategics, are telling you that if a company has none of these five moats, they won’t even show it to their investment committee. So some of them are saying it’s a pass without at least one of these. 

Einar Vollset (27:54): Yeah. And that circles back to what we started talking about: how do you tell that sentiment is risk off in private markets? In the public markets it’s easy, the stock prices crash. But in private markets, you can tell when you see repeat buyers putting higher and higher hurdles up before even looking. And just so you know, the investment committee is the group that signs off on sending an LOI and actually doing a deal. If that committee at a private equity firm is saying, “Don’t even show us things unless these criteria are met,” that means that company is not buying your company no matter what. 

Rob Walling (28:32): And to be clear, we’re saying some PE firms are saying this, not all. But even when some do, if it’s 30% or 50%, that will soften multiples. Any multiple range we give is always an auction. When someone says, “I’m doing three million a year, what can I sell for?” and you say, “Maybe 4x or maybe 15x, we’ve seen in the past two years,” they ask why the range is so big. And the answer is: it’s an auction. Someone had really great net revenue retention and someone really wanted to buy them. So you have to keep these moats in mind. One last thing I want to bring up before we wrap: a TinySeed founder asked, do these same AI moats apply to AI-native SaaS where AI is a core part of the product? 

Rob Walling (29:23): And you said, “If anything, AI-native SaaS, where AI is the heart of it, has higher hurdles. Usually newer and faster growing, buyers will ask harder questions about the risks of disruption.” Talk me through that. 

Einar Vollset (29:37): So we’re seeing stories about folks going from zero to four million of ARR in like three months because it’s an AI SaaS thing. It’s certainly true that a lot of these businesses are getting very fast adoption, but we’ve also seen, and I know of at least one private equity firm that invested in one of these fast-growing things and it went to zero within a year. And that’s what they’re worried about. The key thing to understand here is that founders are sometimes a little frustrated with private equity because they think of them more like venture capitalists. Venture capitalists will take extremely high risks because they’re expecting a vast majority of their investments to go to zero. 

Einar Vollset (30:25): That is not what private equity does. Private equity, if anything, is slower to adopt new sentiment because their whole business model depends upon being able to underwrite the downside risk. And so that is the challenge when it comes to AI. They don’t have a good mental model, or even an Excel model, of how to think about the risks to these businesses. So in that case, they’ll tend to step back. An example from Discretion Capital: we had a business we were selling called Zyra Talk. It was basically an AI voice agent, like a receptionist for HVAC companies. This business had great metrics on every measure: growth, retention, integrations. They had everything. We showed them to the market and had tons of interest, lots of strategic interest, lots of private equity interest. 

Einar Vollset (31:16): They actually ended up selling to a Fortune 500 public company called Evercommerce. So they sold to a pure strategic. But with the private equity firms, we had tons of interest, and the way it normally works in an auction is you go to market, show all the marketing materials, and the people who are really interested will do a management meeting before making a bid. I think we had something like 22 or 23 management meetings, which is quite high. I was expecting an avalanche of LOIs because the metrics were great. But not a single one of the private equity firms even put in an LOI. It became a fight between strategics in that auction. So the mental model to have here is that private equity tends to be much more risk averse than people think, and also a little slower to react. 

Einar Vollset (32:08): So when things are going bad, they very quickly shut down, but when things are loosening up again, it takes a while for them to unwind. I remember being so frustrated in 2022, saying, “You guys have been telling me for years that prices are too high and there’s too much competition. Now is the opportunity. Go against the stream.” They could have made a killing if they’d actually started bidding in 2022 and picked things up for 50% of earlier prices. 

Rob Walling (32:50): Well, thanks, man, for coming on the show and giving basically the boots-on-the-ground report to the podcast audience, because this is info you can’t find elsewhere. You’re not going to see this on TechCrunch. This is not in some blog or book. It’s stuff you’re seeing on the front lines. So really appreciate you spending the time with me today. If folks want to read your most recent book, discretioncapital.com/guide. And of course you are Einar Vollset on X/Twitter. And if there’s a founder listening who’s like, “I think I’m going to be hitting two million ARR in the next 12-ish months—” 

Einar Vollset (33:25): Or 10. 10 is fine too. 

Rob Walling (33:26): At least two. 

Rob Walling (33:28): If they’re between two and 20, or think they’re going to get there, they can reach out directly to you, Einar, E-I-N-A-R at discretioncapital.com. Thanks again, man. 

Einar Vollset (33:37): Thank you. 

Rob Walling (33:38): Thanks again to Einar for coming on the show and lending his wisdom from the front lines, and thanks to you for listening this week and every week. This is Rob Walling signing off from episode 836. 

Rob Walling (00:00): You’re listening to Startups for the Rest of Us. I’m Rob Walling. In this episode, I talk with Taylor Hendricksen. He’s been doing performance marketing online for well over a decade, including e-commerce, B2C, B2B, and has bought tens of millions of dollars in ads over the years. He said it was both Meta and Google when I asked him in the interview, but I’ve known Taylor for about a decade and he’s just extremely knowledgeable when it comes to copywriting and making incredible offers, general marketing, getting people interested in something and actually paying for it. Taylor is one of our coaches at SaaS Institute, saasinstitute.com. If you’re doing at least one million in ARR and you’re a SaaS company looking for a coach like Taylor. Before we dive into our conversation, I’ve been writing emails again, essays that I’m sending out to my email list. I haven’t blogged regularly since 2010, 2011. 

Rob Walling (01:07): I started a few months ago writing my thoughts. These are new thoughts. Some overlap lightly with the podcast, but a lot of them are new thoughts, frameworks, et cetera, that I’m mulling over. You can head to robwalling.com/emails if you’re interested. And with that, you’ll get a free sample chapter of The SaaS Playbook. But realistically, the list on my site says, “Hey, you want some proven cheat codes for growing your SaaS in 2026? Marketing channels that actually work, building a sustainable moat, refining your pricing.” That’s the kind of stuff that I’m talking about when I send these emails. It’s one email a week and it’s an essay of my original thinking, robwalling.com/emails if you’re interested. And with that, let’s dive into my conversation with Taylor Hendricksen where we cover several topics, but one of the ones that we focused on a lot was where founders of all types should be using AI in your marketing and where you shouldn’t be using AI. 

Rob Walling (02:03): And I really appreciated the back and forth that it was kind of impromptu. I had some questions and an outline of what we were going to cover, but it was so interesting to me the way Taylor was thinking about it. And then he and I piggybacked off each other a bit thinking through using AI in marketing operations, content generation, all that kind of stuff. So that’s a highlight of this conversation. Let’s dive in. 

Rob Walling (02:34): Taylor Hendricksen, welcome to Startups for the Rest of Us. 

Taylor Hendricksen (02:37): Thanks for having me. 

Rob Walling (02:38): Yeah, it’s great to finally have you on, man. So you and I have known each other for at least 10 years, maybe 11 or 12. You and I have hung out at Rhodium. Chris Yates had a mastermind going and we hung out for a weekend at one point. You spoke at MicroConf several years ago, talked about, was it funnels and ad stuff? 

Taylor Hendricksen (03:01): Everything that was working at that time. Yeah. 

Rob Walling (03:03): So Facebook ads, funnels, quizzes, all the hot stuff at that time. That goes back to 2018, something like that, 2019. 

Taylor Hendricksen (03:10): I would guess around there. Yeah, 17, 18. Some of that works still. That’s how it always is, right? Half the stuff I talked about at my MicroConf talk back then still works and the other half doesn’t. 

Taylor Hendricksen (03:19): Oh yeah, for sure. 

Rob Walling (03:20): I mean, when I think of your career, what I know of it, you’ve run a lot of Facebook ads. I don’t know if you ran Instagram and other stuff, Google AdWords, but a lot of ads, sold a lot of, correct me as I get done with this if I’m missing anything, but I think a lot of stuff for e-comm and then info products and had some of your own, also did affiliate deals or for-hire stuff. Is that a summary? 

Taylor Hendricksen (03:46): Yeah, it’s pretty good. I would describe myself as a full-stack marketer. So everything from ideation, product design through the copywriting, some of the actual putting the product together, less operations, but then how do you take it, do all the landing page design, connect the funnels, and do the paid media on the side. So you can kind of go soup to nuts with taking a product that’s already there and taking it to market. We’ve done it for online education, some of the digital info stuff, a lot of lead generation, specifically in the financial services industry, and just tried to figure out how to convert cold traffic. We’ve spent a tremendous amount on Facebook as well as Google. So across YouTube, display, Facebook, Instagram, those are the kind of the main levers I pulled in the time. 

Rob Walling (04:22): That makes sense. And you of course had involvement in SaaS as well, otherwise we wouldn’t have you speak at MicroConf and you wouldn’t be a coach at the SaaS Institute, which folks have heard me mention many times on this show. So I guess given that you are now coaching and giving people advice on how to grow, how much do you think you’ve spent on ads across all of this stuff you’ve managed? 

Taylor Hendricksen (04:55): We’ve done easily tens of millions, up to multiple six figures a day in spend we personally controlled and overseen, and affiliates doing almost up to a million a day. 

Rob Walling (05:04): I just want to give people an idea that you’re on here for a reason because you’ve been walking the walk and talking the talk for a very long time and you know what works and what doesn’t. So as I think about you coaching SaaS Institute, B2B and B2C SaaS founders at one million and up in ARR, what’s the number one thing that you hear keeping these folks up at night? 

Taylor Hendricksen (05:24): I think the biggest thing right now is probably AI. Like the boogeyman that gets thrown around. It supposedly has the worst approval rating out of anything out there, but it is the constant thing. With SaaS, with software, we’ve seen these big public companies absolutely taking nosedives in terms of their valuations because AI is going to come and take everybody’s jobs and ruin everything. And the biggest thing now is there’s still this kind of break between AI being a cool whiz-bang toy and actually being effective. So you have this gap that these founders are going through, and a lot of it now is like, “How do I prove my relevance? How do I keep my pricing in the time of AI?” Especially now when customers are coming and saying, “Hey, you use AI to do this.” 

Taylor Hendricksen (06:02): “Shouldn’t it cost a tenth as much, or be doing 10 times more than you normally do?” And I think this is an interesting question of how do you prove your value in a time where people just say AI is a buzzword or a fix for something, even though it’s not there yet. We have one founder in particular who does high-end UI/UX design services for startups and SaaS companies. And the bigger question is, yeah, by all means, go have Claude vibe-code your whole product, and it’s going to be the generic AI output that people are used to. But what comes with the curation and taste and actually having an expert drive it? It’s like basically giving somebody a Lamborghini. If somebody is brand new, you put a toddler in there, they’re going to crash it in a second. 

Taylor Hendricksen (06:42): But somebody who knows how to drive, that thing is a perfectly tuned machine. So a lot of us are trying to figure out how to integrate AI that’s not just a cheap ChatGPT wrapper, but really utilize it as a human-first tool rather than a full replacement agentic thing. 

Rob Walling (06:59): I heard you noodling on something where it was like, use AI for ops and scale, but keep your content and maybe your front-facing stuff authentically human. Do you want to double-click into that? 

Taylor Hendricksen (07:13): For sure. Yeah. I think we’re in the very early days of seeing what AI can do for video, for text, for everything else. And it’s taken basically what was a human-level labor arbitrage and made it ubiquitous. Now anybody can generate as much text as they want instantly. So I think the flood that will come from this, both in video as well as text, the whole world of SEO and all these things is going to be flooded with mediocre content. So I think the big delta in the next couple of years is going to be: what human-first things can you use that are still uniquely human? Something like cold email, where before it was more labor-intensive to supposedly customize each cold email to reach the desired person and have some kind of relatability. 

Taylor Hendricksen (07:56): Now that’s all agentic. And so the amount of cold email that’s going to come through is going to flood inboxes and make it basically a useless channel in a lot of ways. I’ll probably get a lot of hate from people who still use cold email and it still is absolutely effective, just like SEO is absolutely effective and same with most of these marketing channels. But the human-first premium on top of it is going to be a bigger and bigger deal the farther we go. So I think we’re pretty close to passing the Turing test from video. You can still tell AI video for the most part, but a couple of times I’ve been like, “Wait, that definitely fooled me,” which is interesting. 

Rob Walling (08:26): Yeah. And so what happens when that happens? When we get to the point where even video generation, like this video right now, you and I both know we’re humans. If we took the Voight-Kampff test, we would know we’re humans. But what if we could generate video just like this, at this level of quality? How do you think that changes the game? Should founders use it or should they stay away? Is keeping it authentically human meaning a human does it, or what are your thoughts? 

Taylor Hendricksen (08:57): I think the humans need to do it. People have a really good sense of whether something’s legit or not. Our BS detector is high. Whether it’s an offer or something like that, people can generally tell. So when everybody else takes the lazy route and hides behind not going in front of camera, or just has the AI do it, spinning up a sexy avatar to be the pitch person instead of actually doing it themselves, I think it’s just going to be another cheap thing. What’s going to separate you from every other person who could spin up the same avatar? So the human-first premium is real. It’s like when computers first beat humans at chess, back in the 80s or 90s, and chess isn’t dead. 

Taylor Hendricksen (09:33): It’s just now kind of a different game with how it’s played, but it still has that human-first level to it. 

Rob Walling (09:38): It’s interesting because a lot of times we’re asking the question, can we tell the difference between if AI did it versus if it’s authentically human? I don’t think that’s the right question. I think the right question is: is the content any good? Because if you show me two essays or blog posts or marketing landing pages or two podcast episodes, one is human and the other is AI, but they’re both mediocre, does it even matter at that point? And that’s the thing I think we’re forgetting. I have yet to see flat AI just generate something great. If I say “write a blog post on this topic,” it’s a solid five out of 10. It’s mediocre. Now if I say, “I’m Rob Walling and I’m going to dictate a new framework that I thought of,” and I talk for 10 minutes into ChatGPT and say “turn that into a blog post,” that post will at least have my phrasing. 

Rob Walling (10:37): It’ll have my concept that isn’t on the internet yet. And that’s the human aspect of it. I’m going to let you talk, but I’m fired up about this because I don’t think it’s a detection issue anymore. I think it’s just a quality thing. And I have not seen AI YouTube videos that are just AI voiceover on stills impress me. Even if the voice is good, I’m like, “This is just boring. This is flat.” It’s like a mayonnaise sandwich. It’s just a very bland thing, which I think comes back to what you’re saying about humans having to do that. 

Taylor Hendricksen (11:11): Oh, absolutely. You see the videos on YouTube that are clearly bulk-generated, throwing them out there to try to get views. You skip them the second you feel it. You can feel the AI voice, whatever it is. So in general, that’s what’s going to be the biggest differentiator: doing things a little bit more thoughtfully to stay on top of this mass of AI-generated content that’s going to flood the space. You can’t just give something to AI and say, “Hey, write me a blog post or write me sales copy or do this whole thing for me.” I’ve seen a couple of AI tools recently that just say, “Put your website in and it’ll automatically do the go-to-market for you.” 

Taylor Hendricksen (11:46): And that’s a cute idea, but in practice it all falls flat. Every time I have it go through and do it, it’s a really good enabler on the backend. Operationally, being able to do the research and compile the stuff to get it to a point where you can see the nuance and the details, market research or persona research, it could be incredibly effective. But by the time you then take that and have it try to spit out the actual headlines or the actual human-first things, it’s not able to grasp the nuance. It’s very good at “next best thing” or grouping things together and bulk-approaching it. 

Taylor Hendricksen (12:24): But this whole thing of how do you take something over here and connect it here, or really have a nuanced understanding of what a human is actually experiencing to then be able to relate to them? AI will be able to do a bulk offense at it, like a DDoS attack, overwhelming the systems. And that’s the whole thing: people are going to use AI to spin up a hundred ads each with micro-differences between the avatar or the hook or the phrase, and hopefully one of them is good. That’s the only way I can see AI potentially beating the human-first stuff in the short term, meaning one to five years. 

Taylor Hendricksen (12:59): But after that, you’ve got to have the human level into it because it’s about nuance and the things you don’t fully grasp. 

Rob Walling (13:05): I had Eric Ries on the show because he has a new book out, Incorruptible, and one of the things he said I thought was a very succinct description of what we’re talking about. The moment he said it, I knew it in my bones. He basically said AI is the average of the internet. It’s the average of everything. And so if you’re not a good copywriter, if you’re a two out of 10, and you have AI write copy, it’s going to write a five out of 10. And you’re going to be like, “Man, AI is so great.” But if you’re a six, seven, eight, nine out of 10, if you’re actually good at something, you look at AI and you’re like, “This is solidly mediocre. This is like what an intern would write.” 

Rob Walling (13:45): Same thing. And it’s the Dunning-Kruger effect: the less you know about something, the more you think you know. That’s why, if you’re an expert, if you’re a really good designer, you know AI is not a good designer. If you’re a really good copywriter, you know AI is not a good copywriter. If you’re a great musician and you listen to AI music, you know it’s not actually that good. But this is why you see these sentiments on the internet of folks saying, “AI can do this and tomorrow it’s going to be even better.” And it’s like, yeah, a little bit, but it’s not 10% better every month. So that’s what we’re getting at: it produces average work unless you give it above-average inputs and above-average refinement and revision, and you actually train it not to be average. 

Taylor Hendricksen (14:33): Which is going to be a million times more valuable, because the average is going to go from having a hundred people putting out posts to now a million people. So if you do a little bit more to sit on top of that, it’s just going to skyrocket your ability to do things. But if you’re a two out of 10 copywriter and you’re just a straight dev, yeah, you could use it to have a baseline, do persona research, write headlines that work, and get an average passable thing. Sometimes that’s fine. You don’t need to be a pro in everything. But having that expert-level task in whatever it is, especially selling for founders, you have to have that empathy and really believe in whatever it is, otherwise it’s just sales material, just a headline, and it won’t actually resonate with people. 

Rob Walling (15:13): AI is helping founders ship faster than ever, but at some point you’ve probably wondered, is my codebase actually ready to scale? Today’s sponsor Designli can help you answer that. Here’s their CEO, Keith Shields. 

Keith Shields (15:26): Thanks, Rob. We’re hearing from a lot of founders right now who are avoiding parts of their codebase because something might break. And honestly, that’s a sign that your product isn’t ready to scale yet. AI development leaves behind hidden security issues, fragile architecture, and features way more tangled than you’d expect. That’s not a knock on AI, it’s just reality. So we built the engineering intensive. In just two weeks, our senior engineers do a deep audit of your code, stress test your infrastructure, uncover vulnerabilities, and hand you a prioritized roadmap to get scale-ready. We give you full clarity on your product’s health, backed with a money-back guarantee. So if you want to keep your AI tooling, but add professional oversight from senior software experts, book your engineering intensive at designli.co/fortherestofus. That’s D-E-S-I-G-N-L-I.co/fortherestofus. 

Rob Walling (16:18): So I talked to a couple of the founders that you coach and asked, “What is Taylor exceptionally good at? What has he helped you specifically with?” And one of the founders told me that you’ve really pushed him to rethink sales and prospecting in the age of AI. You obviously come from performance marketing where the numbers can get pretty crazy. What do you see bootstrapped founders getting wrong about how fast they could actually grow? 

Taylor Hendricksen (16:42): I think it’s just this artificially placed ceiling that they put on themselves. “I could never imagine doubling my business in a week.” Once you get past that idea and limitation, you realize the only limitation is your own comfort. You don’t necessarily think this will work, or they’ve tried something like that and it failed in the past, so therefore they don’t try again. The biggest thing founders, especially SaaS founders, could take from the performance marketing world is: when something’s working, how can I 10X this in a very short amount of time? What would it take? And once you start to do that, you start reverse engineering: okay, what would it actually take? 

Taylor Hendricksen (17:21): We had a project doing this for lead generation, and it was, “What would it take to get to 100,000 leads?” About 10 times bigger than what we were thinking. And then my business partner and I started going back and forth and realized, “Oh, all it really is, is we just need to crank the dial up to 11 on ad spend and have the backend operations that can handle it.” It was a very scalable deal. The only thing holding us back before was our own limitation. For the founders we’re talking to, SaaS can scale pretty quickly operationally. And especially the service-enabled ones, there’s a lot more headroom there to increase than they ever realized, but they always just get stuck at something comfortable, especially when their needs are met. 

Rob Walling (18:00): We’ve seen a lot of people in the TinySeed community: once they hit 20, 30, 40K MRR, life’s good. They don’t have that broke fire burning under them as much. So they kind of limit themselves naturally, or they’ll naturally get to the temperature of the room around them. If you’re in a group and everybody’s doing $50K and you start to do $100K, you kind of coast. Your goal is not to get to 500K, but just to sit there. So I think getting around people who are doing higher numbers and thinking bigger is key. Not just that ephemeral “think bigger” motivation, but actually, “Well, what would it take to do 10 times what we’re doing?” 

Taylor Hendricksen (18:36): And then what would it take to get up there? But at the same time, not just scaling for scaling’s sake either. I remember having this conversation: “What’s your goal for the business?” “Well, we really want to get to five million ARR.” “Why?” “Well, that just seems like a good number to hit.” But you were there before, you were doing two or three million a year, and now you’re back down to one or two. Before, you had twice the people, twice the headaches, and you were making the same amount of profit. So scaling for scaling’s sake is still not necessarily the best answer. 

Taylor Hendricksen (19:07): And obviously the TinySeed and MicroConf community is not about scaling just to get the Lambo and sit in front of a private jet. But I think it is important to think: why am I doing what I’m doing, and would it be better to scale more? It’s going to have different problems when you get there, but thinking bigger is probably the biggest thing you could bring. 

Rob Walling (19:25): Another founder that you coached told me that you’re really good at go-to-market and marketing and getting content out there. So if a founder buys into what you’ve said, “Maybe I do want to 2X or 5X this year,” and they’re ready to push hard, how do they actually get in front of people these days? What’s working? 

Taylor Hendricksen (19:46): I think the biggest thing is: scaling operations is about 10 times harder than scaling marketing. Marketing’s my hammer, so it’s obviously the thing I want to swing. But making sure you can fill the backend first. Assume SaaS is scalable. Getting out there in front of people is now going to be about really figuring out who your target demographic is. What are the core problems they’re actually trying to solve? And how can you get to the places where they’re actually talking about it? You’ve got to have a really deep understanding of who that market is, and the market may be very different than you actually think. You have to have an offer for getting in front of them that they really feel stupid saying no to, or isn’t a huge burden to get over, and then you have to solve their problem in a different way. 

Taylor Hendricksen (20:26): Starting with the avatar: who are you going after? A lot of people want to go after the most common ones because they don’t have creativity. They go after dentists and chiropractors. But they often don’t realize some of the non-sexy niches are the best places to be. Everyone wants to go after the startup or the FinTech, but the companies who are making money hand over fist and still have a very backwards view of technology, some of those are the best ones to go after. They’re the least critical on product delivery, timing, and speed. So really figuring out who you’re going after is an important starting point. 

Taylor Hendricksen (21:07): The other thing is really trying to figure out what problem you’re trying to solve. You’ve been talking about solving problems with software for decades. And I think a bigger thing now is not necessarily solving the problem they have right in front of them, because a lot of people aren’t waking up and saying, “I need a new procurement software because it’s inefficient.” But really trying to figure out how you’re solving one of their primary problems with a secondary solution. For the UI/UX design agency, they’re not necessarily waking up shopping for a new agency to redesign their SaaS website. They’re really trying to figure out how to look more modern, like they’re not about to go out of business. If somebody comes to your site and thinks, “I don’t even know if those people are still working,” or “The product is going to be bad because it looks so dated,” that’s the actual problem you’re solving. 

Taylor Hendricksen (21:59): Or for one thing we’re working on, a business for digital disbursement cards for corporate payouts. They’re not actually solving “how do I get someone a debit card instead of writing a check.” They’re figuring out how to retain the best workers in areas where churn is one of their biggest problems by making sure people get paid right away. So that’s where some of the positioning is really about: how do you solve the problem that actually keeps them up at night? Most of the time, founder products don’t actually solve that problem, but they definitely can. 

Taylor Hendricksen (22:40): It’s kind of like Nike’s “Just Do It.” They’re selling generic T-shirts and clothing, but what they’re really selling is their ability to encourage you to do that thing you’re scared to do, through clothing and shoes. 

Rob Walling (22:52): Talk to me about some unusual marketing approaches. I’ve heard you mention direct mail and founder-led ugly talking-head videos. Is that working? Have you seen that helping people out these days? 

Taylor Hendricksen (23:06): Yeah, totally. In general, I’m very agnostic about what marketing channels are best for a business. “Best” is very relative based on who you’re going after and what you’re trying to accomplish. In the TinySeed community, in the B2B space in general, you have a target demographic you know you’re going after. Let’s say it’s chiropractors or a specific type of business. Going after that using paid media channels like Facebook and Google, it’s really hard to get that granular on targeting just chiropractors or just the office admin assistants for chiropractors. Cold email has obviously been a great channel for these founders. But most people now ignore most emails in their inbox, and I basically ignore all cold email and cold LinkedIn spam. 

Taylor Hendricksen (23:49): It’s just so egregious that they don’t really get on the platform anymore. So when founders need to get in front of the demographic they need, approaching the old crowded channels that used to work a couple years ago but now don’t, you just have to find a new channel and get in front of them in an uncrowded way. We’ve found that with direct mail, being able to mail something, not a cheap postcard that gets chucked as soon as it comes over the bin, but there are handwritten letter services, there’s stuff in a plastic garbage can that you stuff the letter into and stick in a package. We even got video mailers shipped over from China that you can upload a custom pitch video into, slip into something, and send it out to get in front of the demographic you really want at surprisingly low cost. 

Rob Walling (24:30): Even the video mailers with shipping, with labor and everything, are about $25 or so to get in front of somebody. So when they start thinking about that, they can actually approach their target market in marketing channels that are not crowded now. But you still have to marry that on the other side with the trust built, because as soon as they get that thing or see your ad, the consumer isn’t necessarily just clicking on the ad and going directly to your landing page. They’re immediately opening up a new tab, searching for your company, trying to figure out who you are, checking the reviews, and trying to figure out, “Should I be able to trust these people?” So one of the SaaS Institute founders started making videos on YouTube to build that trust and started posting her expertise across a number of platforms: YouTube, Facebook, LinkedIn. 

Taylor Hendricksen (25:12): And she’s basically now got a really good trust built up over that. She’s a known entity in the space. “Thought leadership” is such a phrase, but she’s basically known as a trusted entity in that space. But that itself isn’t necessarily going to drive a lot of the results. People think, “Okay, well I’ll have a YouTube channel and leads will just flow in.” Kind of. That’s usually part of it, but it’s the trust layer on top. If you’re really trying to go after specific people, those people aren’t necessarily searching for what you’re talking about. So going after them very specifically with direct mail or direct outreach of some kind, send the brownies in the mail, do something different that’ll get through the noise. Then once they go see you, the trust will be built, and they’re much more likely to convert. 

Rob Walling (25:54): We’re talking a little bit about distribution here, and as you drive traffic and generate interest, that attention has to land somewhere. So talk to me about the offer itself. When you think through an offer that you’re going to make, what makes someone actually say yes? 

Taylor Hendricksen (26:10): Yeah, totally. So if you put yourself in their shoes, they’re getting bombarded with different offers, pitches to hire services, spend money with them, or try something for free. That has gotten so saturated because their inbox is full of them. You have to figure out what is the thing that’s going to cut through, and most of the time that’s going to be the baby steps going into it. It’s really hard to come in and pitch somebody cold on a big $100,000 project. But if you can come to somebody and say, “Hey, we have this very specific thing that solves a very specific issue for you. You don’t have to replace what you’re doing already.” 

Taylor Hendricksen (26:44): “It’s going to take a very short amount of time to implement and see the results, and you’re not going to have to spend a bunch or take a big risk on whether it will work.” So for any company out there: what is the thing that’s going to make them feel stupid for saying no to? Alex Hormozi talks about offers all the time. It’s a really good place to start on figuring out how do you stack something that people feel stupid saying no to. And feeling stupid for saying no to isn’t necessarily just a free trial, because a lot of people are offering free trials now. It is: how do you solve the very specific issue that they have, or their primary issue with a secondary solution like we talked about earlier. 

Taylor Hendricksen (27:17): Putting something in front of them that gives them a low-risk way to start testing this relationship with you. That could be something where they start the relationship, watch your founder talking-head videos for three months, six months, a year or two before they’re ever actually ready to interact with you as a business. But once they do, having that thing that makes it easy to say, “Okay, yeah, I’ll give it a try” versus committing to something big, I think should be in every founder’s playbook. The biggest problem with some of the software stuff is the replacement offer: “Come in, I’ll replace your existing internal systems.” That’s a really big ask. It’s a really big one-way door. 

Taylor Hendricksen (27:54): “If I try you and you don’t work, I’ve got to go back and revert to the old system. There’s got to be a lot of breakage. It’s going to be huge pain. It’s going to take months of migration.” All those things. 

Rob Walling (28:05): As we wrap up, I want to circle back to what we started with, which was talking about AI. Lest people think that we are anti-AI or don’t use AI or don’t think founders should use AI, we think none of those things are true. Throughout TinySeed and MicroConf, all of our team members have Claude and ChatGPT accounts and we are using a lot of it internally to automate a ton of stuff, and I know you are as well, and I know you’re seeing the founders that you coach use it too. So I wanted to say, we covered a lot of stuff today: positioning, scaling, distribution, offers. It’s a lot of plates to keep spinning. How are you using AI to make things faster? Or more specifically, how are you seeing the founders you coach use AI? 

Rob Walling (28:53): If it’s not what we said at the top, it’s not to generate the video, it’s not to generate the blog post. So how should we use AI? Because we all should be. It makes us faster. 

Taylor Hendricksen (29:03): Absolutely. I think there are two core pieces of it. One is the agentic stuff: how do I have this repeatable task that I’m already doing be an automated thing? It shouldn’t take four hours a week to do this thing. That’s one level of AI where especially the production and operational people should be absolutely leaning in heavily to whatever agentic framework it is. Whether you’ve got open source tools, Hermes, Claude, whatever it is, that’s an important thing: where am I wasting time on stuff that could free me up to do higher-value tasks? Then the other side is the non-repeatable things. The things you can’t necessarily just hook up an agent to go do research on. 

Taylor Hendricksen (29:41): And then I think it’s more this iterative process with AI as a thought partner. AI is really good at taking long rambling stuff from me, making sense of it, and going back and forth ping-pong style to really develop something out. So for me, it’s a lot of market research, a lot of demographic research, figuring out who we’re selling to. One of the companies we invested in is specifically going after truckers. So getting up to speed on the space, going out and pulling: “Go to Reddit and pull 50 comments based on this, get their actual verbatim language that you can use across the sales stuff. Go do deep demographic research.” Then build all that stuff up to fine-tune the AI for starting to get some initial rough drafts on copy. 

Taylor Hendricksen (30:21): So this kind of back-and-forth thought partnership thing. And making sure you have good guardrails on it too, because obviously the “Oh, you’re totally right” thing gets thrown in a lot. So having custom instructions like: don’t just placate me, really challenge the thoughts, don’t make stuff up, point out where I’m doing something wrong. I’ve developed some custom frameworks around this to hopefully give it some better rails. What I use it most for is how do you speed up the learning curve and compress that time down? For the trucking company we invested in, it’s a FinTech platform for truckers. Making jokes about Swift, the trucking company, is one of the best things to poke fun at. All these different things I would never have known, but AI basically goes out and does the market research to pull actual quotes from different places. 

Rob Walling (31:02): Taylor Hendricksen, as always, a fount of wisdom. I’m really appreciative of you coming on the show. You are a SaaS Institute coach, as I mentioned, and folks can hit saasinstitute.com if they’re curious about that program. It’s our premium paid coaching program for SaaS founders doing a million or more in ARR. So thanks for all that you’ve given back to the MicroConf and Startups for the Rest of Us community over the years, man. It’s great to have you on the show. 

Taylor Hendricksen (31:29): Thank you for putting everything together and thank you for having me on, Rob. Really appreciate it. 

Rob Walling (31:32): Thanks again to Taylor for taking the time out of his busy schedule to join me on the show, and thanks to you for listening this week and every week. This is Rob Walling signing off from episode 835. 

Rob Walling (00:00): Welcome back to Startups for the Rest of Us. I am your host, Rob Walling, and in this episode I talk with Eric Ries, the founder of the Lean Startup. We revisit some concepts from his seminal work and we also discuss his new book about how to become incorruptible. Before we dive into our conversation, SaaS Institute is my premium coaching program for founders doing a million or more in ARR. We provide a private members-only community designed for candid conversations and trusted connections, invite-only founder events built to spark breakthroughs and accelerate growth. We surround you with a curated circle of peers. These are other ambitious founders at a similar stage to you and they’re tackling the same challenges, as well as one-on-one coaching with experienced SaaS operators and subject matter experts, as well as direct access to mentors across growth, sales, product, finance, and more. 

(00:59): You can find out the full story at SaaSInstitute.com. This is a premium paid coaching program, again, only for founders doing seven or eight figures in ARR and only for SaaS founders at SaaSInstitute.com. And with that, let’s dive into my conversation with Eric Ries. Eric Ries, welcome to the show. 

Eric Ries (01:28): Thank you so much. It’s good to see you. Always good to hang out. 

Rob Walling (01:30): Yeah, it’s been a long time, man, since we saw each other and this was your first time on the show, surprisingly enough. I think I want to have you back on before your next book. 

Eric Ries (01:40): Sure. Yeah. Always a pleasure. 

Rob Walling (01:42): Your new book is Incorruptible and it is out today. Incorruptible.co if folks want to jump straight to Amazon or a local bookstore and grab it. I want to talk today a little bit about Lean Startup, which is what most folks are going to know your name from. But you’ve written now three or four books and this new book is fascinating. It’s based on a lot of hard-won knowledge from working on the Long-Term Stock Exchange as well as a lot of observations that probably only you have, working with these large companies in the capacity that you’ve been doing over the past few years. I think first question before we dive into Lean Startup is: what motivated you to write this book? 

Eric Ries (02:25): The new book? Oh gosh. Yeah, I’ve been busy the last 15 years and as they say, I’ve seen some things. So building Long-Term Stock Exchange, building the other companies that I’ve built, helping hundreds, thousands of people start companies. I’m very proud of all the positive work that’s come out of this movement. The global startup movement together has pioneered everything from incredible bootstrappers to massive venture-backed companies and new institutions of every kind. We’ve really had a lot of positive impact, very proud of all that. But there’s a dark underbelly to this whole thing. There’s a toll, a cost. And we treat it like it’s just inevitable that as companies get bigger, they get betrayed. They cease to be what they stood for. We think that founder burnout, mental health issues, all this, we are accepting a certain amount of carnage that it’s just a necessary cost to get all the good stuff we like out of this system. 

(03:17): But the more I’ve studied, the more I’ve learned, and the more I’ve built, I don’t think that’s true. I actually think we’ve been misled by a whole package of what are today called best practices about how companies are to be built, structured, and governed that are frankly value-destroying. And so we as builders, we get the final say here. We get to decide what the best practices are and I’d like us to have an understanding of how we got into the mess we’re in now and start to work together to develop some new practices for the next generation. 

Rob Walling (03:48): Awesome. And that’s a great tease for the middle of the show when we start diving into your story around the Long-Term Stock Exchange and you have a new definition, or a more complete definition, of profit that I think folks want to stick around and hear. But before we dive into that, I want to ask you about Lean Startup. It’s been around for, is it 15 years now, since 2010-ish? 

Eric Ries (04:10): 2011, yeah. 

Rob Walling (04:11): Yeah, 2011. All right. 15 years. And I would guess almost everyone who is listening here has heard of Lean Startup, but to encapsulate it, I’ve always thought of it as you pulling together some concepts: product-market fit that Andreessen came up with, MVP, I think Frank Robinson maybe. I know you and Steve Blank popularized it. Customer development was a Steve Blank thing. You invented the pivot, the concept of the pivot. You pulled these ingredients together in this recipe. And it’s, as you said, been used by bootstrappers and massive Fortune 500 companies. Some of the 

Eric Ries (04:45): World’s largest. 

Rob Walling (04:46): Oh yeah. It’s incredible. But you’re 15 years in now and do you feel like the ideas within it have held up? How have they shifted? Any recent observations on your part? 

Eric Ries (05:00): Oh, sure. Happy to talk. What a ride. I mean, who could have imagined it would get so big? The book has sold millions of copies and people write to me still basically every day telling me they found it helpful. That to me is always the acid test: are practitioners finding it useful in real life, not just finding it entertaining and enjoyable. That’s great. As an artist, I appreciate that part of it. But I write these books for a reason because I’ve personally witnessed and endured the pain and I personally want to help people get out of that mess. I never ask anybody to try anything I haven’t been willing to try myself. I very much eat the dog food before I ever try to serve it to anyone else. It’s interesting being on this tour talking about the new book. A surprising number of hosts have asked me, do I feel vindicated by what’s happened since I wrote Lean Startup? 

(05:51): Meaning that the AI stuff that’s going on now, the kind of changes the technology platform, they feel like I called it 15 years ago. And I was like, “Really? I don’t really…” Yes, I guess that’s right. And people have been quoting my own work back to me: “Remember when you said this? Remember?” I’m like, “Oh yeah, I guess we did say that.” Fundamentally, Lean Startup I’ve always thought was about the confluence of two mega trends. One is the democratization of access to the tools of building. We take it for granted now that a kid in a garage can compete head to head with a Fortune 500 company in the global marketplace. That’s just normal, but that’s a very new accomplishment as a society. So more and more people could do more and more things because the cycle time is going down. 

(06:34): Things are getting faster. And the second mega trend is that, partly as a result of number one but partly for other reasons too, things are becoming more and more uncertain. So our ability to use the 20th century general management toolkit of planning and forecasting is getting harder. Not that it can’t be used for anything, but entrepreneurship is that special domain of business, of organization building, of building, of making, where we really don’t know what’s going to happen. And that’s exciting, but also it’s a little bit scary. Many of the tools that we have as managers, for holding people accountable, for raising and deploying capital, for figuring out what to do, they require the ability to forecast to work. So as uncertainty increases, our managerial tools break down. And so to me, I feel like that was a pretty good call 15 years ago, that we would see more and more of those two dimensions. 

(07:26): And so we would need to develop tools that are equipped and evolved to handle that environment. And boy, is this a crazy environment. 

Rob Walling (07:35): For folks who don’t remember what it was like before Lean Startup and customer development and MVPs became a concept: in probably 2003 to 2006, I was a software developer by day, engineering manager, and I was just trying to build bootstrap products at night. I would go into the basement and I would code. I wouldn’t talk to anyone. I would come up with an idea and I’d code for 400 hours, 500 hours, put it on the internet, try to market it, and it was just frustration after frustration, wasted swaths of time. And so when I heard about customer development, I was like, “A, that’s really scary,” and an MVP, that concept of launching something that’s minimally viable. 

(08:22): That felt scary and it was not the way we used to do it. We all think that’s just the way everyone does it now, but there was a time when, no, it was just years and years of wasted effort. 

Eric Ries (08:33): Oh, it was really controversial. I can still remember. I tell the story in The Lean Startup of a company called IMVU, one of the first Silicon Valley companies that I was a founder of, and we did all this stuff then. We didn’t have language for it, we just did it. And after that company, I was being asked to advise other companies. I didn’t really understand the way Silicon Valley worked back then, but VCs were all of a sudden my new best friends. I didn’t know why all these VCs wanted to talk to me and invite me into their offices. I would go to these meetings and the VC would set it up and they’d be like, “Hey, we have this company that’s going too slow. Can you sprinkle some of your magic pixie dust on them?” I’d be like, “No, no, no. I’m not smarter than anybody. I don’t have magic pixie dust. I just have a better system, a thinking system.” And they’d be like, “Sure, sure, whatever kid, just go make it happen.” 

(09:13): And I’d have these meetings and people would yell at me. They’d be like, “That’s not true. What you’re describing could never work.” And I’m like, “I’m sorry, I’m just telling you a story of something that I personally witnessed. I’m not even asking you to do anything. You asked me.” At a certain point, some of these meetings ended so badly I would have to say, “Listen, with all respect, you called me. You asked me as a favor to have this meeting and now you’re yelling at me.” That’s really how countercultural it was at the time. I can remember being a student in Steve Blank’s class. 

(09:53): He was one of my investors at IMVU and the deal was we had to audit his class. He had just started teaching customer development at Berkeley Haas School of Business and we would make the trip, my co-founder and I, from Palo Alto all the way through traffic to Berkeley to sit in on Steve’s class. I remember the MBAs just being so skeptical. And yeah, now it’s so gratifying to see that these ideas have taken over. But as a result, a lot of people don’t realize that they ever had to be invented in the first place. So they kind of take for granted: well, of course everybody knows about pivots. Of course everyone knows about MVPs. But no, it’s actually a relatively recent achievement that we have the vocabulary to talk about it. 

(10:36): And one of the things I’ve learned from that experience is that conceptual vocabulary is very valuable. Even people who want to criticize Lean Startup have to carry the meme forward to do so. So by creating an intellectual framework for talking about these issues, we have advanced entrepreneurship itself, even if some of the ideas are wrong, because it helps us get to the right ideas. Now we can reason about and talk about things that before we didn’t have language for. 

Rob Walling (11:02): Talk to me about AI. What parts of Lean Startup do you feel like AI makes easier? 

Eric Ries (11:09): I get this question a lot, but I think the question reflects a misunderstanding. Entrepreneurship is not a solo game. It’s not a single-player game. Imagine you’re playing a single-player video game and someone gives you an auto-clicker that does all the tedious clicking for you. Now you go faster, you’re doing better. Did the tool make you better at this video game? Oh yeah, totally. But what if it was a multiplayer competitive game? Well, if you get the auto-clicker and everybody else gets the auto-clicker too, how did it make you better? Not necessarily. In fact, now the question is whether you can use the tool better than your competitors. 

(11:51): It changes the basis of competition in such a way that it makes some things a lot easier, some things a lot harder. So I think the jury’s still out on what the net effect will be of these tools. Now, many of the specific tactical things that we recommend, if you read The Lean Startup now through modern eyes, you’re like, why didn’t they just use Claude Code for that? 

Rob Walling (12:09): It didn’t exist. 

Eric Ries (12:10): It didn’t exist. None of that stuff existed back then. So of course the stories are outdated in the sense that the timelines and the costs of things are all off because now those timelines and costs are totally different. But that’s why I tried really hard in the book to emphasize principles, not tactics, because principles can endure, but tactics are always tied to the specific economic environment in which they’re invented. 

Rob Walling (12:30): Yeah, like that. Folks who listen to this podcast know I’ve written five books. The first one was very, very tactical. That’s actually when you and I met. I wrote Start Small, Stay Small, published it in 2010, and then I was on the speaking circuit. You and I met and were speaking at several of the same events, lean startup events. 

Eric Ries (12:47): Yeah, sure. I remember those days well. 

Rob Walling (12:48): My first book was so tactical and people loved it and it became outdated in 18 months. And so my later books are much more about principles and concepts. 

Eric Ries (12:59): It’s the only way to write something that’s going to endure. And you see with AI, the durability of these so-called best practices is so short. The prompting tools and guidelines and context management, stuff that we were writing about six months ago, 12 months ago, 18 months ago, is now completely wrong. And what’s interesting to me is how quickly people fixate on the new thing, how quickly things become ossified as just so stories. “Oh, everyone knows now you have to do this to get the most out of an LLM.” And it’s like, no, that was just a quirk of how we were building them in February, but now it’s March and we’re doing it totally differently. The breakthroughs are coming fast and furious. 

Rob Walling (13:36): With customer development, obviously there’s build-measure-learn, and you’re talking to customers and then you go build and then you measure and learn. It feels like AI is shrinking these windows. It just takes less time to build. Does it take less time to measure and learn as well? What’s your experience? 

Eric Ries (13:57): This is the biggest problem with the way we are currently using AI. I tried to make this clear 15 years ago: learning is the unit of progress. Well, who does the learning? 

Rob Walling (14:09): The humans. 

Eric Ries (14:10): It’s still being done by old-fashioned wetware between the ears of the founders. At the end of the day, the rate-limiting step, the fundamental constraint, is how fast can you learn? Now AI can be an incredible learning tool. So I do think the next generation of founders, once we get past the bubble and all the nonsense happening right now, will use these tools not to make artifacts for themselves, but rather to improve their own capabilities. That is the big divide I see in the world of AI today. Yes, if you’re trying to just build and measure, these tools are incredible. You can say, “Go make me a thing. Now make me a new thing.” I have a Claude Code agent running on my laptop right now doing book promo, constantly trying to brainstorm ways to get on social media and make a post that might go viral. 

(14:56): It’s constantly looking at my posts and other people’s posts to see what’s gone viral and using that data. So it’s doing what it thinks is the build-measure-learn step on its own. The problem is it doesn’t do any learning. What they call in-context learning is not learning. It’s just token prediction, next-token guessing. So what happens is it inevitably convinces itself to do average work because that’s what’s in the training data. Unless you really give it a lot of your own learning capability, it just can’t break out of that paradigm. The build and measure can be accelerated, but the learning, if you just send it off to do the artifacts for you, if you have it make a product you don’t understand, if you don’t talk to the customers but have the machine talk to customers for you, it will not actually accelerate what you’re trying to do. 

(15:41): It will actually slow you down. 

Rob Walling (15:43): You and I are in agreement here. I talked just a couple weeks ago on this show about the four core SaaS skills: product development, marketing, and sales. Everything else you can figure out. But I conjecture you need these core skills on a founding team or senior folks if you can hire them. And I was talking about how AI impacts each of these. AI speeds along development. AI can help you with sales and marketing, it can create some stuff, but founders still have to do it. Product, making decisions about what to build next, especially in an early stage, I think AI is not good at that and will not be good at it for a very long time. Which is in line with what you’re saying, because it’s seeking the average. 

(16:25): I hadn’t put it in those terms, but it is seeking average work and an average product isn’t going to do anything for anyone. 

Eric Ries (16:33): Yeah. It’s funny. If you look at the studies on how AI works and how people are using it and how it performs, it makes everyone’s work more average, which for below-average performers is an increase. So a lot of people saying AI is so much smarter are kind of telling on themselves. 

Rob Walling (16:47): Oh, fascinating. 

Eric Ries (16:49): Everyone thinks they use AI writing and it’s so brilliant. But then when they receive AI-written slop, they’re like, “This is terrible.” You can’t tell the difference. The number one finding I think from use of LLMs is that LLMs cause the Dunning-Kruger effect to be magnified. They convince you that you’re more capable than you are while they degrade your actual capabilities. If you use them the way the normal tools are designed, obviously there are some tools designed differently, I help build some of them, but if you use them the normal way, I’m convinced that when we put these vibe coders into an MRI machine while using Claude Code, they’re going to look like slot machine junkies because you’re just saying next, next, next. You’re building stuff that you don’t understand. 

(17:29): And of course it’s only a matter of time before someone vibe codes their way into a massive, mission-critical disaster. When they deploy code, they think they understand it, but they don’t. It’s the psychological effect that’s really damaging. 

Rob Walling (17:39): I want to change it up and get back to Incorruptible, what you’re here to talk about today. You introduced it earlier, why you decided to write it, but one story that I was really compelled by, early in the book, is about the Long-Term Stock Exchange. This is a story I’ve been following since you announced it because I love the concept of it. So for someone who’s never heard of it, can you describe what the idea behind it was and then what happened? I believe you had to shut it down. 

Eric Ries (18:07): No, no, no. On the contrary, LTSE is still going strong and we actually made money last year. Yeah, I know. 

Rob Walling (18:14): Oh my gosh. Okay. This is amazing. 

Eric Ries (18:16): In fact, if you’ve noticed, the SEC is considering eliminating quarterly reporting for the first time in 40 years, and that’s our petition. Now I say our petition, but I have to get out of that habit because of course I don’t run the company anymore. I’ve long since turned it over to a really capable management team who are much better at running a financial services company than I am. But yeah, LTSE is live. It’s interesting that you have that reaction. A lot of people do. It’s very difficult to get attention for it because it’s so different, and press doesn’t like to write about it. So many companies come to me and say, “I’m so glad you’re working on this problem. It would be so great if everybody would adopt your principles.” And I’m like, “Great, would you like to adopt these principles?” “I would love to, but I can’t.” 

(19:01): Would you like to lift a finger in defense of the world you want to see? “No, I can’t do it.” So yeah, I have tremendous respect for the companies that are listing on LTSE. It’s such a leap of faith. And our job is to make it easier and feel less scary. One of my goals with the book is to lay out the long-form argument for why we need new civic infrastructure like LTSE and why companies should vote with their wallets to have the world they want to see happen. For people who don’t know, Long-Term Stock Exchange is the first new listings venue for public equities with its own listing standards, its own ideas about what corporate governance should look like, since the creation of NASDAQ more than 50 years ago. We’re in the same regulatory category as NYSE and NASDAQ. 

(19:45): We compete with them head to head. We list stocks. We trade all the same stocks that they trade. Most people don’t realize that modern stock exchanges are all interconnected through what’s called the national market system. All exchanges trade all the other exchanges’ stocks. It’s not like the old days where traders are in a physical building. In fact, that beautiful marble building in New York that people associate with the New York Stock Exchange is more of a museum than a trading floor. The servers are in New Jersey where the actual trading happens. We have servers in New Jersey too. We do the things the other exchanges do. And I used to wonder, I tell the story in the book, why the major exchanges are all the same. If you look at the rules, the listing standards of all the existing exchanges, they’re almost identical. 

(20:25): And when you ask people why something in the economy is the way it is, they always answer the same way. They say, “Oh, well, that must be the result of Darwinian natural selection because the market selects for value creation. So whatever you see must be the best.” This is maybe the most untrue thing that is commonly believed about markets in the whole world. And I got to learn this the hard way because we were very stubborn when we were trying to get LTSE off the ground. This was many years ago now. We raised money. I had an incredible team who had quit way more lucrative jobs to come on this crazy quest with me. We tried to get this new thing approved and we had partners that we had to work with. We got them to agree to adopt our standards. 

(21:03): We had this petition before the SEC and then we got ambushed. I’ll make a long story short. A group of hedge funds, governance experts, policymakers, and people who were opposed to what we were doing did not want to see us succeed. And they made it really clear. They called me and were very bold about it. They didn’t seem to think there was anything wrong with this or even unusual, which made me think, “Do they do this all the time?” They said, “Look, we are going to see to your destruction. We don’t want to see this happen.” And the first time they said this, I was like, “Look, I’m sorry they don’t like it, but this is America. We’re going to run this experiment and we’re going to compete.” They said, “Your thing is doomed.” That’s okay. 

(21:40): If it’s doomed, why don’t you just sit back and watch it fail? Why are you bothering me? They’re like, “No, you don’t understand. We will lean on every one of your partners and make them cancel their contracts with you because every one of your partners needs stuff from us that they care about more than this.” And I was like, “Again, why are you going to such efforts? Do you think there’s something wrong?” They were like, “No, it’s not that we think your ideas won’t work. It’s actually that we think they’re too good.” I know this sounds ridiculous, but they were like, “We’re worried that if you succeed, you will take attention away from the reforms we want to see happen. We want the markets to go in a certain direction and we can’t have an unauthorized person like you messing up our plans.” And I was so naive. 

(22:23): They leaned on one partner after another and the partners would call me and say, “Listen, can you just give these people what they want?” And finally I was like, “I don’t even know what they want. They want me to die. How can I do that?” I tell the story in the book: they timed it perfectly. I was away from my team, thousands of miles away, in the wrong time zone. It was the middle of the night. They finally called me and said, “Listen, all these problems can be made to go away.” Oh, really? Just a small thing. We just want you to change your listing standards to be the same as everybody else’s. And if you do that, why don’t you live to fight another day? And I was like, “Oh, now I understand why everything is the way it is.” 

(22:59): So I gathered my team. It was the middle of the night. I said, “Everybody, look, here’s the deal. I think if we say no, we’re going to go bankrupt. I really don’t see how we can survive. It’s a very small compromise they’re asking for. I wouldn’t blame any of you if you want to do it.” From the career perspective of all the people on my team, just getting any exchange approved would be a really big deal, a feather in their cap they could trade on for the rest of their careers. On the other hand, we had built this company to stand for something. We built it so that we would help other companies stand for something. We didn’t realize those tools would save us first. So anyway, I asked everyone on that team that night, yes or no, and every single person said no. No deal. 

(23:40): And I say in the book, I wish I could say it was my visionary leadership that got us through that night, but of course I was the one curled up on the bathroom floor. That line about being on the bathroom floor, when test readers who were not founders read the book, they were like, “What’s the big deal? I don’t understand why you were on the bathroom floor.” And everyone who’s a founder understands immediately. They were like, “Why is it so…” I was like, “My body thought I was going to die. That’s what was so bad about it.” 

(24:14): When you become ego-identified with the thing you make, what happens to it happens to you. And so I thought we had died to save a principle. Now it turns out, as these things often are in retrospect, this was the best thing that ever happened to the company. Because of these principles, we were able eventually to recover, to get something approved. And like I said, we make money, we list companies, it’s a going concern right now. Yet it left me with this feeling that there was a lot more going on in the economy than I previously understood. And I think that was a big important part of what led me to want to understand: how do these systems work, and what is the role that we as founders play in this ecosystem? 

(24:54): And I think actually we are the ones propping this whole thing up. It works the way it works because we permit it. 

Rob Walling (25:00): Right. And in the book you talk about a more complete definition of profit. Can you share what that definition is and why it’s so important? 

Eric Ries (25:13): So if you ask any founder what it means to be a for-profit company, they look at you like, really, everyone knows what that is. You’re like, but indulge me, what does it mean to make a profit? Easy. Take a $50 piece of wood, turn it into a $200 table, I have $150 in profit. Revenue minus expenses, come on. But if you’ve taken an economics class, you will know that there are some bugs in this definition. For example, ask people: is a Ponzi scheme profitable? And they really don’t want to say yes. What I’ve found is we have an intuitive understanding, what I call the builder’s intuition, about the right way to make money, but we carry around a mental definition of profit that is not aligned, and the divergence creates real cognitive dissonance. 

(26:02): Builders are like, “I don’t want to say that a Ponzi scheme is profitable.” Okay, well, what’s the problem with it? Well, if they think for a second, they’re like, “Well, it creates massive deferred liabilities that have to be paid out eventually.” So yeah, it’s revenue minus cost, but you have to take all costs into account. Not just the current period, but costs out into the future. But does that mean a company that creates a toxic waste dump and gets away with it is profitable? I’m like, of course it’s profitable, but is it? If they’re going to have to pay for the cleanup, isn’t that just a deferred liability? They’ll be like, “Oh yeah, I guess you’re right.” But now what if instead of putting a toxic waste dump in my backyard, I dump my pollution in the river and the town downstream gets sick and people die. 

(26:45): Imagine I get away with it. Is it profitable? They’re like, “Yeah, of course it’s profitable. You’re not responsible for their healthcare.” But did that really create value? You said before that if I moved the expenses in time, they still count. Here I’ve moved the expenses in space. I’ve moved them from my books to the books of the town downstream. Does that make them any less real? Most people are like, “Oh yeah, I guess not.” In economics, this is called negative externalities. If you’ve taken an economics class, these bugs are well known. The conventional definition of profit ignores negative externalities. But if you’re willing to accept that negative externalities have to be counted as part of the profit definition, now we have big problems. Because what if my product is addictive? What if it is damaging to the health of my customers? What if their communities are fragmented or destroyed? 

(27:26): It’s starting to get complicated. And it actually gets even worse. I said before I take a $50 piece of wood and turn it into a $200 table. But what about this: what if I steal a $200 piece of wood and make a $100 table? Is that profitable? Again, imagine I get away with it. No one ever finds out. Most people will be like, “No, because you didn’t account properly for the input factors of production.” Oh, what are those? Well, you have to account for the value, not just the cost, the value of everything that was consumed in the creation of the thing. The second you admit that you have to make this accounting move, now you have a new problem. 

(28:13): What if a human life is one of the input factors of production? People say, “That’s absurd. Nobody does that.” I’m like, “Okay, imagine I make a hitman-for-hire dark web business. Give me Bitcoin, I’ll kill anybody you want. Is it profitable?” People hate this one. They’ll be like, “It’s profitable, but unethical.” Then they’ll be like, “Oh, it’s illegal.” I’m like, “Okay, but what if I made so much money on the dark web that I could lobby the government to have it made legal?” Now is it profitable? It’s not ethical, but is it profitable? And eventually people will pretty much always admit that it’s not profitable, because of course a human life is precious. If it’s destroyed to make $6,000, how is that a good trade? But then you’re like, 

(29:00): “So you’re saying that Philip Morris International is not profitable? Are you sure? Data says that tobacco companies make about $6,000 per death, so that’s how they value a human life.” And as soon as you say, wait, if Philip Morris isn’t profitable, you’re saying that hardly any companies on this planet are profitable. Yeah. So we have to have a better definition of profit, one that we can use as an operating goal, a North Star as builders. What I think is the better one: to make a profit is simply to maximize human flourishing. If we leave human beings better off than we found them, we have created profit. Otherwise, we have destroyed it. That solves every one of the problems we just talked about. And although that sounds abstract, it’s super concrete. If you enact this as a company’s mission or purpose, it helps with so many situations that most companies run into today. 

(29:49): It makes it much easier to build a company that people can trust. Most company charters, if you’re a Delaware C Corp, say: “The Acme Corporation is hereby incorporated to pursue any lawful act or activity.” Any lawful act or activity is pretty open-ended. So I say, go tell your lawyer that you want to narrow it. You want to write down, “I want to maximize human flourishing by making a thing.” Your lawyer will be like, “Listen, keep your options open. Maximum valuation is to be had by maximum optionality.” And if they say that, I want you to ask them: “Does that include the option to turn my customers into Soylent Green and eat them?” Most normal people will be like, “Of course we should write that out of the charter.” But most lawyers will say, “You never know what you might need to do.” 

(30:44): And we’re like, “Why don’t people trust me?” So instead we want to write into the corporate charter that the company exists to do a thing, to make a thing. Tim O’Reilly calls this “create more value than you capture.” And when we do that, we’re by definition making the world a better place through our own profit. I call that the builder’s intuition: the intuitive understanding that the best way to make money is to create a bunch of new value in the world and capture some of it for yourself. But this isn’t a surprisingly radical statement. Because once you admit this, if you tell me that your goal is to do something as humble as to make a great product or bring a little efficiency or beauty into customers’ lives or improve health, you are already a business revolutionary, whether you admit it or not. You are building this company in a business culture that treats all forms of making money as equally good, and therefore extraction and exploitation are its watchwords. 

(31:43): So yeah, proceed carefully. 

Rob Walling (31:45): Someone listening to this, I think it’s an amazing definition. As you spelled it out, it starts off pretty subtle and then by the end it’s like, “Oh no, this is very different from the way corporate America runs these days.” Someone listening might think this is very idealistic and no company runs this way today. But you talk in the book about some examples of companies that do. You mention Patagonia, Costco, Anthropic, you have several examples. As we wrap up, can you give someone an example of a company that you think is already living this way? 

Eric Ries (32:18): Oh, Patagonia. 

Rob Walling (32:19): Patagonia. Yes. But also like Costco. Anthropic. You have several examples. As we wrap up, can you give someone an example? 

Eric Ries (32:31): Can I illustrate with a story? 

Rob Walling (32:33): Please. 

Eric Ries (32:33): Maybe it’s more valuable than an abstract concept. I want to tell you the legend of Saul Price, who many people today don’t remember, but he is actually the father of modern retail. He’s so influential that when Sam Walton was thinking of getting into the retail business and trying to figure out what he should name his company, the reason he chose Walmart was as a tribute to the company Saul Price had created: FedMart. Let me tell you about FedMart. Saul was a lawyer before he became an entrepreneur, and when he was a lawyer, he was trained that he had what’s called a fiduciary duty to his client, meaning you have to put the client’s interest before your own. That’s what we all want from our lawyer. So when he became a retailer, he asked himself a simple question: “Who’s my client?” And he said, “Oh, the customer is my client.” So he had what’s called a fiduciary hierarchy in his philosophy: customers first, employees second, shareholders last. 

(33:24): You will find this pattern in a lot of the greatest companies in history, shareholders last. Unfortunately, we live in the era of shareholder primacy where we’re taught to put shareholders first. So what did it mean to be a fiduciary to the customer? Saul believed that his job was to look out for the interests of his customers no matter what. So for example, when his competitors would try the loss leader strategy on him where they would dump products below their own costs to drive people out of FedMart, Saul would post signs all over FedMart saying, “Hey, don’t buy this product from me. You can get it cheaper down the street.” Can you imagine anyone doing that today? It’s extremely rare. That was FedMart. So customers loved FedMart. They would drive way out of their way to shop there. Company grew, it was a huge success. 

(34:08): So successful that he took it public. But when he was a public company, he felt this financial gravity always pulling on him trying to make him more mediocre, force FedMart to act on best practices. Investors constantly were on him for higher prices and lower wages, but he believed in low prices and high wages. He’s like, “This is the engine that makes this work. Why are you trying to ruin it?” So as a lot of entrepreneurs have tried over the years, Saul took the company private again, buying out all the investors and bringing in new investors. They owned 51%, he owned 49%, and this solved exactly zero of his problems because his new board was still in the hypnotic spell of these best practices. They wanted higher prices, lower wages, faster growth, retail best practices. 

(34:57): So Saul was a completely uncompromising SOB and would not give them what they wanted. So one day in 1975, Saul comes into work and he can’t get into his own office because they’ve changed the locks on his door. He doesn’t work there anymore. What happened next is like one of those natural A/B test experiments you see in business history sometimes. In the A corner, we have the FedMart investors. They got what they wanted. Saul was gone. FedMart was converted to conventional best practices and within seven years, they had driven it into bankruptcy. It took Saul 20 years to create what they were able to destroy in seven. In the B corner, we have Saul. Now, did he retire? Did he complain about how unfair life as an entrepreneur was? No. Saul took two weeks off and then he was back at work. 

(35:44): He leased the office upstairs from FedMart headquarters and started a new company, which he called the Price Company. Their product was called Price Club. And when I was a kid, Price Club was like the dominant retailer I would shop at with my family. Costco and Price Club were the two. 

(36:01): But most people don’t remember Price Club anymore because, as you’ve foreshadowed, one of the people who left FedMart to go to Price Club with Saul was a guy named Jim Sinegal. He had worked his way up from stockboy to executive at FedMart. Saul was a big believer in promoting from within, which is why his companies had such coherence to them. Saul and Jim both understood that there was an engine that made FedMart work, and once you break the engine, destruction follows. But the positive side of that is because they knew it was an engine, they knew they could do it again. So they created Price Club. Price Club was a big success, and with Saul’s blessing, Jim left to start his own new company. And eventually the two companies were merged to create a company they called Price Costco. 

Rob Walling (36:44): I remember that. Clunky name, but I totally remember. 

Eric Ries (36:47): We remember. 

(36:48): Now it’s just called Costco. Today, Costco is a $400 billion public company. To get a sense of how big Costco is: Costco is so big that its house brand, Kirkland Signature, if that was a standalone company, would be bigger than United Airlines, Procter and Gamble, or Coca-Cola. And that’s just their house brand. Costco is massive. But why was FedMart destroyed while Costco hasn’t been? Costco’s been going for 40 years now. Jim Sinegal has long since retired, yet the ethos endures. Why? This is the double mystery of this book. First, why does this happen? Why would investors kill the golden goose? People say, “Well, it’s inevitable.” But if it’s inevitable, why are there exceptions? Why is Costco the exception? So to build an incorruptible company, one that can be one of these exceptions, we need two things. 

(37:36): We need the ethos of Saul Price, the fiduciary commitment to customers and employees, not just shareholders. We need the trustworthiness that that way of working creates. But we also need the integrity of Jim Sinegal. When Jim took Costco public, he encoded the company inside a governance fortress that protects it from outside meddling. That’s why when I say Costco is a high-integrity company, I don’t just mean they’re ethical. I mean they’re able to make and keep promises, an ability that most modern companies cannot. So that’s incorruptible in a nutshell: ethos plus integrity. 

Rob Walling (38:12): Amazing. Eric, thanks so much for joining me on the show today. As I mentioned at the top of the show, incorruptible.co if folks want to buy the book, it is out today. And if folks want to keep up with you on the internet, they can scroll down to the bottom and put their email address in to subscribe to your list. 

Eric Ries (38:29): Please do, please join the mailing list. We have so many cool bonuses for those that order today or this week: a secret chapter, implementation guides for those that want that, reader’s guides for those that want that. So we tried really hard to make it as worthwhile as possible to act now, not wait. Thank you very much. And if you feel like it, on the website you can also see lists of many, many independent booksellers all around the country that are carrying the book. So you can buy the book in hardcover, eBook, or audiobook, wherever books are sold, but if you want to support your own local community at the same time, maybe buy at an independent bookstore. 

Rob Walling (38:59): And you’re doing a book tour. If folks want to see where you’re at and read news stories and see if you’re in their city, how is incorruptiblegoing.com? 

Eric Ries (39:10): Yeah. All the latest and greatest will always be there. 

Rob Walling (39:14): Thanks again for joining me, Eric. 

Eric Ries (39:15): My pleasure. Thanks a lot. 

Rob Walling (39:17): Thanks again to Eric for coming on the show. And as a reminder, if you want to order the book, you can search for it on Amazon or head to incorruptible.co and it will be for sale wherever great books are sold. Thanks so much for listening this week and every week. This is Rob Walling signing off from episode 834. 

Rob Walling (00:00): Imagine this: you’re about to close a massive deal. You’ve been grinding for it, you’re pumped. And then your customer’s legal team decides to make things interesting. What happens if you get hacked? How do you protect our data? And your brain just goes blank. That’s the nightmare founders deal with all the time. That’s exactly what Ysecurity solves. They are 40 security engineers who’ve actually done security at Apple, Uber, Microsoft, Robinhood, Brex, and more. And get this: you don’t hire them, you rent them by the hour. No massive salary, no expensive consultants, just real experts embedded in your company helping you get SOC 2, ISO, whatever you need. Set a monthly cap, know exactly what you’re spending, and close the deal. Head to ysecurity.io/startups and book your free strategy call. Your first eight hours are free. 40 engineers, one full working day, totally free. Go take it. 

(00:57): ysecurity.io/startups. That’s the letter Y: ysecurity.io/startups. Welcome back to another episode of Startups for the Rest of Us. I’m your host, Rob Walling, and in this episode I’m going to talk through some solo topics. The first one is about how a TinySeed founder who found they didn’t have product-market fit just started generating $10,000-$15,000 a month in quasi-consulting revenue. It’s really customer development mixed with project-based work, and I was impressed with how quickly they pulled this off. I’m going to talk about what separates Nobel Prize winners from forgotten researchers, and one or two other topics as time allows. Before I dive into those topics, tickets for MicroConf Europe are going fast. We will sell this event out. We’ve sold out all our events for the past several years. MicroConf Europe is in Reykjavik, Iceland from September 21st through the 23rd of this year. We have incredible speakers coming to this event, our world-class hallway track. 

(02:05): And of course, producer Sonya is lining up some amazing excursions to hot springs, thermal spas, and a distillery. microconf.com/europe if you want to check that out and grab your ticket. Tickets will never be cheaper than they are today. And if you or your company are interested in supporting the event and getting in front of a couple hundred founders, mostly focused on B2B SaaS, you should consider sponsoring. Shoot us a note at sponsors@microconf.com and my trusty team will get back to you ASAP. 

(02:46): My first topic of the day is about a TinySeed company called BlinkMetrics at blinkmetrics.com. I did get permission from the founders to tell this story. I was going to anonymize it and then I was talking to Nathan Tyler, one of the co-founders, and mentioned I was going to talk about this on the podcast and he said, “Oh, just use the name. Tell them what we’re up to.” And I really appreciated that because the story is an interesting one. So we accepted BlinkMetrics into TinySeed earlier than a lot of other TinySeed companies. Nathan has had a nice exit under his belt, so he’s a serial entrepreneur and someone we put faith in to execute alongside his co-founder. And so they were building BlinkMetrics, purely as a B2B SaaS, and had some early traction. They came into a batch, I don’t even know if it’s 18 months ago. 

(03:41): I lose track of it these days. And what they found is that what they were selling wasn’t resonating. Their product-market fit was very weak or non-existent, and they were struggling to make sales and struggling to retain people, tweaking with the pricing. But in true entrepreneur startup founder form, they have iterated so quickly, tried a lot of things, and been right on enough of them that they’re starting to see some traction. So Nathan in particular and I have gone back and forth with Loom videos and Slack voice messages, having these async conversations about approaches that he and his co-founder are trying. And one of the things he eventually decided to try, he was asking me what I thought about it, was the approach of: look, I want to do some consulting and project-based work to serve both as revenue for the company, because the company wasn’t really making any money, but also as customer development to find out what people really need. 

(04:42): And before I continue, BlinkMetrics, the H1 today is “Take your business reporting out of spreadsheets for good.” You know the data is somewhere in your CRM, finance, and operations tools. BlinkMetrics pulls it all together into live dashboards that finally answer the questions your individual tools can’t. And as I’ve talked about on this show, building analytics dashboards is a tough space because they’re often vitamins, not aspirins. And that’s what BlinkMetrics was running into. And so they decided to take a pretty bold move. If you go to their custom dashboards page today, you can see they have just three pricing plans and they are effectively one-time. They have a $5,000 custom reporting dashboard done in 30 days, done for you, with a lot of custom code and custom integrations with apps. There’s a $10,000 one if you need a few more things, and then there’s a custom one starting at $25,000 and going up from there. 

(05:39): And I’ve seen founders both inside TinySeed and out try to do the consulting-to-product path, and it is challenging. There are a lot of challenges that go along with it. If you can’t see commonalities between all of the projects, then you’re basically just a dev shop. And if you can’t charge enough to make really strong margins, you find yourself on a hamster wheel of never-ending code writing and you can’t productize it. It’s a trap that a lot of consulting firms and agencies fall into and they’re never able to get away from that instant infusion of cash when you can charge $5,000, $10,000, or $25,000 for a few weeks of work. It makes it hard to then go try to build a business on $50 a month. 

(06:24): And so Nathan and I had a lot of conversations about this. The interesting thing is he came back, a month or two after one of our conversations, and said, “Well, I’ve been generating between $10,000 and $20,000 a month in this project work and we are learning a ton.” And I thought to myself, and I realized both he and I had been talking down about it, being like, “Yeah, it’s kind of not working and you have this consulting stuff you’re doing.” But then he said, “Well, some of it is turning into recurring revenue.” So some folks are paying $500 or $1,000 a month. It’s a pretty substantial amount of MRR with most projects. So the MRR is actually starting to build. Talk about customer development. Most people don’t do customer development to this level, where you are truly building mostly custom software and then able to find the commonalities. 

(07:23): But the really interesting thing was just how I was like, “Yeah, it’s not SaaS, so the revenue isn’t worth much.” That was kind of the way I was talking about it. And then I realized it’s pretty incredible. Think about what they’ve done: within a month or two of deciding to do this, they’re bringing in between $10,000 and $20,000 a month in project revenue. But it’s cash. It’s cash that allows them to pay the bills and to keep the company going. And I just had the realization at a certain point that as entrepreneurs, we often just make things out of nothing. From nowhere, suddenly this business is a six-figure ARR company that will support both founders until they can figure out how to turn this into recurring revenue. And it’s such an incredible luxury that we are able to do that. I asked Nathan, “Ten years ago when you were working a day job, did you ever think you could just spin up a business doing $10,000-$20,000 a month effectively overnight?” I mean, they had a website, that was it. 

(08:31): They didn’t have a bunch of incoming leads or anything, and all of a sudden this business is doing this. And he said, “No, I kind of take it for granted these days.” And that’s the thing when you talk about entrepreneurs who execute and just get it done: they kind of take it for granted. And I was doing that in our conversations as well. I actually asked him, “I don’t think you have a ton of traffic, but how are you finding these new clients?” And he said in a Slack message, “Nothing secret. LinkedIn, networking groups, coffee chats. I did 104 coffee chat type calls in Q1, which yielded 24 sales calls, which landed enough deals.” So it’s just putting in the work that has led to this. And I’ll say it’s not about never giving up. I don’t mean you should never pivot. This is in fact a pivot. But the fact that they’re keeping this business alive, learning things, and seeing commonalities between these dashboards, they discovered a whole new customer type. 

(09:20): There are partners, agencies, and fractional CFOs, EOS integrators who want this type of thing, and they don’t just want a $100 or $200 a month dashboard. They want something that’s pretty complicated to set up. But Nathan is technical, he’s a developer, and so he’s able to get this going. The other thing he pointed out to me is that back in the day this would be a lot of manual, grindy work, but AI makes it way faster. He said, “The fundamental economics have changed.” The API connectors to do new integrations, AI is actually really good at building those and writing all the unit tests and smoke tests. He was telling me, “I think this could go from 30 days down to delivering in seven days. 

(10:25): And there are some I think we could get to the point where we could deliver in a day or two, in essence.” And so that’s obvious once he said it, but it hadn’t occurred to me just how valuable this model might actually be. And so you might say, “Well, can’t anyone just spin up AI and do this?” And it’s like, yeah, but these fractional CFOs and EOS integrators don’t want to do that and they don’t want to host this software. And if you just use AI without a bunch of controls, it will hallucinate, data can be wrong, code can be buggy and insecure. And effectively BlinkMetrics is taking care of that. So not only are they generating revenue and discovering new customer channels and picking up on commonalities, but they are also turning a significant number of these projects into more SaaS-based subscriptions. 

(11:11): And if someone paid $5,000 or $10,000 upfront to have custom software written, think of how sticky that is. They’re not going to cancel in three months or six months. The LTV on this is going to be high. The churn is going to be very, very small, if not net negative. And so I wanted to call out the BlinkMetrics case study for a couple reasons. Number one, being a founder and being able to just make something out of nothing is so impressive. And I think a lot of us take that for granted. If someone came to me and said, “Yeah, I’m doing $20,000 a month in consulting work,” my initial thought would be, “Oh, I’m sorry,” because I am so immersed in the SaaS space where everything’s recurring and that’s where the value is. And that’s true, but also let’s just take a moment and be grateful. 

(11:56): If we can support ourselves with our own products or whatever we’re doing, just how impressive that actually is. And how the version of us from 10 years or 20 years ago would be so impressed and so happy with what we’re building. And then secondarily, I wanted to maybe give a bit of inspiration. If you’re out there doing consulting work and trying to get into a more SaaS-based model, I think BlinkMetrics is going to make this work. They really are on that trajectory, and that wasn’t the case even three or four months ago. It changed very quickly with a lot of focused effort: 104 coffee chats, 24 sales calls, executing with AI, and just grinding through a lot of stuff that’s probably not fun at this stage. 

(12:47): But my hope is that BlinkMetrics is going to build an incredible business. My next topic is what separates Nobel Prize winners from forgotten researchers. This is a tweet that I will link up in the show notes, and this tweet effectively tells a story of Bell Labs and a man named Claude Shannon who gave a lecture in 1986 that explains why some people win Nobel Prizes and other equally smart people spend their whole lives doing forgettable work. He had spent 30 years at Bell Labs observing those who succeeded and those who didn’t. And he talked about several habits that the Nobel Prize winners had. The first one was that most scientists deliberately avoided the most important problems in their field because the odds of failure are too high. So they would pick a safe, adjacent problem, solve it cleanly, publish it and move on. But because they never took swings at hard problems, they never knocked it out of the park. 

(13:48): That’s what it takes to win a Nobel Prize. The second habit was about doors, like the doors to their offices. He noticed that the scientists at Bell Labs who kept their office doors closed got more done in the short term because they had no interruptions. But the scientists who kept their doors open got more done over their careers. The open-door scientists were interrupted constantly, but they also absorbed every new idea passing through the hallway. Ten years in, they were working on problems that the closed-door scientists did not even know existed. The third habit was inversion. One example is a scientist who Bell Labs refused to give a team of programmers. So he flipped the question and asked why machines could not write the programs themselves, and that single inversion pushed him into the frontier of computer science. 

(14:40): So it’s thinking about the same problem in a different way. The fourth habit was that knowledge and productivity compound like interest. Someone who works 10% harder than you do does not produce 10% more over a career. They produce twice as much. The gap doesn’t add. It multiplies, and it compounds silently for years before anyone notices. This last one hits me the hardest, because over my career I’ve seen founders who show up wanting that instant quick hit of success, and sometimes they get it. Sometimes you get lucky. But I don’t want to base my approaches or my advice on getting lucky. The founders I see who show up day after day, year after year, shipping and thinking in terms of years, not months, as I often say on this show, are many of the folks who have outsized outcomes. You can look at my product career in the early days, just plodding along, making nothing for several years, then making a few thousand dollars a month, then maybe $10,000 or $20,000 a month. 

(15:43): And then suddenly, after 11 years of grinding, having this massive, successful multimillion-dollar company in Drip and having that exit to where I didn’t have to work again after 2016. It seemed to come out of nowhere, but it didn’t. It was shipping software for years. It was learning marketing for years. It was shipping this podcast 52 weeks a year, running MicroConf. It was a lot of things that compounded to contribute to that success. And then even beyond that, if you look at MicroConf and TinySeed these days and the success of this podcast and the YouTube channel, all of that has taken years and years to build. So this idea that 10% harder produces 10% more: it doesn’t add, it multiplies. And obviously if you get lucky and knock one out of the park early, good for you, but that shouldn’t be your expectation going in. 

(16:45): Going back to the second habit, keeping doors open, I think of that these days as being in community with other founders. And I hesitate to say social media because social media is such fake community. I think more along the lines of actually meeting folks in person at in-person events. And not just because I run in-person events. I also think of private Slack channels where it truly is community. I’m in a few private Slack channels with other founder groups, and I think consuming content like this podcast, where there is a community of folks sending in questions and guesting on the show to give back, whether they’re being interviewed about their experience or answering listener questions, to me that is keeping your door open. 

(17:38): It allows you to absorb new ideas as they pass through the hallway, so to speak. And it’s not just this podcast. There are other podcasts that I think are good for bootstrappers and SaaS founders. And then the first habit was about not picking a safe, adjacent problem and solving it cleanly, but taking bigger swings. I think this could be looked at two ways. We could say if you’re not building a billion-dollar company, you’re being too safe, but I don’t think that applies in our space. That’s not how I think about it. I think of this as just generally staying in your comfort zone versus being willing to fail and get uncomfortable. And sometimes that means having a nice, safe business doing $10K a month and pivoting that into something that is much bigger, or at least has bigger potential, but is going to be hard and scary. 

(18:28): And that is exactly what we did with Drip: the story of the early days of plateauing at $8,000 or $10,000 a month and then pivoting into a multimillion-dollar business. That was tough. It was a lot of work and it was not glamorous, but that was the big swing that we took. I also think about it as, in your business day to day, are you working on the safe stuff? Are you staying in your comfort zone, writing the code or whatever it is that’s predictable and certain? Or are you doing the scary, risky, uncertain things: trying the new marketing approach that may never come to fruition, making cold calls and cold emails, doing the grindy thing that, if it works, has asymmetric upside and will change the course of your business and potentially your life. 

(19:16): But doing that makes you uncomfortable. It’s unlikely that the biggest risk in your business is something you can safely fix while staying in your comfort zone. And that’s what I like about this first habit. So I hope you enjoyed that walkthrough of Nobel Prize winner habits. My next topic is also a tweet. It’s from barretto@tiiny.com, but it’s T-I-I-N-Y.com. I’ll link that tweet up in the show notes. Someone had asked them, “It’s been years since you started. Most builders are launching apps like there’s no tomorrow, within 48 hours and the like. But you, years in the making. What’s your take on working on a project until it’s really successful versus launching several apps quickly?” Barretto has built Tiiny Host, which is tiiny.host, the simplest way to host and share your work online. I believe it’s bootstrapped and he’s the solo founder, and it’s doing more than a million a year. 

(20:19): And I enjoyed his response. He said, “This is one of the reasons indie hackers are not succeeding. I picked one idea, but in reality one problem space, and I dived deep into it for five-plus years. The idea didn’t instantly work out, but I learned a lot, navigated, and found product-market fit.” And then you see folks below, of course, chiming in, a thousand percent. Posted about this recently: vibe coders, focus on one problem or sector over a long time so it can compound. So obviously this depends on your goals. If you want to get a lot of things into production and potentially get lucky, then you probably want to build a bunch of things and see what sticks. But I continue to see evidence from folks who have built great things without a lot of luck and without a huge social media audience, but got in, solved a problem, and had to focus on it for a long time. It doesn’t need to be five years for you, but this continues to support that thesis. 

(21:06): And my last topic for today is around an Instagram post featuring several pro basketball players warming up on a court. Steph Curry takes two shots and misses both of them and he says, “The rim is off.” The measurements of the rim, it’s supposed to be exactly 10 feet. It’s not right. He has such confidence in his own ability and feel that he’s questioning the height of the rim. In the video they measure it and it’s off by, I don’t know, like an inch, maybe an inch and a half. 

(22:00): It’s kind of hard to tell. A very, very small amount that no one else could tell, but he is such a professional with such incredible feel that he was able to detect that with almost pure intuition. And then there are a couple other clips of folks dribbling on a court, the ball bouncing slightly different than they expect, and they say, “There’s an issue here, like under this board, it’s like a dead spot.” You see them just being really puzzled by it, and then people come out and they realize there’s a dead spot on the floor. Watching these clips on Instagram actually reminded me of when I used to run track. I ran track for nine years in high school and college and we used to run a lot of 200s in practice. In a given week, depending on the workout, you might do 10 or 15 200s, or maybe 20 or 30 in a given week, to build up speed and endurance. 

(22:49): And I could tell within about a half second how fast the 200 I just ran was. We would run as a group and I remember running a bunch of 200s with my dad timing and my brother there. We’d run one and I’d say, “28.5.” And he said, “Yeah, 28.7.” I said, “Cool.” Then we’d run another one and I’d say, “28 flat.” And he was like, “Yeah, it was 27.9.” And he said, “You really have a good feel for this.” And I remember it was just something I did so much. I wasn’t even thinking about it. It just felt that way. 

(23:31): And the idea here is that when you do something so much, you gain an expertise and an intuition, in quotes, an intuition that looks like magic to an observer. Part of it is pattern recognition, a bit of repetition, and you learn how that vibe is. How many shots do you think Steph Curry has made from the three-point line? He knows when it leaves his hand if it’s going to go in or not. He knows way before it hits the rim whether it’s going in. And so when he feels it and he’s like, “Yeah, that’s going to go in,” and it doesn’t, he’s like, “Oh, that’s weird.” He does it one more time, he’s like, “No, something’s off here.” It’s the same with any expertise. As a chef, you get the feel and taste for things. As a startup founder, you start to get the feel of where you should be focusing in your business. You start to get this feel of, “Ooh, this part’s making me uncomfortable. This is probably where I need to be focused right now.” 

(24:13): People ask, “What do the best founders you know do differently than those that fail?” And a lot of it is figuring out where they should be focusing their time and how to execute on that. And so if the biggest bottleneck in your business is marketing and sales, but that makes you uncomfortable, or you just want to post on Twitter, or you get into marketing and sales but you kind of half-ass it and you don’t really focus on anything, you don’t really do the parts you don’t want to do, you’re going to find that you’re never going to get better at those. 

(24:58): You’re never going to get this expertise that looks like magic. When you ask Derrick Reimer, “How did you decide to build that feature or not build that next feature?” it might look like magic. How do you make such good product decisions? Well, it kind of looks like magic, but Derrick’s been building products for at least 17 years, maybe more. You ask Ruben Gamez how he knows what to focus on next when he’s working on SignWell: he has a process. He looks at the business and gets a gut feel of where the bottleneck is, and then either focuses on that himself or hires someone to do it. He doesn’t half-ass it. He goes all in on it to figure it out, and he knows that if he puts effort into it, he’s just going to make it work. He has that confidence. 

(25:48): And if it doesn’t work, it’s okay, because he’ll do the next thing, and you don’t have to be right all the time. You can be right 60% of the time and be pretty well off. When you look at some of the founders who’ve come on this show who have bootstrapped to $50 million exits, $80 million, $100 million exits, literally bootstrapped with one or two co-founders, and you listen back to what they did, they generally worked on the right things. They got a lot done and they generally worked on the areas of uncertainty, and they up-leveled their skills. They didn’t say, “Well, I don’t really know how to participate in a Reddit forum or a Facebook group. I don’t really know marketing. I don’t know how to do sales. Maybe I need to read a bunch of books about it.” Maybe you do, but you also probably need to dive in and just figure it out while learning from those who have done it before you. Just having that confidence and building that repetitive muscle of doing these things often. 

(26:50): Doing new things that scare you often, and that ability and willingness to learn new things and get outside your comfort zone will build expertise in you that looks like magic. When I started Drip, I had a lot of confidence that it would succeed, and a lot of confidence it would succeed very quickly. The latter part was not true. It took us a lot longer than I thought. But I did have this confidence that I could figure it out because I’d figured out a bunch of smaller things along the way as I’d stair-stepped up. Then after Drip, I had even more confidence that whatever I did next, even if it was bigger, scarier, more stressful, with more on the line, I would be able to make it work because I had built that muscle and a bit of expertise that to an outsider might feel like magic. 

(27:42): But in addition to the 21, 22 years that I’ve been thinking about this stuff and writing about it and launching really poor ideas in the early days, I’ve been recording 833 episodes of this podcast and three or four hundred YouTube videos over the past five years, writing five books. I actually just completed the manuscript of my sixth book. And I haven’t always been right, far from it. But if you show up every day and you think in terms of years, not months, and you put in the work and work on the things, some things that scare you, doesn’t always have to be, but the areas of uncertainty in your business, I have a hard time imagining you’re not going to build some incredible expertise that looks like magic. Thanks so much for joining me for this episode. It’s great to be able to talk into a microphone and know that tens of thousands of people will listen to it, and some will be impacted and some will be inspired, and for some it will change your life. 

(28:44): This is why I keep doing this: shipping podcasts, YouTube videos and books, starting TinySeed, running MicroConf. It really is the best job I’ve ever had. So thanks for being part of that. Thanks for listening this week and every week. This is Rob Walling signing off from episode 833.