Episodes

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. 

Rob Walling (00:00): 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 do a lightning round of listener questions. In fact, I’m going to take as many of the written listener questions, the text questions that we receive and crank through them with probably shorter than usual answers. The challenge is we get a lot of questions here at the show and it’s great. It makes for great content. It allows you as a listener to hear other voices and to hear what folks are working on. And frankly, they may ask questions that you’ve never thought of. And that can help make us all just a little bit smarter and get there a little bit faster. But I tend to put audio and video questions to the top of the stack. Every now and again, I fudge that rule. 

(00:48): But as a result, our text questions pile up. And I have some questions here from 2024, from two years ago. So I apologize to those folks, but I kind of wanted to crank through a bunch of the backlog. There’s an awesome range of questions from reducing risk with my startup to go full-time, when to register as a business, design audits, how to calculate TAM for a step one business, how to know when to pivot, all kinds of things we’re going to get into. But before I dive into that, I’m doing a live Q&A and AMA on May 20th, and it’s only available for MicroConf Connect members. MicroConf Connect is our online community for founders just like you. Folks who are bootstrapping or mostly bootstrapping and building incredible SaaS companies. MicroConf Connect is highly curated and it is one of the higher signal-to-noise forums or online communities that you can be part of in the space. microconfconnect.com. 

(01:51): If you want to check it out. And again, I’m doing a live Q&A/AMA where you get to ask questions and hear me answer them, only for members of Connect on May 20th. Sign up before then to get access. 

(02:15): Let me dive into my first question. This one’s about reducing risk with my startup to go full-time. It’s actually a Reddit thread, and we’ll of course link that up in the show notes. A user was sharing their salary information as they went from an intern making $15 an hour in 2017 to a tech company product strategist in 2025 at 28 years old, making $440,000 a year. Now, caveat this: they probably have to live in the Bay Area or in a very expensive place in order to make that. So I’m guessing they do not live in a low cost-of-living city. And one response to this thread said, “Congrats, man. I have a question for you. I earn $400,000 via my base salary. I work at a Fortune 50 company. I have a side hustle that is the one-man army of me and freelancers, of course. 

(03:08): The salary I pull for the business is good. My thing is, how do I get over that hurdle to go all in on the business? It’s not that the salary I draw from it is bad. It’s the unknown future factor. W2 is safe. I’m well known within my space, so jumping to another company isn’t hard for me, but that fear of the company fizzling out in a few years gets me. I’ve had successful businesses that ran into scaling issues before and those fizzled out. This one I think has longevity, but no way I can scale it to where it needs to be without cutting the W2. So what do I need to just do it?” Now, I actually think this person thought that the original poster was a founder and they’re not. And so there’s a bunch of people in the thread that are like, you mistakenly asked this question and there’s no good answer to it, which is one of the reasons I wanted to address it on the show. 

(03:53): Building a business when you have a really high salary and taking the jump is very hard. This is why it’s easier to basically take this leap when you’re younger, because when you’re in your teens, 20s, even early 30s sometimes, I guess this 28-year-old is making almost half a million dollars, but you get the idea. The younger you are, usually your earning potential is lower. And the further on you get in your career, the harder it gets. So one thing to note is if you’re listening to this and you’re still early in your career, now is probably the best time to start a business if you want to do this eventually. The other thing is that these high salaries are like golden handcuffs. And the only piece of advice I can imagine for someone making $400,000 a year as a W2 employee who wants to take the leap is to save a bunch of that money. 

(04:41): If you are spending 390,000 of that and only saving 10K a year, then yeah, it’s a huge risk. But if you’re making 400K and you can stock away 200 grand a year, then in a couple years you have two full years of living expenses. You already have a business that’s doing something. You said the salary you pull for the business is good. So you should actually be able to save more than 200K. The biggest problem I’ve seen with folks making this much money is lifestyle inflation. They or they and their spouse just live it up and that’s great, unless you want to leave to start your business. That’s when it’s a problem. So having the discipline and the optionality of stocking a bunch of money away in the bank is a big way to maintain your optionality. 

(05:26): You have a business. If you get to the point where it’s not scaling and it fizzles out, you go back and get that W2 job again. You said you’re well known in the industry and it would be easy for you to switch companies. Obviously that goes down a little bit over the years. If you get 10 years into the business and you try to go back, yeah, there’s probably going to be a little bit of a challenge in getting the old job back at that rate. But it feels to me like you have to make that decision of when is it worth it. I remember I was making between $250,000 and $300,000 a year as a consultant. I was a micro-agency where I was doing a lot of the work, but I was outsourcing to freelancers and making a big cut on those folks. 

(06:08): This is the 2007-2008 timeframe. And I quit all of it when I had about just under $100,000 in product income. I was able to do that for a couple reasons. Number one, we did not let our lifestyle inflate to consume all of the business revenue that I was generating. Number two, I saved a lot of that business revenue. And as I was growing the products on the side and had the consulting business running too, I was stocking away as much of my product income as well. And so we had enough of a cushion because I am risk averse. I never bet anything that would have meant we lost the house, never did credit card debt. I was always pretty disciplined. I say I’m risk averse, but I’ve obviously taken risks in my life starting companies and angel investing and buying crypto in 2016. 

(07:01): I’ve talked about this a little bit on the show in the past, but what I did do was be pretty disciplined about it. And if you don’t want to be disciplined, then you will reduce your optionality. If you want to live it up and spend that 400K, that sounds like a lot, but you’re in the Bay Area and you kind of do have to spend it if you buy a house. This is one reason I don’t live in the Bay Area. I was born in the Bay Area and I will likely never live there again because of this. Making adjustments to your lifestyle and not consuming everything that you make is a big way to maintain your optionality. I said lightning round and then I gave a long answer to this one. I’m going to try to be a little faster when I answer these other ones. 

(07:43): Next question from February of 2024. James L. says, “Hey Rob, I can’t promote your YouTube and books anymore than I do. Love your content. Myself and my co-founders are bootstrapping a property app and wanted to know when is it a good idea to officially start the process of being identified as a business? As we are looking to first validate our idea using a landing page, I want to know what the next steps would be after we get our first five to 10 customers.” The answer is it depends. It’s kind of about risk tolerance, because if you set up an LLC it reduces your liability. But as loose guidance, you don’t need one when you have a landing page. You don’t really even need one when you have some revenue. In a perfect world you would. Personally, I would use Stripe Atlas and set up, what do they have, LLCs or C Corps. 

(08:33): If you really want an S Corp, you can talk to a lawyer, but Stripe Atlas gives you clean docs and it’s pretty inexpensive. I would consider doing that once I was convinced it had some legs. Is it making $500 or $1,000 a month? That’s a decent business. I will admit, I bet I was doing $100,000 a year before I switched away from a sole proprietorship. And a sole proprietorship, for those who don’t know in the US, just goes on something called a Schedule C on your taxes. So you don’t have a business entity. Now it meant all the liability was on me. It wasn’t an external entity that could be sued if something went sideways, but I didn’t want to deal with all the accounting and potentially payroll depending on the way you set it up. So I would say if you really want to do it clean, you do it when the first dollar comes in. 

(09:22): Very few people do that. Most people just leave it on somebody’s Schedule C and put it into maybe a separate bank account and track it. But I think you can do this a little later than you think. If you’re doing $5,000 a month, yeah, I would definitely have an entity set up by then because the business starts to convince you that it has traction. One thing to be careful of is once you set up an LLC or a Corp, you do then have some bookkeeping and accounting and additional tax filing. So there is some additional ongoing cost once you set that up, as well as annual fees to your state. It’s just a little more admin paperwork and headaches. So that’s one reason why I would prefer not to set one up until I felt like the business has legs, or you can include it under an umbrella corp. 

(10:14): I had a consulting LLC and I would throw my products under there until they were making enough revenue that I spun them out on their own. Next question is from Matt. And Matt says, “First off, I absolutely love your book, The SaaS Playbook. I’m in the early stages of founding a SaaS product to give financial advisors access to pre-built charts with the ability to build decks, create reports, and record videos over slide decks they make.” Generally it’s to help them better communicate crucial investing ideas with their clients, visually. Every chart tells a story and answers a common client question. “My question is on pricing. At first, I thought seat-based pricing made the most sense with an enterprise tier, but after reading your chapter on pricing in your book, I’m now conflicted. Users will sort of see the same thing when logging in, except the colors, logos, and disclaimers on each chart will be different. 

(11:06): But if five advisors who are all associated with the same firm log in and have the same branding on their charts, they will see the same thing. I’m trying to effectively price this service and would love your advice. For context, I’m 24 and have limited experience in the startup world. I quit my traditional Wall Street job earlier this year and now I’m working on this.” Sorry for the delay, Matt, but I do have thoughts on this. Number one, with AI, seat-based pricing is getting kind of a bad rap because people are saying agents are going to take all that over. So we’ll put that to the side for now. If you can do seat-based pricing, if people see something different, generally I would use seat-based pricing. 

(11:45): In this instance, I would think about whether there’s any type of feature I could build, such as messaging or putting the advisor’s name on the decks. Maybe have a conversation with ChatGPT or Claude and explain this exact issue and say, “What are 10 ideas for features that are commonly used to justify seat-based pricing?” And then you want to build one that is actually useful. You don’t want to just build a feature that no one’s going to use, but that is probably the number one thing I would think about. The other option is to not use seat-based pricing and instead base it on the number of decks created or reports created. Pick a different value metric. I don’t know enough about this business to help you with that exactly, but you would want to pick something where when they get more value from your product, they pay more. 

(12:37): Thanks for that question, Matt. I hope it was helpful. Next set of questions. These three come from Neil Magnuson. And I think Derrick and I answered this one before, but I’m going to weigh in again just in case we haven’t. At how much MRR should you have a design audited from a professional designer? I don’t think it’s about MRR. I think it’s if your design is causing issues or confusion, or people are telling you it’s crappy and you think it’s dragging the brand down, then I would consider having, I don’t know that I’d do an audit, just having a designer redesign the thing. I mean, maybe if it’s close they can make tweaks, but usually you just redesign it. And if you’re doing $20 a month and people are complaining, would I have a designer redesign it? These days, would I have Claude maybe redesign it or something? 

(13:27): That’s probably more of what I would do. But I don’t think there’s any MRR mark. It’s more about whether it’s causing you headaches and losing you business. Because you can do it at $10K MRR, $50K MRR, $100K MRR and get that audit or redesign done. I will caution you: I see a lot of makers and designers who build a product and then just redesign it over and over. “I’m going to redesign the landing page again. I’m going to redesign the homepage again.” Instead of actually doing marketing and doing the hard thing, they just want to keep redesigning. So be careful of that. 

Keith Shields (14:12): 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. We get full clarity on your product’s health back 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 (15:04): Second question from Neil. What’s the best way to calculate the total addressable market for a step one business in the Shopify app store? I don’t know of a tool that allows you to do this. It would be a guess. Frankly, I would try to look at non-step one businesses. So are there any businesses doing this thing for non-Shopify apps? If it’s a shipping or label printing service, can you look at how big they are and just take a guess? I think all of this is going to be a guess. And to be honest, do you care what the TAM is for a step one business? A step one business in the stair-step approach, what do you want it to be? $5K a month? That’s a pretty good step one business. $10K a month is awesome. I don’t know that I care about the TAM. 

(15:46): Obviously if the TAM is $1,000, that’s too small, but it feels like anything you’re going to build is going to have plenty. TAM is not going to be the limiting factor. It’s going to be total reachable market, the market you can actually get in front of. And more than that, it’s just going to be: can you rank for this term in the Shopify app store? Can you try to get to number one for the search terms? That’s a much bigger question than the total addressable market. Trying to figure out how much the existing apps that are doing it are making, or trying to guess how much it will make if you launch into a gap in the market, for that second question I would just build the thing. Use AI, crank it out, build it, see what you can rank for, see what the traffic’s like. 

(16:29): Back in the old days of SEO, maybe 2009 to 2012, I would buy exact match domain names. I’d put up a single landing page with a bunch of content that I would either create or hire someone to create, just to see where it could rank. I would frequently rank on the first page. These were for longer-tail keywords, obviously not amazing head terms, but I would just try to get an idea of what the volume actually was. For a step one business, I might consider doing the same thing today because the code doesn’t take that long with AI, and I think it’s a good learning experience. Now, please don’t quote me and say, “Rob said you no longer have to validate anything.” 

(17:15): That’s not what I’m saying. I talk about the 20/200 framework. The 20 is the very quick keyword research. I would still do that here. To try to estimate how many people in the Shopify app store are searching for something, couldn’t you look at any keyword tool? The Google Ads keyword tool, any search tool you can get anywhere, and just kind of guess: Shopify has how much of the market? That’s a question to ask Claude or ChatGPT, and then get a ballpark number of how many searches you think are there, and are there other competitors? I would do a couple hours of research before I built a step one business. I don’t know that I would do the full 20 hours of landing pages and customer conversations, though customer conversations I could actually see doing, to validate whether this solves a real pain point. 

(17:59): Going on to Reddit or other online forums and having conversations so that you do in fact get five to 10 people that are interested in this before you build it, because just because the building is simple and easy doesn’t mean you should skip validation. Now, 200 hours for a step one business, 200 hours with AI actually sounds like a bit too long. I feel like you could potentially build a step one Shopify app in less time than that. That doesn’t mean I would jump straight to building. The third and final question from Neil is, how can you know if your step one business could break free of its marketplace and be standalone? I’m not sure you can. Ways I would think about it are a couple things. If you’re going to build a Shopify app, I would look around at what other platforms are out there. 

(18:47): There’s WooCommerce, there’s Magento, there’s BigCommerce. It’s interesting. I’ve heard from a lot of people that Shopify is a dominant player and has the vast majority of the dollars being spent, and that’s probably true. But the idea I would be asking myself about is twofold. Number one, if I build an app for Shopify, can I build it for the other three or four major platforms and how far do I think that could extend my growth or my top-line cap? The other question is: if I build a Shopify app that does something, are there other custom-made shopping carts on the internet that would really want this functionality that I could somehow integrate with? 

(19:43): The problem there is integrating with truly custom-built carts is going to be custom work for each one. So unless you’re charging a lot, or there is some type of standardized way to hook into all of them, such as it hits an email inbox or sends an SMS, that part is much harder. Beyond that, I don’t think you can really know from the start. Until you get something live and get people using it and see how fast it grows and see where it plateaus, it’s going to be really hard to answer all these questions. There’s just not publicly available data on this topic. Next question is from X/Twitter from June of 2024. 

(20:28): I did a call for questions on the podcast. Igor Beneck asks, “How do you know if it’s time to pivot? If it is, how do you know how to pivot? Are there general strategies that can be applied to such situations?” Kind of. How do you know if it’s time to pivot? When what you’re doing is not working for long enough that it’s just not working, and that’s it. It’s when you’re out of ideas or out of motivation on the current product. Now, knowing what or how to pivot: you go with your founder gut, there’s market pull, there’s guesswork. I don’t think there are generalizable strategies. It’s always going to be muddy. If you have 50 customers that are not really paying or are churning and you ask them what you should do differently, they’ll tell you 47 different things. 

(21:16): And as the founder, you have to make the hard decision with incomplete information to figure out what and how to pivot. I did a talk about the big Drip pivot we did. We’ll link it up in the show notes, but you can search Google for it. The title is “I Grew This SaaS by 13% Every Month for 13 Months.” It’s the inside story of the early stages of building Drip and how we plateaued. We did not have product-market fit, churn was super high. I talked about all the feedback and input we were getting and how messy it was, and there were two or three steps I used to make that decision at the time. One was my founder gut, and another was getting advice from people I trusted and then sitting with it and just trying to decide whether we should pivot into marketing automation. 

(22:08): I have a really tough time generalizing any of that. The early stages of any product you’re building are the fuzziest by far. It’s really hard to know when and what and how to fix things unless you’re getting some type of input and you’re taking some type of leap of faith. Next question is from Michael. His question is about episode 720. That episode was titled How to Prioritize Your Focus in Both Your Startup and Personal Life. In it, Craig Hewitt and I talked about having kids and trying to build a startup when you have young kids. Michael says, “I lit up at the quote. If you have four kids under eight, that’s me.” One, three, five, and seven. And then Craig said, “You’re screwed.” It is very challenging. I’ve definitely had to learn to prioritize ruthlessly and delegate things I could do better myself. That’s the key. 

(23:03): Somehow I’m making significant progress despite all the craziness. You said it gets better as the kids get older. Does this mean I’m going to be unstoppable in a few years? The answer is: I think so. If you are able to make progress, I’m assuming you’re working nights and weekends. Whatever you’re doing with four kids, yeah, I would say you are going to have a superpower of being able to prioritize and delegate ruthlessly. And most people don’t have to learn that. Look, if I was single and 24 years old with infinity time, let’s say I do have a day job but I work 40 hours a week and then I have another 40 hours, you can stay up late and do all the things you can do when you’re young. You don’t learn how to prioritize and delegate. You have been forced to. So I would actually take that as a good sign. 

(23:57): Back to Michael’s email. Any tips for making it through this time of life and for best leveraging the additional bandwidth as it becomes available? I would say you’re pretty good at leveraging your bandwidth and you will probably know exactly what that next priority is. If you have 20 things you should be doing and you’re working on the top two, it’s the third one that gets the attention once you have the additional bandwidth. It sounds like you’re doing a really good job on this so far. Tips for making it through this time of life: enjoy it as much as you can. That’s the tip. There’s no silver bullet. You don’t have as much time as you need to grow as fast as you want. But for me, it’s about getting to the point of having enough revenue that I can quit the day job as soon as possible, because that is the biggest recapture of your time. 

(24:43): A caveat to that: if you can make a couple grand a month, two, three, or $4,000 a month, and you can step your full-time work down to 32 hours or 24 hours, you’re only working three or four days a week. This is what I did at my development job. My boss really liked me and I said, “Hey, I only want to work four days a week because I have this other thing that’s doing enough revenue that I don’t need the money anymore.” You buy out your time. That’s the whole point of the stair-step method. So my tip is: don’t bite off something huge that you have to work for years to get out there. You want to get something to revenue that can help you buy out even if it’s one or two days a week of your time. 

(25:21): And if you can buy it all out, great. That is the point where you have the maximum hours to dedicate to what you’re working on. Thanks for that question, Michael. I hope it’s helpful. And my last question of the day in this lightning round is from Nim. This one’s from 2025. Nim says, “Hi Rob, longtime listener and fan. Thanks so much for your work and your wisdom. I use Start Small, Stay Small as a reference.” For those who don’t know, that is my first book. startsmall.com if you want to pick up a copy. Nim has two questions. The first is: the common advice when starting out is to talk to 10 people who match your ICP. However, I found that unless you have a deep network in a vertical, it’s extremely difficult to talk to that many ICPs outside of conferences. 

(26:03): Number one, this is why I say build your network, not your audience. If you have an audience, you’ll probably get people to talk to you too, so either a network or an audience would work, but I think it’s easier and quicker to build a network and it’s a lot less work than building an audience. Back to Nim’s email. “While as a software developer I have the advantage that I can build whatever I want, I don’t have the experience or network from another vertical that I would have had if I’d worked in a different field, for example home inspection or senior care. For entrepreneurs entering a market cold, do you recommend flipping the book a bit and starting by building something small?” Maybe. Senior care is a great example. I interviewed the co-founder of Senior Place on this podcast. 

(26:44): They didn’t have a network in senior care and they made cold calls, and that was it. And people talked to them. So there are spaces where you can cold call. Cold email is a little harder, but you don’t necessarily need a network. You’re doing it the way a lot of people start out. When you first start out, you don’t have any network, audience, or customers. As you build products and assets, you get to be known a little bit. I don’t think most people should build an audience, but you do build a reputation and can become known, at least on the internet. Maybe it’s not in a particular vertical, but just by launching stuff you can make a name for yourself. I don’t know if that will do what you want here, because for senior care or home inspection, doing stuff on the internet is less relevant unless you’re doing it in a Facebook group. That could be interesting. 

(27:31): A Facebook group or a Reddit group, where you start without a product yet and you’re just hanging out. If you think you want to go after this vertical, you start posting and kind of become a helpful name in the group. That is one way to build a network. But the other thing I’ll say is when Jason Cohen did this to validate WP Engine, he contacted a bunch of WordPress agencies and consultants and freelancers and said, “I will pay you for an hour of your time. I want to talk to you about hosting. I have an idea.” My memory is that he got 40 yeses before he built it. I’m trying to remember if at one point he said that no one actually asked for the consulting fee, maybe, maybe not. 

(28:13): It doesn’t really matter. He was willing to pay them their typical consulting rate for that hour. And when we were building Drip and I wanted to talk to some ex-salespeople and marketing people from some competitors of ours, I similarly contacted them via LinkedIn and said, “I’d love to talk to you, I’ll pay you whatever your consulting rate is.” In that one, I only talked to about five people, but none of them charged me anything. They wanted to meet me and hear about the company we were building and potentially expand their network. So there are different ways to do this, and sometimes throwing money at it is what works, or at least being willing to throw money at it can work. And Nim’s second question is: your advice is to not throw everything at the wall and see what sticks. 

(29:03): That is, not to build 52 startups in 52 weeks like a Twitter SaaSpreneur, but instead to actually follow a method. My question: what counts as working on something? Seems to me that if you’re at the early stage where you’ve just identified a market and a pain point, it makes sense to validate three to five ideas at once if you can do so cheaply, and pick one to actually invest 100% in if you manage to get some paying users for it. Is that wrong? I don’t think that’s a bad idea. Coming back to the 20/200 framework again: for the 20, I used to have 10 ideas that I would sketch out, research, and try to get a general idea of how much demand there is. How competitive is it? 

(29:43): There are not going to be any amazing high-demand niches with no competition. That doesn’t exist anymore, but just to get a top-line idea of demand and think, “Can I play the angles?” I would do that for 10 ideas at once over a weekend. Then to build out landing pages or have conversations with potential customers, I could see doing that with multiple ideas. Sure. That’s the 20 hours, roughly. The third part where you’re doing 200, this is where you’re building these products. That’s where it gets a little tougher. Do you want to build and launch three to five products? I think I would probably be whittling down at that point. Even if you have five landing pages and you’ve tried to have conversations in five niches or with five ICPs, it feels like you’re going to have more traction on one or two of them. 

(30:37): And these days with AI, if you’re building a step one business or a pretty simple MVP, maybe it makes sense to build two of them. I could be convinced. What I don’t want to do is give you permission as a builder or maker to spend a ton of time on this step without being more certain. But I definitely understand the desire to get more validation by actually building something and getting it in people’s hands. I would almost say: let’s say you started with five landing pages and talked to a bunch of ICPs and that gets down to maybe two or three you’re kind of iffy about. What if you then tried to pre-sell them or tried to get pre-commitments on those two or three? 

(31:21): And whether they write you a check you don’t cash, or you do cash it, or there’s a Stripe link and they pay for the first three or six months, I think that’s what Jason, the co-founder of Senior Place, did when he made those cold calls. He got checks that they cashed and said, “Pay for the first three to six months and we’ll cash it. Once you have it, you’re prepaid.” Pre-payments are still not 100% validation. Nothing is 100% until customers are paying you and not churning and you have a full product. But I do find it an interesting thought experiment to whittle it down using each of these steps. Each of them is a hurdle and it’s a marketing/sales funnel. 

(32:05): And you’re trying to get signal in a super muddy, messy, cloudy time with this product. This is when you have the least confidence that you’re doing anything right. You don’t know if your ICP is right. You don’t know if your copy is correct. You don’t know if you’re selling it well. You probably aren’t. You don’t know if your pricing’s right. It probably isn’t. You don’t know if you built anything anybody wants. This is the hardest, or at least the cloudiest, part for sure. It is the least certain part where you have the most variables that aren’t working. And that’s all validation is trying to do: take a few of those and get you just a little more certainty before you go off and build a full product. So thanks to everyone who sent a question in. 

(32:51): As always, we can use more video and text questions. I think I only have five audio or video questions right now. If you send one of those in, the odds of you getting answered in the next couple episodes are pretty high. With text questions, there are still a couple dozen, but I’m going to continue to work through those. If you want to ask a question, you can email questions@startupsfortherestofus.com or even easier, go to startupsfortherestofus.com and click Ask a Question in the top nav. I recently recorded a brand new video of me asking for your listener questions, so you can go there and see that instead of the old one where I think I had a Beatles baseball hat on, no facial hair, and I think no glasses. It barely looks like me, but that was from several years ago. 

(33:33): You click Ask a Question, you can record video or audio on your phone or laptop, or you can enter a text question. As always, I love getting questions from listeners. I would never have thought to cover the range of topics we covered in today’s episode, and I really appreciate everyone who sends in their question. I’ll continue to answer them and try to answer them as quickly as possible. So thank you for listening this week and every week. This is Rob Walling signing off from episode 832. 

Rob Walling (00:00): Their feedback while valuable, it’s not anywhere close to how valuable your software can and will be for them if you solve a desperate pain point. And what you really want is you want customers, even if they’re customer zero, to be desperate to pay you for what you’re building. Welcome back to another episode of Startups for the Rest of Us. I’m your host, Rob Walling. And in this episode, I answer questions from listeners just like you. I have a great range of questions today, including whether to have my customer zero pay me or whether I should comp them, kind of in exchange for all of the work that they’re going to put in helping me figure out what to build. Whether writing ad copy to be spoken, like on a podcast, is different than writing written copy, metrics for a transaction fee-based SaaS that has no subscriptions, and more listener questions. 

(01:02): Before we dive into that, I built a course. It’s called the SaaS Launchpad, and it is by far the best course I have ever built. I spent months architecting and creating the content that was the basis of this course, and then producer Ron and I spent almost six months diving deep and flushing out all of the modules. It has almost 10 hours of video content, and it is the best course I know for early, early stage SaaS founders. It’s called Launchpad because the idea is that if you have no idea for a product you should build, it helps you look at ways to generate ideas. It helps you look at ways to validate ideas, to pre-validate them so that you don’t go into a basement and build for six months and regret your life choices. Even with AI these days, can’t I build it in six minutes? 

(01:53): Maybe, but should you build it in six minutes? Or should you spend 20 minutes doing some type of Googling to see what the competition is like? So it’s called SaaS Launchpad. It’s at saaslaunchpad.co. And if you haven’t checked it out, I highly recommend it. As I said, it’s kind of all of the wisdom and knowledge that I’ve learned over the years, both launching products and watching founders launch products. And so it has the biggest mistakes. It has a list of, I think it’s like 18 factors of what I would see in a perfect SaaS business that effectively almost no SaaS businesses actually have, but it gives you an idea of things to watch out for and a path to take if you want to bootstrap a SaaS. saaslaunchpad.co. And with that, I want to dive into my first listener question. 

(02:42): This one is actually not a question. It is a thank you email from a longtime listener who asked to remain anonymous. And they said, “I just went full-time on my business. I just wanted to write a quick thank you for your guidance, both direct and indirect, that has helped me build my SaaS to the point where I can quit my day job. Four years ago, I tweeted you asking about one-time payments versus subscription payments, where you obviously, in parens, directed me to charging an annual subscription versus charging one time. Ironically, I emailed DHH around that time and he told me the exact opposite. I’m glad I listened to you.” That’s the point the business really started to grow and compound. While I did get rejected from TinySeed when our revenue was smaller, we also chatted last year about going full-time and how best to get there beyond just raising cash. 

(03:34): The reason I’m reaching out to say thanks now is two weeks ago, I quit my job and started working full-time on my product. Six years to overnight success. $35K MRR and growing four to 6% a month. Wouldn’t be here without your recommendations, both in person and via books and the podcast. So thank you. Keep up the good work. I love emails like this. I read them on here because they bring me so much joy and they’re honestly the reason that I keep doing this. I could sail off into the sunset and sit on a beach in the Caribbean, but it’s so fun to have an impact on people’s lives. It really juices me up. What I like about this email too is there’s a PS at the end. Open source freemium funnel numbers are brutal. Low annual contract values and low conversion rates. 

(04:24): Probably should have taken your advice and started a different business, LOL, but thankfully I’m making it work. So it just goes to show you can make it work, but this is the whole, I’m going to go against the advice, and then once I get there, I’m going to be like, “Oh yeah, I should have listened to the advice.” But either way, this longtime listener and their six years to overnight success is something that we can all celebrate. And with that, let’s dive into my first listener question. 

Luke (04:55): Hey, Rob. My name’s Luke. I’m a super big fan of the podcast and listening to it has really helped me begin my journey in entrepreneurship. I am starting a SaaS company that is an ed tech product aimed at secondary schools. And the nature of such a product is that I think it really needs a trial on a secondary school before I start delving into sales, marketing, et cetera. Should I have the trial school pay for this product or should I give it to them as a service for free as they’re participating in a trial? I know from what you’ve said on the podcast, I’m likely to get better and more real feedback if they’re paying, but I do feel as though there’s a chance that issues arise in terms of what the product is providing when tested on a live school environment. Thank you. 

Rob Walling (05:46): Yeah, so Luke, you mentioned that I have commented on this in the past, and my default is always to charge something. Even if you give them a significant discount, you want them to have some skin in the game and you want to know that this is something that they are willing to pay for. I knew an entrepreneur who built a launch list in a small niche of like 10 or 20 emails and he was in touch with them. And when it came time to kind of launch into what he called beta, I said, “You should call it early access.” But when it came time for him to do that, he comped all of them, I think for life. And I was like, “No, those are your…” Let’s just say of those 20, you could have gotten 10 to become customers. I don’t remember what he was charging, but even if you were charging $250 a month, so $3,000 a year, if you could have gotten half that, that’s still $15,000 a year. That would have been a great little kickstart. 

(06:40): $1,000, a little more than that of MRR for an early stage bootstrap SaaS is a big deal. So I would have a really, really tough time not charging something for this. Now, if you have an idea of what your pricing is going to be ultimately, whether you see competition out there that you are not competing with per se but basing your pricing on, or if you have some idea and you’re like, “It’s going to be $5,000 a year or $20,000 a year,” whatever it is, even if you give them 50% off, 60% off, getting someone to pull out a credit card is really quite a bit of validation that they actually want that. I think it’s a trap to comp them. How much buy-in are they going to have when they’re not paying? How much confidence do you have that anyone will pay for this? But also, their feedback while valuable, it’s not anywhere close to how valuable your software can and will be for them if you solve a desperate pain point. 

(07:39): And what you really want is you want customers, even if they’re customer zero, to be desperate to pay you for what you’re building. Now with that in mind, of course, there’s going to be issues during development. And it’s kind of like, well, if they’re not paying anything, then I can say, “Oh, sorry about that bug. Remember, it’s free.” Or, “It’s taking a while, but remember you’re not paying for it.” Don’t do that. I think you own up and be very clear early on that, hey, this software is early access. There might be bugs. We’re doing the best we can, but there might be issues. It might take us a week to build a feature. We can’t necessarily build every feature you want, et cetera, and couch it upfront instead of hiding behind this shield of free. 

(08:21): Therefore, they can have low expectations. I’d say set their expectations realistically, but then ask them to pay. So thanks for that question, Luke. I hope it was helpful. My next question is about written marketing content versus spoken marketing content. 

Dave (08:42): Hey, Rob. I’ve got a marketing question for you. I’m considering sponsoring a season of a podcast that is listened to by my exact ICP. The way the math works out, if I only get a single sale at the price of sponsoring the season, it’ll end up being a 15% ROI on my investment, and I feel very confident I can get at least one sale out of it, but of course I want to have multiple sales. My question is, do you have any advice about writing copy or marketing materials for something that’s going to be read out loud as opposed to read on a website? Also, knowing that I have a very specific audience for this, is there anything I should be doing or advertising that takes advantage of the fact that it’s not a generalist audience that’s listening, but rather people who I really believe could be champions for purchasing my product? 

(09:45): Any help would be really appreciated. Thanks for entertaining my question. 

Rob Walling (09:50): So this is a great question. The answer is yes, it’s different. It’s very different. I mean, the one thing I learned early on, I remember the first time I read something that I wrote, is that the word “probably” is hard to say. Probably, probably. You just stumble over it and now I almost always write “likely” because they’re basically synonyms and I’ve just gotten in the habit of writing “likely” instead of “probably.” That’s just one tiny thing I’ve learned writing copy that is going to be read aloud and not written. On this podcast and the YouTube channel, I believe we have 40 or 50 different sponsor ads, maybe more than that, that we have coordinated with sponsors on and either written the copy or certainly worked with them to refine and hone it. And so the expert on that topic is actually our very own producer, Ron. 

(10:41): The Startups for the Rest of Us written ad copy remote correspondent. Over to you, Ron. 

Ron (10:46): Thanks, Rob. So first off, I think it’s worth calling out that podcast ads are voice, right? They’re not going to be read silently. They’re being spoken out loud. So whatever you write needs to flow off the tongue naturally. So after you’ve written your script, read it out loud to another human, or at least record it on your phone and play it back. You’ll find where there’s natural stumbles and words that don’t flow nicely. If you’re using Claude or some other AI to help write the script, then actually even in the prompt, say, “This is going to be spoken out loud by a host.” And that generally helps with the outputs. With written ads, we get to rely on things like headings and bullet points and visual formatting, and you don’t actually get that in a podcast ad. So I think it’s important that things flow and that it makes sense as you’re listening through. 

(11:34): You’re kind of building towards that CTA at the end of the script. I think leaning on a scenario or a story works better than just listing features. For example, something like, “You know that moment when you’re struggling to juggle three clients and you realize you forgot to send an invoice,” you’re trying to put the listener in those shoes so they think, “Yeah, that’s me.” You want them to raise their hand and recognize themselves in the ad. Just like written content, if there’s a testimonial you can wrap into the ad, that can work really well too. Imagine something like, “Derrick at SavvyCal said conversions went up 18% when they started using our plugin.” I think this is extra powerful when the testimonial is coming from somebody that the audience would recognize within their industry. I like to keep it to just one simple, easy-to-remember call to action. 

(12:18): A lot of people are walking or driving or doing something else while they’re listening to a podcast, so help them out. Use a vanity URL. Same goes for promo codes. Keep them short and simple. Depending on your web address, it might actually make sense to have your host read out the URL, especially if you’re not using standard spelling. So if your product is called Sendly but your domain is SNDLY.com, you probably want to spell that out for people, otherwise they’re just going to type in whatever they heard and end up somewhere else. I think it’s worth offering something special to folks who are coming from a podcast ad. So don’t just send them to your website and say, “Go to CRM.com and learn more.” Give them some reason to act. So maybe that’s an extra month free or $1,000 off their first contract, or whatever makes sense for your business. 

(13:07): And it doesn’t always have to be a discount either. You could do a bonus offer like a free onboarding call or access to a special resource that you put together for the audience. That incentive gives the listener a reason to actually use your link and it also helps you track whether the ad is actually working. Since you mentioned that you’re sponsoring a whole season of the podcast, you have some extra options. You might consider mixing up your message from episode to episode. So if you have a six or eight episode series, maybe you have two or three different messages that you can test out over the course of the season. Since you’re committing to a full season, I’d recommend building out a dedicated landing page just for that podcast audience. On that landing page, you can give a little hat tip to the show, something like, “For Startups for the Rest of Us listeners, we’re offering an extended free trial plus priority onboarding,” or whatever it is. 

(13:57): It makes the audience feel like they’re getting something special and it reinforces the connection between your brand and the podcast that they already trust. I’d also ask the podcast producer or host if they’ve seen any good results from anything in particular. They know their audience better than you do and they’ve probably seen what’s worked for other advertisers. Maybe it’s a certain type of offer that converts better, or maybe their audience responds well to a particular style of ad read. At the very least, you can ask them if they would recommend tweaking the script at all. There might be something that the host would never say, but they’re willing to do it if you put it in the script, but they would tweak it slightly and then it’ll just sound more natural as they’re reading it. I think the last thing is that it’s worth matching the energy and tone of your ad to the podcast itself. 

(14:43): Some shows are going to be more buttoned up for a professional audience and while you might get away being a bit more casual with other industries. All right. I hope that helps. Best of luck with the sponsorship, and now back to Rob. 

Rob Walling (14:57): Thanks for that, Ron. I really appreciate you weighing in, and thanks for sending that question in, Dave. I hope it was helpful. My next question is about metrics for a transaction fee-based software company. 

Sean (15:14): Hey, Rob. I’m Sean, the co-founder of a B2B SaaS platform for outdoor rental and experience operators, things like bikes, skis, kayaks, and tours. We charge a percentage-based booking fee instead of a monthly subscription. The upside is our average account generates roughly five to 10 times what operators in the space would be willing to pay for a flat subscription. We have zero churn and steady account growth, but the trade-off is the seasonality. Comparing month to month and calling it MRR doesn’t really work because it’s not recurring on a monthly basis. It’s recurring annually. So our main pulse check has been month-to-date revenue versus the same period last year normalized to our active accounts. Net negative churn has been built in: as our shops grow, our revenue grows. What other metrics should we be watching for a transaction fee model? And as a follow-on, do you think MicroConf would still be valuable for someone not running a traditional subscription SaaS? 

(16:07): Thanks. 

Rob Walling (16:08): Yeah, it’s a good question, Sean. Thanks for sending it in. I guess first of all, I don’t consider you SaaS because SaaS to me is subscription software. If you refer back to, gosh, what was it, four episodes ago where someone asked, are they SaaS? And I said, SaaS is subscription software where the majority of the value comes from the software itself. And since this isn’t a subscription and it’s just usage-based, I wouldn’t call it SaaS. That’s kind of a nitpick and I don’t know how much it matters, but I did want to clarify that upfront. Not only do you have this monthly revenue that isn’t recurring, right? It’s not an agreement where it happens every month, it’s usage-based, but you also have seasonality, which makes it even harder. Before the seasonality, I had a whole diatribe I was going to give on this. 

(16:54): And then when you said, “Oh, it’s seasonal,” it’s like, yeah, you kind of have to look at the prior year. So of course, month-to-date revenue numbers versus the same period last year, I think is a great way to go. Is it truly seasonal, or is each individual month different? Meaning, is June, July, August all approximately equivalent, or does June map to June, July to July, August to August? That’s one thing that gets me thinking about this: are there shoulder seasons, like spring and fall, where revenue is half or a quarter of the peak summer season, but June, July, August should effectively be almost approximately the same. I would give some thinking on that, but if truly it is really individual months, then yeah, you just have to look at the growth from the last year. 

(17:51): I don’t know what else you would look at. The other thing I’d be thinking about is the customers that you have who are paying you. You can look at churn. It’s not churn in a traditional sense, but it’s churn as in: which customers paid us last June that are not paying us this June? That shows they churned because they’re not using you anymore. I would be thinking about how to set up customer success to reach out to them and nurture them if in fact they have not returned. I would also be looking at your top five, 10, or 50 customers in terms of the revenue they generate for you, such that the aggregate is great, but then knowing your individual customers is important too. 

(18:40): The other thing I’d be thinking about is that a lot of businesses started as transaction fee only, and they do eventually move to subscription plus transaction fee. And when you pay that subscription, the transaction fee goes down. So if you pay a couple hundred dollars a month, then instead of paying 8% of GMV, you only pay 6% or 5%. We saw Shopify do this in the early days. We’ve seen Gumroad do it. I’ve seen many companies think they’re going to make it with GMV only and they eventually do move to subscription. Of course, you’ve heard me talk on this show about how when you go to exit, subscription revenue will be valued at a higher multiple than just transactional GMV processing. I’ll add two other things. I do hear you on the fact that you can charge more on a percentage basis than you could as a flat subscription. 

(19:36): And so there’s a challenge there, but I feel like if you were charging an annual subscription, not a monthly one, and it gave them a discount or other perks, they get some special stuff plus the processing fee goes down, is that worth pitching? And lastly, you asked about MicroConf and whether that would be worth it. And I think absolutely. I mean, we have one-time download software folks, especially in Europe, who attend MicroConf. We have WordPress plugins, Shopify plugins, all types of businesses. And so while MicroConf, of course, is focused on bootstrapped and mostly bootstrapped SaaS, I’m guessing the challenges that you face are 80%, 90% the same as someone with a recurring revenue model. So I think you’d get a lot out of it and meet some great people to boot. My next question is about selling into low-awareness markets. 

Mark (20:38): Hi, Rob. It’s Mark here from Australia. My co-founder who is technical and I, as a domain expert, launched our B2B SaaS about 18 months ago. It’s a lightweight risk management platform that replaces spreadsheets and manual reporting and uses AI to guide non-experts through risk identification, treatment, and reporting. We’ve been deliberately learning the sales and marketing fundamentals. So thank you so much for The SaaS Playbook. We’ve read Traction as well, and we’ve been running through a mix of content and SEO, LinkedIn outbound, some paid ads. We’re looking at some conferences and sponsorships later this year. We’re seeing some engagement, but we’re struggling to turn that into consistent meetings. Specifically, what I’m noticing is that the market is generally low in awareness of risk. They have limited internal capability and the people who are responsible for risk are typically wearing multiple hats, and risk might not be their core capability. 

(21:41): That was really a key part of why we built the product in the first place, but now it seems to be turning into a sales hurdle. So I guess my question is, if you’ve seen this kind of situation before, do we just stay focused and continue executing consistently in terms of those traction methods I mentioned, or are there other things that could work and help us get more traction at this early stage? Thank you so much. I really appreciate the show and everything you do for the community. Cheers. 

Rob Walling (22:11): Thanks for the question, Mark. Yeah, I mean, this is a tough one. This is where you are fighting an uphill battle. I talked a lot in Start Small, Stay Small, my first book, which I wrote in 2010, and I talked a lot about how as a bootstrapper, you really want to find demand. I wasn’t familiar at the time with the five stages of customer awareness, but in my experience at that time, having some successes and a bunch of failures, the successes had online demand. They had some type of search volume. Even if I wasn’t going to win the search volume challenge, it showed that there was demand somewhere. And if there’s demand somewhere, you can usually get in front of it by being on Reddit, by placing ads, by gasp, maybe building an audience, probably don’t want to do that, but maybe you do, by SEO, of course, cold outbound, all the 20 B2B SaaS marketing approaches. 

(23:09): I don’t need to go through them all here, but when there is that actual demand and the awareness that they have a problem and that there’s a solution, that’s the best place to be in. And of course, not all markets have that. And there are founders, mostly bootstrapped, who are making it work where folks don’t have the awareness that there is a solution, but usually they know they have a problem. And it sounds like in your case they’re not even problem aware, because they’re like, “I don’t really know what risk management is.” I can’t tell you to shut a business down or to pivot, but aside from becoming a media company, starting a podcast or YouTube channel to educate people, writing a lot of articles, or publishing a book, you’re essentially educating them that they have a problem. Because even a cold email is, “Hey, do you know you have a problem?” That’s going to be a brutal uphill battle. I have a tough time imagining enjoying building mostly bootstrapped SaaS if that were the case. 

(23:53): So while I can’t tell you to pivot or bail on the idea, I know of very, very few examples of bootstrappers who have been successful when folks don’t even know they have the problem that needs to be solved. At least if they’re aware of the problem, it’s still an uphill battle, but you mention it and then they’re like, “Oh yeah, I do have that problem. Oh, I didn’t know there was a solution.” And then you can kind of present that to them. But in the case you’re in, it really does sound like a tough situation. 

(24:46): And I’d be thinking about, are there any adjacent markets that are aware they have the problem, so that you don’t have to completely bail on everything that you’ve built? I mean, with AI these days, we can all build every app in what, 20 minutes? Obviously I’m being facetious, but realistically, if you have subject matter expertise in this space, I find that it can be a bit of a trap to say, “Well, there’s a bunch of products in this space for the advanced users, but there’s a lot of less advanced users who don’t use those because they’re too expensive or they need a simpler version of it.” I’ve heard this before. The challenge is that those folks usually don’t have a budget, or they aren’t actually that interested in solving this problem, or they don’t really know how to solve the problem, or the tool has to completely solve their problem in a way that is almost impossible for software to do. 

(25:46): So I say that to let everyone know who’s listening: just be careful with that assumption. There is likely a reason that the simpler version doesn’t exist today. You could totally give it a try. I’d love it if you’d prove me wrong, but I think it can be an easy trap to think of building for folks who don’t have the budget or the real interest. And this is kind of a side project for them, right? I don’t mean a hobby, I don’t mean on nights and weekends, but if their main focus of their job is X and then 5 or 10% of their job is Y and you’re like, “I’m going to build for the people where 5% of their job is Y and I’m going to solve that Y problem,” you’ve got to be really sure that they’re going to be motivated to care enough to invest any time or money into that solution. 

(26:46): So thanks for the question, Mark. Hope that was helpful. And our last question for today has two topics: one is about freelancers, about finding them and general thoughts on them, as well as the music for this podcast. Let’s roll into this question. 

Bernard (27:09): Hey, Rob, this is Bernard. I love the show, and as a small off-topic start, one thing that I also really like about your show that I don’t think many people mention is your intro music. You have multiple songs and I noted down that my favorite song is in episode 810, for instance. So please bring that song back more often. It’s a really good song, and maybe also talk about where you got the song from, who made it, give them a shout out. So my question is about freelancers. I would just generally like to hear your thoughts about freelancers, how you think about the topic when it comes to bootstrap founders. Some things I’m specifically interested in: first of all, pricing. How do you know what is a good price for something that you have maybe never ordered before? 

(27:55): Should it be hourly, result-based, or maybe a retainer, and just what is a good amount? Then also discovery: where do you find freelancers? Obviously Fiverr and Upwork are some options, but what else do you use? And then more generally, I would just like to hear your thoughts on the topic. Maybe you have some strong opinions that come up when you think about the topic. Yeah, that’s all. Thanks. 

Rob Walling (28:17): So I’m going to start with the music. And that particular song in episode 810, I’m going to drop just a little sample of that here to remind you. So thanks for noticing that. Folks have actually commented that the podcast kind of had a soft reboot in 2018 when I went from having a co-host to going solo. And at that point, I wanted to introduce some higher production elements. And I talked to my editor, Josh, who we’ve worked together for, it’s got to be more than 10 years, probably like 12 years now. And Josh has edited five or 600 episodes of this podcast. You think, dear listener, you think you’ve heard my voice for hours and hours. Imagine having to edit this podcast at 1X and hearing all my foibles and cutting all of the times that I misspeak. But all that said, I tasked Josh with just finding some royalty-free tracks. 

(29:32): And one of the tracks Josh brought, he actually wrote. And this track, Zellewave, he wrote back in 2013. And so I asked him to give me a little background on it. Josh himself is a musician and an engineer and a music producer. So he told me that in the early 2000s, many indie developers were creating their own mobile games. Me being just a few years graduated from college, I’d be checking job boards to see if there was any audio-related work out there. I found that many of these developers were looking for sound effects and music for their games, often looking for 8-bit or chiptune-style tracks. That’s an electronic style inspired by the sound chips of vintage computers and game consoles. When people say “vintage,” it makes me feel old, Josh, because that was me growing up. 

(30:24): I eventually got my hands on a chiptune synth plugin and Zellewave was the first track I created with it, really as an attempt to just get familiar with the plugin. From there, I went on to compose music and sound effects for several mobile games during that time. However, Zellewave itself was never used, as most projects required simpler, loopable, game-level music that fit nicely in the background. Fast forward to when we were overhauling the production level of the podcast and adding more music. In addition to the royalty-free music service you had, you asked me if I had any instrumentals and I threw Zellewave in the batch of tracks for you to review, and it made the cut. And it now lives on in the podcast as part of our music rotation. Not sure if your listener is interested in listening to the full version or not, but it did manage to find my old portfolio work SoundCloud account I created back then to host these compositions. 

(31:15): And of course, we will link that up in the show notes. In addition, at the end of this episode, after I sign off, I’m going to ask Josh to put the entire track because it’s less than two minutes long. Just append it to this episode. I had never heard the entire track. I’ve just heard the intro part, and it’s a cool groove. Yeah, it’s a jam. So thanks for asking that question, and thanks Josh for giving us all the background and for composing some awesome music for the show. Now on to the second question. This is about freelancers. So there were many questions in the voicemail: what is a good price, should it be hourly or results-based, should it be a retainer, what is a good amount, how do you find them? There’s a lot of questions here and we could probably spend a whole episode on it. 

(32:00): It just would be kind of boring, I think. So let me give you the 80/10 of what I’d be thinking about. Upwork is really where we go to hire freelancers. That’s where I’ve gone for a long time. I don’t know of some magical other place. I know that a lot of people go to Fiverr. I’ve used Fiverr a little bit, but really Upwork just tends to have a really good selection. You could also check out dynamitejobs.com. Dan and I have a good crew of contractors over there as well. For me, freelancers are to fill either a temporary gap or what I call a black box role. And what I mean by that is if I could put a black box on the desk and you could feed it some kind of input and you know the output you want, it’s a great role for a freelancer, especially if you don’t have that on an ongoing basis or don’t have a full-time amount of that. 

(32:55): So give you an example: Josh. Josh is a freelancer. He’s a contractor. Now we’ve worked together for ages. I mean, Josh may in fact be the person I’ve worked with the longest out of everyone. He basically takes in an audio input, my maniacal ravings, and he tightens it up. He cuts out all the misspeaks. He queues it and the end result, that output, is a black box result that we know we want. And just to give you an example, Josh and I have never met. Josh and I have never even done a phone call before. We always communicate in writing. It’s kind of a trip to think about that, right? Video editing is a great example for this. Copywriting can be this too. 

(33:43): I happen to know Leanna Patch, who writes a ton of copy for TinySeed and MicroConf and has done the copy for my Kickstarters. I happen to know her in person, but I have worked with copywriters in the past that I just find. And the end result I want is good copy. If I can feed in the information about our brand and, “Hey, this is the book or the whatever that I want you to promote,” and they write good copy, I don’t need 40 hours a week of copy, 52 weeks a year. I really just need an output, a result that we can take and move on. Design is another amazing use of freelancers. Whether it’s visual design for a slide deck or for a PDF or for your website or for your app or for your logo, most companies of our size don’t need a full-time designer. 

(34:29): And the good news about design is when you see the result, if you like it, that’s it. It’s done. There’s no legacy. There’s no technical debt with it. And the reason I bring up technical debt is the moment I start thinking about software developers building my core product, I start getting a little uneasy with freelancers. Now, if you don’t have the money, you don’t have the budget, you have the constraints, you might need to use freelancers. But if I were building a SaaS today, I would try to avoid it. I would want a full-time person dedicated to it, whether that’s me or whether that is someone I hire. There’s a certain amount of ownership of the codebase, and technical debt will screw you. I mean, you hear me talk about this on the podcast all the time. Getting three or four freelancers to come in and build three or four designs for me, or write the copy, or edit a bunch of audio, or design a T-shirt. 

(35:24): You can think of all these examples. If the results are good, it’s done. There’s no huge negative. But if I get three or four different developers, especially freelancers, to just pop in and build a little feature here and there and build this part of the app, and then we’re just going to tie it all together, that is a recipe for disaster. It’d be like hiring three or four different companies to pour the foundation of your building and then trying to, all right, you build this floor and you build the second floor with a different contractor, and you build the third and fourth floor, and expecting that building to have any type of structural integrity or to look halfway decent. So those are kind of the two buckets that I think about, right? These things that are easier to outsource where the results come back, but there can be some technical debt tied to it. 

(36:09): In addition, the big question is: what is your core competency as a company? What really are you selling? What do you want to do better than the competition and what are you selling to your customers? If you’re a SaaS app, your product is such a core part of what you’re offering. And so anyone building that product, I don’t particularly want a freelancer who’s flitting in and out of my life to come and build that. Now, there are elements to this, right? What if I want an operations manager who’s just going to do a bunch of admin work, or an executive assistant, whatever term you use? Could they be a freelancer? Could I do 10 hours a week with someone and either pay them hourly or just pay them a monthly retainer? 

(36:52): I think you could. In fact, I have done this. We have worked with folks where we have a 10-hour-a-week retainer and ongoing work, and as long as the results on a week-to-week basis take a lot of work off my plate and there’s no kind of legacy sitting around, I don’t think this is the worst idea. The question of hourly versus results-based versus retainer: it really depends. Retainer is if you need ongoing work, that’s it. If you need someone to write copy every month, if you need design work every month, we’re in a position where we actually do need a lot of web design work. Not a 40-hour-a-week web design work, but five to 10 hours a week. We’re launching enough stuff and tweaking it. And so we have had a web designer on retainer for a while. 

(37:39): We have a copywriter on retainer. And of course, the downside of not having someone on a retainer is you don’t have their availability and you may have to find new freelancers to do work that you need. So there’s a lot of questions. Pricing is so hard to say because if they’re in the Philippines versus the US, the pricing can be five to 10 times different. And of course, pricing is all over the place: what is a copywriter versus a designer versus an executive assistant versus an editor versus a producer? The pricing is just all over the place. The way that I know pricing is typically by looking at Upwork or Fiverr or asking ChatGPT or asking in my network. I would go into the TinySeed Slack and say, “I’m looking for this role. I’m thinking $40 an hour, $50 an hour. 

(38:24): Does this sound reasonable? What are people paying for this?” So it’s a market system, and sometimes you can be clever and pay under market with someone early who is more junior. Usually that means they’re not going to be as experienced and it’s going to be a lot more work on your part. And so you can be clever and be cheap. I used to do that when I didn’t have much money, but you want to break that habit at a certain point. I really these days do believe in getting what you pay for. And when we go in to post a job, I will not take the low-end bids on Upwork at all because I don’t think the quality’s going to be there. So if we post a job and we get bids in the $30s and $40s and also a bunch in the $10 to $15 range, I won’t even look at the $10 to $15. 

(39:11): And it’s not that we have infinite money or that I’m immune to cost. I’m really quite frugal, actually, but I just don’t want the headache of the $15-an-hour freelancer. But I like this question. Overall, I think freelancers are a boon for bootstrappers. I mean, I remember when I was first starting out, we were talking 2003 to 2005 and 2006, and there was no Upwork. It was really hard to find freelancers. I remember going to Craigslist and posting job ads and trying to get people. Remote work wasn’t a thing. It was a hassle and it was expensive. Anyone you hired usually was in your local city, and going overseas, even trying to pay someone in Canada or the Philippines, was really hard. 

(40:01): Therefore, it was really expensive to do all this stuff. So I see a lot of value in freelancers, especially as bootstrappers where we don’t have the budget to hire people 40 hours a week and we don’t have the work to give someone 40 hours a week of a given task. Oh, and that reminds me. The big trap I see some other people falling into is: cool, I’m going to be all freelancers because I don’t want any employees, or I’m going to have five or 10 different freelancers all doing different things. And it’s like, now you’re a project manager and you’re a traffic cop and your entire job is keeping people on task, reviewing work, herding cats, managing all these people who don’t really have loyalty or ownership. They don’t have loyalty to you and they don’t have ownership of what they’re building because they are just going to move on to their next thing. 

(40:41): That is a nightmare. So don’t overdo it. You do want core team members. This idea of not having any core team members is a mistake I’ve made and it’s a mistake I see some other entrepreneurs make. And once you make it a few times, you realize, oh no, I’m going to hire core for the things that I want to be really exceptional at and that we want to own, and then I’m going to have these ancillary resources for the other stuff. And they have the freedom to build an awesome life for themselves and they can provide great results, much like our editor Josh has been doing for the past 12 or 13 years. So I hope you’ll join me in celebrating all of Josh’s contributions to this podcast, because it would not be what it is today without him showing up consistently week after week. 

(41:26): I talk about shipping 52 episodes a year since 2010. That doesn’t happen on its own and it doesn’t happen without an extremely reliable editor like Josh. So thanks for all the amazing listener questions today. If you have a question for the show that you’d like to hear me or me and a guest answer, head to startupsfortherestofus.com and click “ask a question” in the top nav. I actually recorded a new video for VideoAsk because the old one was recorded with a backwards baseball hat on. I was unshowered. I didn’t really think we were going to keep VideoAsk around, and that was seven years ago. So we recorded a new one just a few days ago. You can check that out at startupsfortherestofus.com. And as a reminder, we are going to put the full Zellewave track after I sign off here in just a minute. 

(42:14): Thanks for listening to me this week and every week. This is Rob Walling signing off from episode 831.