Episodes

In this episode of Startups For the Rest of Us filled with mystery and intrigue, I fly solo. I talk through things like product myths and that famous quote from Henry Ford about building a faster horse; talk through some thoughts around how people think about selling their company, what would I do if I sold it, what is life-changing money; and I dive into a bunch of other topics in this Rob solo adventure.

But first I wanted to let you know that MicroConf Remote is happening today. MicroConf Remote v2, which is a take on the 8-bit video game theme. If you have not checked out this platform, gather.town, that’s what we’re running this version of remote on. It’s pretty amazing and I think it’s going to be good. As this comes out, I’m doing a live keynote with one of the several amazing speakers. We’re going to be covering five topics specific to early-stage SaaS and gaining traction, so it’s for folks who are pre-$10,000 MMR.

We dig-in to Ruben Gomez’s AppSumo deal that he did, complete with numbers and advice, and how he thought about it, do’s and don’t, pros and cons, all that. We look at Derrick Reimer’s product […] launch that happened a few months ago. We look at some content marketing. We look at several topics that if you’re not in there you should head to mircoconfremote.com, you can still buy tickets. Whether you just watch the keynotes or just watch the videos, whether you participate in the hallway track in the gather.town environment, it’s really a unique event. Props again to producer, Xander, for putting it all together. Hope to see you there.

Finally, before I dive into today’s episode, Startups For the Rest of Us has 899 worldwide ratings, and I’m trying to get to 1000. It would be amazing if you could give us a five-star review in Apple Podcasts, Stitcher, Spotify, wherever creator podcasts are sold. Our most recent review, and it’s different in a rating. A rating if you just click five stars, I’m forever indebted to you. A review is when people write in text. These are the things that I read late at night when I’m close to crying myself to sleep. I use these to keep me happy, motivated, and focus on pushing this forward.

The subject line that this review is fundamental. “I’ve enjoyed listening to this podcast for a few years now without running a SaaS. It’ll still take a while, but I know that after we’ve launched, I think back to this podcast together with MicroConf as providing the fundamentals for getting started. I really appreciate the mix between tactics, strategy, and combined with humour.” Really? You’re the one that thinks this podcast is funny. “Combined with humor,” I appreciate that, “this is a go-to podcast for me.” The humor is included in the podcast. He specifically calls it out, this is great. Thank you John Erling from Sweden. Thank you so much John Erling. If you have not left us a rating or review, I really appreciate it.

Now, let me dive-in to the first topic that I want to cover today. I’m calling this product myths. I’ve always been annoyed with the quotes from the Steve Jobs’s and the Henry Fords, where it’s like, whether it’s focus groups, if I’d ask people what they wanted, they would have wanted a faster horse and instead I’ve built them a car. Here’s why I hated those quotes.

Number one, it’s unlikely you have the resources that Steve Jobs and Henry Ford did. But the time Steve Jobs was, I think he was 20, he was worth $1 million. By the time he was 21 he was worth $10 million. By the time he was 22 he was worth $100 million. A lot of that was on the back of this incredible once-in-a-generation invention that Steve Wozniak had designed. It was called the Apple I. That’s what made them have all these amazingness.

After that Steve Jobs then proceeded to launch failure after failure, from the Lisa to the original Macintosh, which eventually became successful but it was a trainwreck when it launched; to the Apple Newton, fail, fail, fail. He was running the company so poorly that he got kicked out. The board voted him out, and he went off. If you read the book, I think it’s called Becoming Steve Jobs, it’s a lot about the interim years and how he matured during that time. Then he did figure himself out when he went back to Apple in the late 90s. He was amazing not only as a business person but as a product person.

Before that, yes, he was a good marketer. Yes, he could talk. Yes, he could stare at people and convince them to do things that they maybe they shouldn’t do or they were scared to do. You would say it’s either persuasion, intimidation, or something. But he was not a great product person in the early days. It was Wozniak and, obviously, Jobs learned this and did become that overtime.

All that said, these luminaires are quoted and I feel like it’s this myth of should you listen to your customers or not. There’s an in-between because when Henry Ford says, that “people would have asked for a faster horse,” that’s like saying, I ask my customers what they wanted and they said that they want a button in my interface to download a CSV, and then make changes, and reupload it. Are you’re going to give them exactly what they want, or you’re going to put your product hat on—maybe your vision hat, your founder gut feel hat—and say, that’s a dumb idea, there’s a way easier way to do that. Why don’t I just build a lightweight kind of Excel manipulation widget within my app? This is just an example, I’m not saying that’s the better or worst way to do it.

If you’re a product person, you’ll never take customer suggestions and build what they want because you wind up with crap software. You wind up a million settings, you wind up terrible UX, you wind up with terrible UI because customers are not product people. They’re not experts for the most part in general. When Henry Ford says they were asking for a faster horse, I put on my visionary, my product hat, and I think what’s the job to be done? They want something that moves faster than a horse, what can do that? Well, trains can do that these days. Locomotives. When was this—1905, 1910. Locomotives can do that. Can we build a locomotive that runs at something that’s not on rails?

That’s the type of innovation that Ford put into place. To take his quote and to act, like don’t listen to customers at all, I think is a grave misuse of that as product people. Instead of taking exactly verbatim, literally what a customer said in building that in your app, there’s a balance there. It’s that product vision that you have. Where do I want my product to go? How do I want it to feel? How do I want it to be used? What do I want to build and not build in it? What do I want it to become and not become?

I tell you, in the early days of Drip, people wanted us to build affiliate management software into it because a competitor had it, they wanted us to build shopping carts into landing pages where all these things that other competitors had built, and we’re opinionated enough that we said our opinion is that we should integrate with the best of breed. So we had 35 tier 1 integrations.

By the time we’re 1½–2 years into Drip, and that was the approach we took. That was our opinionated stance on whether we’re going to make this thing an all-in-one, I’ll say monstrosity. Not that all all-in-ones are monstrosities, but that’s what it felt like, is that we would be a worst in class and we’d have five tools built into one, or we could be best in class marketing automation and integrate with the other best in class. That’s my stance on this whole Henry Ford quote.

I’d love to hear your thoughts, maybe I’ll tweet this out too to get a conversation going because it kills me every time someone says it. It rubs me the wrong way that it’s touted as it is. This big grandiose thing of, I’m such an innovator, look at me. Yes, you did invent it and you did innovate in the way that you solved customer problems, but then don’t go back and say, I didn’t do anything customers were asking for, because they were actually asking for a car. They just didn’t know it.

My next topic is post-exit thoughts. I seem to be talking with a lot of founders these days who are considering selling their company, are in the process of selling their company, have sold their company, and are thinking through what they would do next or what to do next, and what this all means.

I’m not honestly sure why this is happening, if it’s truly a wave or if it’s just my experience of it right now. I know that I’ve talked about it maybe six episodes ago. I said, hey, if you’re thinking about selling your company, just book a time on my calendar because I’m always happy to talk for 30 minutes.

This is a life-changing moment, for better or worse. It’s a pretty much undoable decision, and this is something I’m happy to talk to people. I probably talk to 4–5 people over the next few weeks, but even the prior year I get us an email or two per month of a founder who says, I’m in this boat, and I’m either thinking about it, or in the process, or I’ve done it. What’s next?

In addition, obviously, a lot of my angel investments have matured to the point where they are starting to have inbound acquisition, interest, and TinySeed companies, as well, definitely received kind of, you get accepted into accelerator, you get some funding from a venture capitalists, and you’re certainly get offer for more funding, and often start to have offers to be acquired. There’s been something on my mind.

I’ve always been up to the stance that, look, if you bootstrap or mostly bootstrap your company, you’re in control. If you want to run it forever, amazing, and if you want to throw off profits, amazing. A lot of people do that, a lot of people do it for a few years, and then eventually they decide, well, I want my next act, or they decide, if I sell it now, I can actually make 15 years of net profit. Instantly, that goes into my bank account, and what can I do with that? How does that change my life?

You do see founders. Back in the day, I thought Josh from Baremetrics would run Baremetrics forever, and I thought Adii Pienaar might run Conversio forever. There are certain people that you watch, and they do exit. They move on and do really interesting things after that.

I don’t take a stance that you should sell or shouldn’t. It’s not always or never, it really does come down to this situation you find yourself. Honestly, if you get an amazing offer it very well maybe once in a lifetime. That’s the point where I find some founders where they’re getting an offer for 10 or 15 times revenue, and that’s like, I’m not saying that it’ll never happen again, but you really to grow this company and keep growing it, and ride it over the top to ever see that dollar amount offered to you again.

With that said, Dan Norris and I talked a couple of episodes ago about selling. He and I actually have a difference of opinion on this, which I think is good. I don’t think either of us are incorrect on this. I just think there’s a lot of nuance into it. There were some thoughts around these two topics. The first is, what would I do if I sold my company? There’s that question.

Back in the day, I remember Basecamp, Jason Fried saying, why would I ever sell? I don’t know what I would do next. This is my life’s work. That’s great, that’s great for them, that’s their opinion. I would just say don’t necessarily take that opinion as yours unless you really thought about it.

The most interesting people I know—or I say a lot of the most people I know—have a lot of creativity in them. They have the next thing. Even if you call back to my conversation with Josh from Baremetrics a few weeks ago, he’s laser etching tweets on wood right now, and is that going to turn into his next company? Probably not. But is that something interesting for him to do for a while until he does figure out what that next thing is? Yeah.

In fact, I believe yesterday I saw a tweet from Josh already. I chatted with him a month ago, maybe. He said, I don’t have anything. I’m not going to do software. I’ve been doing software for 15 years. I’m looking to do something else. I saw a tweet from him yesterday, I’m building another software product. He’s building a personal finance or investing thing because he’s kind of running into issues managing, not managing his money, but he has a substantial amount of wealth now and becomes complicated to manage, and Google Docs doesn’t always work.

What I found is that fear of what would I do if I sold my company? I wouldn’t have anything to do. I might just sit around, play golf, and drink all day. I might just curl up and die. Just knowing you, knowing the founders that I know, in MicroConf, in MicroConf Connect, listeners of this podcast, people in TinySeed, the founders that I’ve run into with that conversation over the years? What would you do? You’ll probably do something really interesting, you probably will. I feel like I don’t really necessarily want to equate it to a fixed mindset vs growth mindset because I do think it’s pretty binary.

If you have read that book by Carol Dweck called Mindset, it’s about having the ability to see or learning the ability to see change, to become more comfortable with change, and to learn that I can change. Just because I can’t do math today doesn’t mean I can’t learn it. Just because I don’t have an idea today doesn’t mean I can’t come up with one. Just because I don’t have the ability to be a great public speaker or a great writer today doesn’t mean I can’t work and change that. I think there is, again, it’s not exact, but I do think it’s a little bit of that, it is fear, I guess what I see.

I grew up in a family where the lot of decisions were made based on fear. My dad had and has clinical OCD, not that joke OCD of I need everything to be on a table or I wash my hands. He had OCD so bad he didn’t leave his bedroom for 7 months when I was a senior in high school. He lost 80 lbs because he couldn’t eat, because of the compulsions. It was not a good show. It was severe, severe mental illness, and the doctors who saw him said you should be hospitalized, this is so bad. You can imagine how that shaped my upbringing.

There’s a lot of fear involved, and it’s like an anxiety disorder OCD, so there’s a lot of fear involved in OCD. That then became a mindset around everything. I was like, the unknown is scary and therefore you shouldn’t do it because there are negative repercussions, bad things can happen, blah-blah-blah. I guess that that’s how I feel a little bit about this. When I see fear as a mindset for any decision, I have to question if that’s a good way to think about it.

I’ll caveat that. Of course, there are some things that truly are scary. You can die climbing Mount Everest, or there are situations you can get yourself in where fear is good, they’re dangerous. Let’s take these career decisions and founder decisions as not those things that are going to endanger my life.

In thinking about what would I do if I sold my company, I almost think if you’re a creative, driven, motivated person who has built a company or multiple companies, or been launching things for a long time, of course, there’s a lot involved. There’s hard work, luck, and skill involved with building this company, and maybe you do want to run it forever. But run it forever because you want to, not because you’re scared of what you’ll do if you sell the company.

If you still have work to do, you still have work to do in your space, or in your app, or you’re not done yet, by all means to do that. It really does feel like, if you’re gonna just avoid potential change or potential uncertainty, I’m just not sure that’s the best way to live your life.

Again, there are many reasons not to sell a company. I think what would I do if I sold it is not a great reason. Now granted this comes from me who, every company I’ve sold, I’ve always had MicroConf going on. I have had this podcast going on. I knew that when I sold HitTail—I was working on Drip and I sold that, and before that I was writing a book, I built a membership site, I did all the stuff—then when we sold Drip, I knew there was MicroConf and this podcast, figured I write another book, which I’m working on now—robwalling.com, by the way, if you want to learn more about what I’m up to there—I knew that there would be something.

I started hacking PHP again. Right after I sold Drip, I started tying into stock trading APIs and crypto APIs. I never did anything with it, but I told around and it was fun. I hadn’t written code in years, and I found things to do with my time. Now, there’s TinySeed. What would it be like if I said, what would I do if I sold Drip? I’d still be running it, we wouldn’t have sold it.

My guess is Derrick being super ambitious and wanting to do new interesting things, he would have moved on and I wouldn’t begrudge him that. I feel like I made the right choice. I’m not saying because I made the right choice for this end of what happened and now I’m super happy with what I’ve built, means that everyone should. My thought holds that using the thought of what would I do if I sold my company has a reason not to do it, in my mind is a mistake.

Let’s cover another topic relating to selling. It’s really less about selling, I guess. It’s more about this term life-changing money. Something that I realized and felt but had not heard words put to it until I interviewed Will Schroter back six or eight months ago. He’s the founder of startups.com. Something I felt, I remember the first time I had, honestly, even like $20,000 in my bank account, it was so much more money than I’d ever seen in a bank account. It was more money than, I’m sure my parents had that money at some point, but I just remember drinking powdered milk as a kid, I always had food to eat but there was always this issue of we can’t do this because of the money, or I can’t do things that I want to basically.

That’s why I started being an entrepreneur, to be honest, selling candy at a markup, selling comic books at school in order to get the things that I wanted. I remember the first time I had $20,000 or $50,000 or $100,000 in the bank it was this feeling of, wow, I have some safety now. I can take time off if the world economy crashes, if a lot of bad things can happen and I’ll still be okay.

To me that changed my life and it changed the way I was willing to take risks, because when I have $1000 in the bank and my rent was $700 a month, I couldn’t take many financial risks. But when I had $50,000 in the bank, could I spend $11,000 dollars to buy DotNetInvoice back in 2006 or 2007, whenever that happened? Could I do that?

Yes, I could take that risk because I knew I could replenish it, I knew it wouldn’t bankrupt us, I knew I wasn’t taking out a loan. It allowed me to then take a risk that I then built up to, let’s say, $40,000 in the bank, and then could I spend $30,000 to buy HitTail? It’s a pretty big risk, but my life was changed by each of these moments. My life was changed both in the security of it and also in my risk tolerance increased to the point where I could make bigger bets and have a bigger impact.

Will sure to put this into words and he said, I tell people that $250,000 in the bank is life-changing money, when you didn’t grow up rich grow up rich. I mean, I would even posit that $100,000 in the bank is enough for most people to take a year off, or multiple years, it depends on where you live in the world. When I say life-changing, I don’t mean I go out and buy a Maserati or buy some ridiculous house. I just mean that it changes the way you think about your life and the risks you can take.

Another way my life has changed is generosity. My wife and I’ve always done our best to use our resources for people. I’ve had friends whose grandparent was dying when Sherry was in grad school. They weren’t able to afford to go see him and we’re like, here’s $600 for a plane ticket. That was the last time they saw the grandparent alive. We’ve actually done that multiple times to be honest. That’s one of those things where a few hundred dollars is just priceless in that instance if you can do that.

In fact, we had a friend who came back years later. I didn’t even remember doing it, but they said that was a life-changing moment for them because not only did they get to see the grandparent, but it occurred to them the generosity involved there. It wasn’t the amount of money. They were kind of like, I should be more generous, too. It’s just a fascinating thing. Life-changing money for us has allowed us to be more generous in more ways to more people in bigger ways. I guess all that to say that life-changing money can be different things to different people.

If you grew up in an awesome middle class suburban, middle or upper class, or whatever then maybe you didn’t have the fears that I have of going broke or of not making your rent. Life-changing money can mean different things to different people. If your upbringing was great and you have a fallback, your parents will bail you out or whatever, or you have friends and family money which is this whole other expression—maybe I’ll have time to go into it today or maybe another—then maybe $50,000 in the bank isn’t that big of a deal to you.

But to me and I think to most people, there does hit a point where your ability to be generous, your ability to solve problems and make them go away, your ability to take bigger risks really ramps up the more money you have. I’m not saying it’s a quest for money so you can do all these things, but there are certain notches. I do tend to disagree with the survey you hear around like, hey, if you make more than $70,000 a year, then it’s really incremental how much better, how much you enjoy your life, or how much happier you are. That hasn’t been the case for me, nothing gives me more joy than to have the resources to then be able to put into these startups.

If you think about it, startups and these small companies, even these 1-, 10-, 30-person companies are what really drives the American economy. That’s where the majority of the hiring comes from. I can see that, it has been a future, and I continue to see it as a future, especially as companies get bigger and bigger and bigger, they’re less fun to work for, and that freelancer economy, the gig economy, and startups are just up into the right. I’m all in on that right.

For me, my life has changed at every step along the way. At the time when I had $2000 of side income from a software product while I was working consulting the day job. Then boom, I quit that day job and it made full product income in 2008 or 2009. When was that? Thirteen years ago, to that moment when HitTail which was the product that then made two or three times in a month more than I had ever made in a month before. Now that was a life-changing moment. On and on and on, each of these things have been such incredible steps along the way.

Dan Norris and I talked about the arrival fallacy. I never arrived in terms of, oh, I’m here, and now I’m going to be happy forever, but that’s not what I’m here for. What makes me happy forever is being creative and being able to work on what I want when I want to. Having that control is something I wouldn’t have had 20 years ago when I was coding, as a W-2 employee and as a consultant.

Even once when I was working on my own products, there was this fear. I had control, but there is this fear of which of these is going to be squashed. Frankly, most of them eventually did, whether it was after I sold them or while I was running them. A lot of them got squashed by Google or got squashed by a competitor. AdWords stopped working. While I had it, there was, I needed that next step, the next step, that was the drive.

I don’t mind the arrival fallacy. I don’t kid myself anymore to think, oh, I have arrived, I’m gonna be happy forever. But I do think this is great. It feels great to be here and what’s next? Maybe I’d take a month off, maybe I take six months off like I did after I left Drip, between Drip and launching or announcing TinySeed was six months. I’ll be honest. It was on that two or three months until Einar and I started talking and kind of mapping it out and all that.

All that said, none of that would have been possible without that life-changing money. Again, whether life-changing is $20,000, $50,000, or whether it’s a million, your life is different at each of those milestones.

My next topic is something I’ve talked about in passing on the podcast usually with a guest. Just want to put it down for you here to think about and it’s about funnels. There are obviously low- to no-touch funnels, there are high-touch funnels. Something I’m seeing that’s fascinating in the really quick growth that I’m seeing in a lot of my investments and companies that I advise are these dual funnels. It’s where you have that really wide funnel—low-touch, no-touch—so you can imagine, say, Castos which is podcast hosting, or you can imagine Docsketch which is esignatures, competes with DocuSign. It’s a very wide market and it’s a very large funnel. You get a lot of leads in and it’s lower priced. Docsketch is $10 per user, and Castos (I believe) is $19 for their lowest plan.

On the flip side, you might have an app that is high-touch. David Heller’s Reimbi, for example, is—I don’t know what the pricing is—$500 a month, I believe. This is a high-touch funnel, midmarket to enterprise sales, as we would call it. The companies that I’m seeing that are really crushing it have both. It’s really interesting because the wide funnel with a lower in price point allows a lot of people to use it, allows it to spread via word of mouth, and it gives you a brand because when you have a 1000 versus 5000 versus 10,000 people who are using and paying for an app, you’re just kind of everywhere, and that’s amazing.

Then if on top of that, you then also have that high-touch, high-price funnel where enterprises are coming to you saying, I need an enterprise version of that. You’ve heard it if you’ve listened to either Craig’s podcast called Seeking Scale, that I really enjoy, that he does with Andy Baldacci, and then there’s Rogue Startups, but he’s talking about how there’s a higher-end funnel in private podcasting. If you go to castos.com right now, you’ll see they talk about podcast hosting and private podcasting. Those are in the marquee, they’re in the H1. You can imagine that this funnel is really powerful because of exactly what I’ve said, is the way these two play into each other.

Similar with an e-signature app, you can imagine this, I’ve already talked about the low-touch end of it, but well aren’t there enterprises out there? What if you’re a mortgage broker, or realty, or do a lot of sales or whatever, you need 5000 docs a month or 10,000 docs a month. That would be that high-touch, high-end, expensive, top part of the dual funnel.

The takeaway here is dual funnels are really interesting. We had it with Drip, not to this extent. We obviously have the really wide funnel on the lower end starting at $49. I think even better, if we had been able to have like a $19 plan, that would’ve been cool. Then we had folks in the $500 to, I forgot the top end was by the time I left, but it was definitely in the low 4 figures per month. It wasn’t to the extent, some of these dual funnels I’m seeing in terms of the top end, but we had it. I just didn’t necessarily recognize it and I didn’t realize how powerful it was.

Realistically, what often happens in this case is that when you get this dual funnel, in the early days the low-touch or no-touch funnel winds up being the majority of the revenue, as you’re getting because you don’t have the logos and you don’t have the user base. But as you start getting the higher-end users in, the more expensive enterprise folks, they become more and more and more higher percentage of your revenue base. That, of course, is when you’re growing on both fronts and you have that brand, that’s when growth is accelerated dramatically.

That’s it for this week’s solo episode. I hope you enjoyed it. You can certainly let me know in the comments or you can tweet me @robwalling if we’re not connected on Twitter, let’s do it. As always you can find detailed show notes at startupsfortherestofus.com. This is episode 541.

If you want even more detailed show notes, sign-up for the mailing list. startupsfortherestofus.com enter your email. We send out a weekly email where my assistant producer, Aaron, does a fantastic job of doing time stamps with topics and bullets. It’s even more in-depth than what we release to the public on the web site.

As always, thank you for joining me this week and I’ll be back in your earbuds next Tuesday morning.

Rob: Welcome back to Startups for the Rest of Us. I’m Rob Walling, and we’re going to be hanging out today, talking about some bootstrapper news, news that is relevant to those of us who are bootstrapping, or mostly bootstrapping SaaS companies. Today, we’re going to Twitter Spaces, the closing of Indie.vc, some Shopify App Store drama, and a few other topics.

I have Tracy Osborn and Einar Vollset on the show again today. Those are my two teammates with TinySeed, they’ve been on many episodes in the past. As you know, Tracy was the founder of WeddingLovely and is now the program manager for TinySeed.

Einar Vollset is my co-founder with TinySeed. He has a ton of experience in SaaS, M&A as well as enterprise sales, cold email, along with his CS in Computer Science that I like to say I won’t hold against him.

Before we dive into that, I want to remind you that MicroConf Remote is coming up next Tuesday. If you have not purchased your ticket, microconfremote.com. I highly recommend it, it’s for earlier-stage folks, I’d say pre-5 or 10K MRR. But if you’re anywhere from idea up to about 10K, we’re going to be diving into four in-depth case studies of early-stage marketing approaches that folks have used to get traction and it will either be founders or subject-matter experts who can share numbers, thoughts, ideas, best practices, as well as some really cool opportunities to interact with fellow founders.

Producer Xander has really outdone himself on this one, and there is an entire video game aspect to it where you’re an avatar and you can walk around, you can walk into the venue itself, the auditorium. You see this visually in your browser, and then you’re seeing the livestream and it’s going to be me talking with these founders and going through keynote-type stuff.

And then you can leave and go explore a bunch of other rooms that are going to have content and other attendees, so replicating the hallway track where you can walk up to someone and just have a video chat with them between talks, as well as head to different rooms that emphasize different things whether it’s education or marketing tips.

It’s all kinds of stuff. It’s all kinds of fun and again, in true MicroConf fashion, we don’t want to run an event that’s just like everyone else. If you recall last year’s MicroConf Remote, we had segments like founders in cars getting coffee or not getting coffee in that case. I had a talk show host desk setup, we were between two large potted plants, just all these different sets. It’s because we want this to be entertaining.

We know that sitting at home is not what we’d rather be doing, we’d rather be in a room together chatting, so we’re putting our creativity into these types of events to make them more interesting, more compelling, and hopefully more useful to you, that the content sticks and resonates more as you’re about to both absorb it and talk to other folks who are doing this. Again, microconfremote.com, grab your ticket and I hope to see you there.

With that, let’s dive into our bootstrapper news roundtable. Tracy Osborn and Einer Vollset, thanks so much for joining me again on the show.

Tracy: Happy to be here.

Einar: Thanks for having me, Rob.

Rob: I gave the two of you a little introduction before I hit record here, so let’s just dive into our first story which is about Twitter Spaces. In essence, for those who have been under a rock, Twitter Spaces is a beta or an early-access, limited access feature in Twitter that is essentially—you guys correct me if I’m wrong—a ClubHouse, but it’s in Twitter instead.

Einar: Yeah, it’s a rip-off of ClubHouse.

Rob: Well, rip-off is one way of saying it. I mean, if they rolled it out last week, my guess is it was probably in development potentially even before ClubHouse came about. I don’t know how long ClubHouse has been around. It’s synchronous audio, so imagine taking all the benefit of a podcast and removing all the good things about it.

You need to sit there live, there’s no recording, and obviously there are some benefits. People come in the audience, you can just bring them in and have a chat and such. I don’t have access to it yet. Do either of you?

Einar: I don’t, no.

Tracy: I do not.

Rob: Have either of you attending a Twitter Space or a ClubHouse?

Einar: No.

Tracy: I find this frustrating. I understand why these companies are making these spaces. A certain group of people have access to something like verification or only a small amount of people can use ClubHouse, or only a certain amount of people can use Twitter Spaces, so it drives up this need here. You see other people using it, and all the other people like us are going, what’s going on over there? I don’t have access to this, I can’t host these things. There’s a marketing need for it, but it frustrates me.

Rob: Does it feel like fake FOMO?

Tracy: Yeah, I feel like I’m supposed to have FOMO about it, and I just get mad and then I don’t want to use it. But I don’t think I’m also the typical tech user, or maybe I am.

Einar: I don’t know. We actually made this mistake over a decade ago. We did reMail, which is an email startup. We just let everyone in. They were like, all right great come on in. We got mentioned on Tech Crunch and it just completely melted our servers and everything. It was a horrible experience for everybody, so I’m a little bit more sympathetic to the staged, let in some people, see how it goes, add a bit of FOMO, that sort of thing.

I actually think it’s been done reasonably well. I get what you mean, though. Sometimes it’s a bit much, but having been on the other side of it from an engineering perspective, I do have some sympathy.

Rob: But I feel like Twitter has the resources to not do that. I guess since they are so big, maybe if they let everyone in?

Tracy: Yeah. I see it as Twitter being the owner of this. I should have looked up how long ClubHouse has been around, so maybe that’s a scaling issue on their end, but Twitter has been around for what, 10 years now?

Rob: Longer, since 2007.

Tracy: I feel like they’re looking at ClubHouse locking it down, and being like, ooh we can lock it down too.

Rob: Yeah, I see that. My thing with ClubHouse is I think they want to avoid having to deal with so much spam right off the bat, and if we do it by referral only, that can help you in the early days but until you have the momentum to then go in the back-end, build all the bots and the AI needed to help solve that. Because if they just open it up to the world right now, even if their servers didn’t melt, it would be brutal. The spam and all that would be a major issue for them.

Tracy: Sorry for interrupting, but also I would actually say it’s not just for keeping out spam, but it’s more of a higher-tier of conversations by limiting it to only a certain amount of valuable voices. That can ensure that when people join they’re like, ooh look at all these great conversations going on rather than a lot of mediocre conversations with all the hoi polloi inside of it.

Rob: Right. I have not been in Twitter Spaces—there have been a few—but one started yesterday and it’s like, I have work to do. And that’s the thing. If they were an RSS feed of certain conversations, would I subscribe? Probably. Maybe I’d at least try it out, but I can’t stop in the middle of my work day. I’m not going to stop and sit there and go talk about bootstrapping or whatever.

Einar: If only there was some sort of technology where you could have a feed of things with audio, and then you could listen to it as you wanted.

Rob: XML would be a really good approach for that. That’s the joke I’ve been making with friends. Like really? Are we going backwards here? This is terrestrial radio, it’s just smaller, it’s just more niche. I guess I’m not a big fan of it.

However, I will say producer Xander and I have talked extensively once I have access doing some MicroConf stuff, and doing potentially a livestream audio event, whether it’s just like a MicroConf on air that we do audio only, because the chance for participation, I do see some of the benefits where I can call someone from the audience.

I’m sure there are other benefits that I don’t know about but that’s really the only one. We already do MicroConf on air as a livestream. It happens to be a video livestream because that’s just the norm for real-time content, because to do an audio livestream is unusual, I’ll say, so we do that every few weeks, we get people engaged, we get questions, and that’s cool.

Again, the only difference I see is the ability to see someone in the audience and say, they can contribute on this topic too, I recognize their name, and pull them in spontaneously, so to speak. Do either of you see any other benefits that I’m missing from either of these platforms?

Einar: Yeah, I think certainly just having a livestream and then it being like, yeah it’s on some website somewhere is one thing. Certainly with ClubHouse and definitely with Twitter, you have more the network effect, the fact that it’s inside these networks of things. In relation to ClubHouse, I keep seeing people on Twitter who I know have 5000 followers or something, and they come along and they’re like, look I’m on ClubHouse and now I have 150,000 followers.

They’re clearly very aggressively trying to build out by suggesting people and building that network, and I do think that’s a big part of the appeal. You could always do livestreams on the internet, that isn’t new. It’s just the more building the network and the social network and engagement around it, I think is the innovation.

Tracy: I feel like we’re pushed as consumers being that we’ve watched Twitter grow, and they’re watching all these other social networks like Instagram grow. A lot of people are realizing the power of being in early, building that initial network, and having that payout over time, if they can get in early enough. Now when social networks start, people are like, maybe this one will go big so I’m going to try to get in big early. And then they fizzle, which makes me sad.

As with Twitter alternatives, I think people have done that too. I’m not sure if that was really Mastodon, but I did know some people who were thinking that Mastodon would be the big competitor to Twitter, and therefore…Mastodon?

Einar: Masa-what? I’ve never heard of Mastodon. What is Mastodon?

Tracy: Yeah, exactly. It died, I think. It may be still alive. I do know of some people who looked at that and were like, this could be it. They spent a lot of time trying to build up that network just in case, and I feel like that could be happening a little bit with ClubHouse.

Rob: Yeah, the network effect will win. That’s the thing. With ClubHouse now a feature of Twitter, and Twitter already has the network, so my prediction is ClubHouse will be done. I know they have this amazing valuation right now—and I say amazing, what is it, billions of dollars—but for me it’s this typical silicon valley FOMO investor thing and everybody wants a piece of it now because it got popular.

Twitter has the network. If Facebook were to do this, they would have the network. ClubHouse is building it from scratch. I’m on Twitter, I have 21,000 followers. When I go to ClubHouse, I believe I have like 42. For me, I’m not going to invest my time on ClubHouse. I’m literally waiting to have access to Twitter Spaces. By the way, if you work at Twitter and you’re listening to this, I would love to have access to start doing a little Space now and again. Hit me up.

Tracy: Use the power you have.

Rob: It’d be great. I’d bring an audience with me, so I think it would be beneficial. I’m not some clown who’s going to show up and gather four people to do it.

Einar: Rob, are you verified on Twitter? Is that a thing?

Tracy: Oh my gosh.

Rob: It’s a thing. I’m not, no.

Einar: Okay. Tracy, did you used to be verified on Twitter?

Tracy: Yeah. Einar knows that I was just complaining before we jumped on the call and started recording this. I used to be verified but I changed my username from @limedarling to @tracymakes and lost verification. I’ve been in the, as I said earlier, the hoi polloi ever since.

Rob: That was like giving Tracy a papercut and pouring lemon juice in it. That’s what she just said.

Tracy: It’s like Einar’s favorite pastime.

Rob: Yeah, it’s the verified thing. So, prediction—Einar, is Clubhouse in business or swallowed up within 18 months?

Einar: Eighteen months, that’s a lifetime. I still think they’re around. They raised so much money. Didn’t they raise $100 million or something insane? I still think they’ll be around, I do. I used to think Snapchat was just a flash in the pan which it clearly wasn’t, so I’m a little bit more bullish (I guess) than you guys.

Rob: Tracy?

Tracy: I’m bearish because if I look at the social networks that made it big like Twitter, Instagram, Facebook—they outscale depending on the time. You can spend hours on each of these social networks, or you can just check in every five minutes, every now and then, and just catch up really quickly and close the app.

ClubHouse doesn’t really have that time scaling. I feel like it’s all or nothing. When the newness wears off, I feel like it’s more likely to not be as engaging anymore and that participation will drop off to a point where ClubHouse might have some issues.

Rob: I agree with you there. I think longer-term, Twitter Spaces will probably stick around. Maybe they’ll add video, and it becomes another avenue to do livestreams.

Tracy: Wait, do you think ClubHouse will bring in a Twitter-like alternative so they do have that time scaling?

Rob: No. What do you mean bring in a Twitter alternative?

Tracy: If we go with my analogy…

Rob: Ohh, I see what you mean. Add Twitter functionality?

Tracy: Yeah, exactly. So then you have the way of catching up really quickly but you don’t have that huge time effort. Do you think that ClubHouse will move into that direction?

Rob: With $100 million they can do whatever they want, but that seems like an odd place to go down at that point. I just think Twitter Spaces will stick around. I want less synchronous things in my life, period.

This is why we use Voxer. Voxer, for those who don’t know, is an asynchronous way to send audio communication. I push to talk, I can leave a five-minute Voxer, and then Tracy or Einar—it’s a private message—they get it, they can listen to it at their leisure and they can 2X or 3X me—3X is the speed—and then they can respond back.

We still do calls when we need to, but it cuts down the need to have a bunch of back and forth in Slack, or just go everything’s like let’s jump on a 30-minute call to discuss this. Oftentimes you can just go back and forth with little audio, and that’s how I want my life to be—more async.

Tracy: Voxer is essentially calls but without the call part, just like voicemail.

Rob: It really is. When I’m off a call or I’m just making dinner with my kids, before I sit down, brrt, you know? I’ll say, hey Tracy I was thinking about this one thing, what do you think? Blah-blah-blah.

In any case, let’s move on to our next story. Really interesting news this week—shocking news to be honest—that Indie.vc is shutting down. Bryce Roberts posted to Medium, a post titled The End of Indie. He doesn’t give a ton of background other than to say it looks like LPs weren’t as interested in this fund. For those who don’t know, Bryce runs two funds. One is the O’Reilly AlphaTech Ventures, oatv.com. In fact, when I emailed Bryce, that’s the domain name of his email address. That’s a very large fund, traditional venture capital, quite successful from what I understand. I don’t have inside information there.

Indie.vc is, again my understanding is it’s a much smaller fund and it was investing in alternative VC. Their terms are (let’s say) more bootstrapper-friendly and you can buy back equity and pay things back. Here’s a screenshot of an email from an LP-alluded partner, a potential investor in Indie.vc. The screenshot says, “Hey Bryce, we are out. The shift in strategy for the fund over time for your good intentional reasons has moved further away from the kinds of companies we are looking to have exposure to.”

And so he says, “Without the institutional support to scale the Indie economy we envision, it’s time to take our learnings and refocus to other strategies within the portfolio to deploy our capital. To our friends, founders, scouts, and supporters, thank you. It’s been an honor to write this chapter. Maybe we’ll get the band back together, take another run at the Indie opportunity down the road.”

This came completely out of nowhere, and I tweeted about it that I was surprised and also frankly saddened that the experiment didn’t work in a sense. They funded 40 companies, you can’t say nothing good came out of it, but the fact that it’s shutting down only six years after it started is a bummer.

Being lumped in—TinySeed has been lumped in with Indie.vc—as this bootstrapper-friendly funding and the mission I think is overlapping, but obviously TinySeed is very different in that we run the year-long accelerator, that our terms are quite different. They’re not custom terms, they were really just straightforward equity, and our focus is B2B SaaS. There are a lot of differences between the two, but I feel like I’ve talked a bit about this. Tracy, do you have other thoughts to add on Indie closing down?

Tracy: Yeah, I actually wasn’t thinking this before the call, but when you said the name of their blog post, The End of Indie, it’s interesting that it says that rather than End of Indie.vc. It’s a little bit saddening because Indie.vc and why TinySeed gets lumped in with them is that we are aiming for more of that independent bootstrapped type of world. Those types of entrepreneurs are looking for a path other than VC or just bootstrapping.

When the blogpost says End of Indie, and then talks about the LPs not wanting to invest in the space, what I’m hoping is that it doesn’t tell people that being an independent Indie entrepreneur—rather than say VC track entrepreneur I think is the way to look at it—they don’t think that that’s also the end of that, like people aren’t going to invest in this field, because we have investors.

We just raised our second fund and we’ve been really successful in getting people on board our mission and I just hope that blogpost doesn’t read as this mission of supporting independent entrepreneurs doesn’t work anymore.

Einar: I agree. Certainly, Bryce in Indie was a pioneer in this space. I certainly think we share the mission in terms of, I feel like in the last 10 years at least—I think this is what triggered Indie.vc to get formed—the name of the game in terms of funding has become chase after unicorns. It used to be, if you don’t think it’s going to become a billion-dollar business don’t invest.

A couple of years ago, it was forget about a billion dollars. If it can’t be $10 Billion then let’s just not invest. And then last I heard a week or two ago, people were talking about hectacorns or something crazy which is $100 billion.

Fundamentally, a key part of thesis for TinySeed is there is value creation and there is value in supporting founders who want to create businesses that are successful and ambitious but aren’t necessarily wanting to be $100 billion, super famous, the face of Fortune magazine, or whatever, where maybe a win is you sell for $20, $100, $5, or $10 million, that’s a win for everybody, including investors. I’m sad about it.

We at TinySeed took quite a different approach. We get lumped in with them and similar funds reasonably often, but in a way I actually think of Idie.vc and those kinds of funds more similar to revenue-based financing on debt funds, versus certainly what we think—or at least what I think—is given how early we invest—Indie usually invested later than us—you just need to be an equity investor and you need to basically not allow founders to buy back equity.

As you guys know, we sometimes get pushback on this. Why can’t I just buy back my equity? Why won’t you be happy with 5X or 10X your money back? For us, the reason is that the math just doesn’t work out that way. We think that the companies that we build, what we’re trying to do is to support a large number of founders and companies.

Some of them won’t do so well, and some will do well and sell for or just get to $5 or $10 million. Some will do really, really well. That whole mix of things needs to be in place in order for founders to be successful, but also in order for investors to be successful.

As you see with Indie, if you can’t convince investors or LPs to keep investing, then you’re dead in the water. The most founder-friendly terms in the world are just to give cash for no equity and no nothing to founders, but that doesn’t provide a suitable return for investors.

That’s been the challenge for us from day one. How do you find that balance between founder-friendliness and suitable investor returns, given that everybody has other options to what to do with their money? You can put it in crypto or S&P 500 Index funds, or you can YOLO into GME options.

There are a lot of things people can do with their money, and I think you need to find what that balance is. I think we’ve found it, and certainly I hope so at least, I guess time will tell, but I think that balance is hard to strike. For whatever reason, it doesn’t seem like Indie found it.

Rob: Yeah. You and I spent at least six months working on the TinySeed terms. We looked at Indie’s terms and came up with our own terms. I believe we had five, maybe six versions of different terms. There were straight equity—

Einar: Some were terrible.

Rob: Really bad, and some were way too founder-friendly in the sense of, hey investor give us $100,000 and we’ll give you $120,000 back in 10 years. That doesn’t work. We had some where the fund made out like a bandit and what founder or whatever in their right mind would accept that, right? That’s what we had to find, the balance where the Venn diagram intersects that founders will take it and it’s a good deal for them.

Einar: In some cases they were maybe a decent trade-off in some situations, but they ended up that they would preclude or stop the founder from doing certain things. We think a lot of the companies that we back will be successful without further funding after us, but we did want to come up with terms which meant that if they do decide, this is a bigger opportunity that I thought I want to go after the more traditional venture track, then they should be free to do that.

Some of the terms variations we thought of really snookered founders. In some cases they were complicated to the point where it wasn’t obvious. I’m not sure that most founders would have understood them until it was too late. Five years later they’re like, oh crap I can’t do this now. We see that just in general venture terms and stuff. You end up in a scenario where whatever terms that an early-stage investor put in is so weird that it ends up blowing up the cap table and ruining the company at least for further financing.

Rob: Yeah, and that was a big reason that we did land on equity, that it’s been around for centuries, it is understood, we invest the money, and we get a percentage. Really that’s the simplest way. All the other terms we had were a bunch of if-then-else statements in a contract in essence. If this happens, then this happens at this point, and it made us feel a little less comfortable. If you ever do decide to look into funding, whether it’s angel, whether it’s TinySeed bootstrapper-friendly, and whether it’s a venture, you really need to look into these edge cases.

To wrap up this topic, the sad news is that Indie has closed up shop and that’s a bummer. The good news is, before Indie, before TinySeed, we were bootstrapping. You can still build companies without any funding. You can. Is it probably a little harder? I think so. Will it take you longer? Probably.

This is what MicroConf, this podcast, my books, and everything I’ve been saying since 2005 is about. Don’t ask for permission to build your company. Build your company, not your slide deck. Go out and build it. Revenue is the best slide deck. That is another thing I’ve said at several talks. If you really do decide that you want to raise funding at some point, then the more traction you have the better off you do. So get in the trenches, get some revenue, get someone paying you—real customers, real product, real money—and that’s the way to do it, and it’s still totally possible.

If you need help along the way, it is good that there are funds like ours and other ones I’m sure will come along that can help folks who maybe don’t want to necessarily hop on the venture track, may want to, down the line.

Let’s move on to our next story. This was one I found on Hacker News, and we will link this up in the show notes. “Shopify says remove Stripe billing or get booted from their app store. We’re a SaaS business currently listed on the Shopify app store. Today, we got a stern email from Shopify’s partner governance team. TLDR: Don’t even have Stripe as an option for Shopify users or we’ll boot you. Also, back pay since January 2019.”

I’m not going to read this entire email—it’s several paragraphs long—but in essence, if you’re in the Shopify app store, even if you have a separate SaaS app, if you have any Shopify users coming through your SaaS app—imagine if you have your own domain, drip.com for example—and Shopify users are using it, then they’re saying that you have to go through Shopify’s billing.

I want to start by saying this is no surprise to me. While it sucks, that’s what Shopify is, a monopoly in essence. Back in the days as Drip pivoted into ecommerce, this was shortly before I left, we started talking to Shopify about getting in their app store and this was one of the big concerns I had. All of our billing engine and everything, refunds, annual prorating, just all the complexity, is a custom billing engine built on Stripe and it works really well. We have a credit system, overages, on and on and on. Some folks wanted to be in the Shopify app store, and that means suddenly you hand over all of that.

Our customer support people no longer have the ability to just provide someone with a refund. That was a pretty major yellow flag for me during integration so I’m not surprised by this. Yes it’s a bummer. What do you think about this Tracy?

Tracy: About the same. The hard part was because you shared the Hacker News page with me and of course I had to go through and read the comments…

Rob: Oh, don’t do that.

Tracy: Yeah, I shouldn’t do that. Now my thinking is warped by all these comments, but the top comment does make an interesting point which was, people have been talking about Apple taking a 30% cut of folks who are doing payments through their Apple apps, and the Shopify CEO was I think rightfully complaining about that—the loss of the open web—while also having this within Shopify. I just think that’s a little disappointing, I agree with that assessment.

I wish we could have an open environment both with Apple as basecamp and everyone has been talking about as well, but also with Shopify. But that said, I’m a pessimist when it comes to this kind of thing. It does not surprise me whatsoever that it’s this way.

Rob: These are big platforms, this is what they do eventually. This is why amazing step one businesses are these Shopify apps. It used to be mobile, but I’m not necessarily a fan of being at this point since everything’s sold for 99 cents it seems. There are the Shopify apps wherein the Salesforce app store and wherever else we can think of the online ecosystems and you can get in. Heroku is another one. It’s amazing to get to $5000, $10,000, $20,000 a month relatively quickly if you rank for terms that people want to search for if the ecosystem’s big enough.

Longer term, these are not great million-dollar, multimillion-dollar businesses if that’s your aspiration. This is your step one. Use that to then buy out your time and then either pivot this into hey, I’m going to build another business that’s very similar that isn’t in the Shopify App Store, or go and build that other app because platform risk is a big deal. Basically, you have to do what they say. They’re going in asking the original poster for 20% of revenue dating back to January 2019. That’s two years of revenue. That’s insane.

Tracy: Yeah, that’s wild.

Rob: Yeah. What do you think Einar?

Einar: I’m sort of the same. It’s not surprising that they’re doing this, but it’s hypocritical of them (Tobi) to be ragging on Apple when they’re doing the same thing if not worse. I think it was Tobi, who’s the CEO of Shopify, who said last quarter or the quarter before, we’re expecting to see a company IPO that’s built on the Shopify platform. I’m like, that’s tricky when you do things like this. I guess it’s happened on some platforms before, but not a lot.

There are some companies that maybe have done that on mobile, maybe some gaming things have done okay, but on a single platform? No. As an investor, we know this. We’re slightly wary of backing things if you’re only running on Shopify or a specific platform, because it is a risk. They can easily decide the next day, we’re doing exactly what you’re offering and it’s going to be free and now you’re screwed.

You can have a significant business that can be killed overnight by running on someone else’s platform and I think that’s a risk that everyone should take into consideration. Like I said, I somehow doubt that a Shopify plugin will become, well IPO, as a billion-dollar business.

Rob: One of the early questions we ask folks who apply for TinySeed if they are on a single platform is, what are you thinking to get around your platform risk, basically? Usually the approach is to look at the other platforms, to build out into a broader ecommerce thing. I have second-hand—through one of the investments that I have, an angel investment from long ago—have seen platform risk blow up and have seen a large platform just throw their weight around and be able to pretty much, extortion maybe is too strong a word, certainly dictate, that’s a good way to say it.

I know what can happen, and it doesn’t happen when you’re at $500,000 ARR. It happens when you’re at $5 million ARR. It happens when you get to that point that you get on their radar and they see, wow why is this company making all this money on our back? We want a big piece of that, and that’s usually what happens.

Einar, with your experience helping SaaS founders exit—SaaS founders that are doing basically anywhere north of $1 million, seven or eight-figure SaaS companies—have you seen acquirers be wary of platform risk in this sense? Even if, let’s say, someone did have a Shopify app that was doing $5 million or a collection of them, would a potential acquirer be willing to pay the same multiple as they would if there was no platform risk?

Einar: No. Certainly not. No.

Rob: That clear, huh?

Einar: Oh yeah, 100% because they’re aware of the risk; it’s obvious. There are ways to mitigate it. To give you an idea, in some cases there are things that you sort of know are platform risks but they’re not really the same sort. For example, for at least the last year or two, it’s been the case that a B2B SaaS business was usually selling for some sort of an ARR multiple gets discounted if it’s a business that serves WordPress clients exclusively.

That’s much less of a platform risk than Shopify or Apple because it’s an open-source thing and yeah, I guess WordPress can stop you or Dotcom can stop you from being in the plugin directory or whatever, but certainly the risk there is much lower. Those guys are taking a discount if they were not serving that market. There are just many, many buyers who are willing to punt on an asset or certainly pay a premium for an asset that’s running on the app store or whatever platform we’re talking about.

Rob: Our next story is another Twitter story, which is unusual. I don’t feel like Twitter ships many new features. In the past three years have they shipped two major features? But here we go. Space is at the top, Super Follow is a way for Twitter users to charge for their tweets. It’s like a subscription. I could say hey, I’m going to have my public Twitter feed but if you want the juicy details—I don’t know, more honesty, more transparency, whatever it is it’s the super secret sauce—then you can pay $5–$10 a month to get this separate private feed for Rob Walling.

Tracy, I’m curious if you would be willing to pay. Is the price set at $10? I should have read this, but can you set your own price or is it $10? They’re showing it as $4.99 so they haven’t clarified this, but would you pay to read anyone’s tweets? Is there anyone that comes to mind where you’re like, yes I would do this?

Tracy: People are making this Substack comparison. I also think it’s like Patreon, and I feel like there are people on Patreon—definitely not the majority—that are using it as a thought platform. Oh gosh, I always get bullish and bearish wrong. I would say I am bullish on this, actually. I don’t like it. I think I would pay for people’s tweets. It’s a smart move by Twitter.

With the trends between Patreon and Substack, and Twitter reaching the point where it has nearly everybody (it seems) has a Twitter account now, it feels that’s a natural evolution and a better way of monetizing the platform than just doing all the ridiculous advertising stuff that they were doing, all the weird Twitter ad stuff.

I wouldn’t want to pay for someone, I would probably say I’d prefer to read their tweets for free. I can see the business case for it, and I could see myself being won over by super amazing thought leaders, like if Barack Obama was doing a lot of thought leadership on Twitter and then decided…

Einar: He needed some money to charge $4.99?

Tracy: I don’t know, maybe the book sales aren’t going as well as he thought and he has to move over to Twitter. I could see myself being like fine, take my $5 a month so I can have access to what you’re saying.

Rob: Einar?

Einar: Before the thing I didn’t actually realize they had released it. I think it’s a good move for them. I certainly think it opens up some new use cases and I can see myself paying some stuff. I guess it’s been mostly used for porn, but isn’t this what superfans or onlyfans or whatever it’s called does? It’s sort of like that, so I think in general it’s fine. Why not? I’m just happy to see some sort of a product innovation from Twitter. It’s been a long time.

Rob: Me too. I’m waiting to see what some creative folks do with this. When I think about it in general, I think this isn’t that interesting. It’s like, okay you put up a pay wall in front of some tweets, but when Patreon first came out I felt the same way. But now I see how it’s used and I support probably 10 creators on Patreon. So would I support creators on Twitter where it’s almost a donation model? Yes, because I do that on Patreon where I pay people just to podcast.

Einar: Do you think I should set up a Super Follow just to do my YOLO GME bet tweets on there? Would you pay for that?

Rob: It could be there. I wouldn’t, but there are people out there who would. I agree with you. On a product front, this is a good move. People are comparing it to Substack, but Substack is email newsletters, so I don’t see how. This is a walled garden and Substack is email, unless I’m misunderstanding it.

Einar: I don’t think it’s the same. I have to be honest. I’m quite surprised at how successful Substack has been. I have to admit, that’s more surprising to me than anything else.

Rob: I know, that’s another one where I’m like, how? Why? You could just do this with MailChimp. Like, why? I know they have some other features and such. It’s really a tightly-niched product (almost) and I wonder what the reach of that can be if it can be venture scale. Obviously email marketing can be, but that’s a really different use case than just creators.

All right, our next story is actually comparing Google Cloud onboarding versus AWS onboarding, and it’s a blogpost on kevinslin.com. Obviously, we’ll link it up in the show notes. He says at the beginning, “Disclaimer: I used to work at AWS and have both conscious and unconscious biases towards my former employer.”

In essence, he received credits for AWS and Google Cloud, and he had to get onboarded essentially from scratch in order to redeem this offer and then get access to the stuff. In the end, his comparison is that the AWS process was completed in under a week, got all the credits and the perks right away, and access to first-party support from AWS. The Google Process was still ongoing after three weeks, he got credits in chunks, and he’s not sure what the terms are and when they renew. The first point of contact was a sales rep, not talking to a third-party partner.

To me, this is a bit of Amazon does tend to be… their customer service is not terrible. I tend to have decent interactions with customer service, and they do have human beings working in Amazon. With Google, anytime I’ve needed something, it’s pretty terrible in terms of going to forums and such. I would hope that Google Cloud would just be organized differently and again, he obviously has his own bias. I have not gone through this process, but Tracy I’m curious what your thoughts were after reading this post.

Tracy: Again, there was a Hacker News post for this and again, I looked at the comments.

Rob: Don’t do that.

Tracy: I am affected by the comments that are there, but some of them made a point that it’s actually more about instead of just Google Cloud versus AWS onboarding for people, it’s actually a comparison for YC companies. We kind of see this at TinySeed. When you set up a perk for an accelerator, some of the people that we get perks for will have a dedicated rep that you can just email immediately and they give you all the answers that you need.

And then there are other companies that say, we offer a perk but we’re not going to also offer the infrastructure to support all of that. Both of them are successful, it sounds like—as someone made a point—AWS has a better rep for this YC perk. I feel like a lot of it is just beating the horse about how Google support is terrible and AWS is great. I would argue that AWS’ rep for the YCombinator would be better than normal support for AWS.

Rob: What do you think, Einar?

Einar: I’m not sure what I think, actually, but I certainly think that’s right. One of the most frustrating things about this that we see with TinySeed, too, is that at least AWS has been around for a long time. That’s part of what’s shining through here, and they tend to be consistent with their stuff. They’re like, if we’re going to offer you 150,000 in credits then that’s what we’re going to do.

We had the experience with one of the perks that we offer with TinySeed where it was $100,000 and then I got busy, I got a bunch of emails all of a sudden, and then I read one of the emails from this. Like yeah, we’ve decided to change the program a bit. Usually those things are like, we changed our privacy policy. And he’s like, no we’re going to do now it’s $1500 per…

Tracy: $500.

Einar: $500? Even worse. I was like, you mean you reduced it from 100,000 to 500? That’s just an email in a change? That’s a bigger deal to me than how much pain it is. Although, with that being said, I like AWS a lot. I got the YC. AWS used to have a YC alumni credit, too, which is nice. I accidentally blew that. It was quite substantial, I think it was 100,000 or something. I accidentally blew that by having a cluster of huge instances, databases that I forgot to shut down.

I didn’t notice because it was just eating through my credits, and all of a sudden two or three months later I got an email that says, hey you owe us $13,000 in credits. I was like, you guys can clearly tell that I haven’t used this at all, this is a mistake, could you please set my bill to zero? And they did do that, AWS did which I’m not sure that everyone would have done the same, so I’m inclined to be pro-AWS just for that reason alone.

Rob: I’ve only used AWS, so I don’t know that I want to weigh in on the pros and cons. I’ve had people use Google Cloud and love it, too, so it’s an interesting datapoint.

As we wrap up, our last story is about the LinkedIn gig marketplace. In essence, they are developing a freelance work marketplace that could rival fast-growing gig sites like Fiverr and Upwork.

I hadn’t realized that LinkedIn acquired the assets of UpCounsel back in 2019. UpCounsel was the go-to two-sided marketplace I used to recommend people head to if they needed to find a lawyer, because it was actually pretty vetted—the lawyers—and I had found at least one, maybe two that I worked with back in the 2015–2016 timeframe.

I’m a little bummed that that isn’t around anymore, but I guess they acquired the assets. The founder, Matt Faustman, stuck around with LinkedIn and now they’re using him to essentially build this similar marketplace, although it’s not focused on legal, it’s more about gig workers.

Obviously, LinkedIn has both sides of this marketplace. They definitely have folks who are looking for work who may be interested in freelance work. They have company pages, but I’ve always thought of them as a little eye-rolley. It’s like you need to have one so people can say that they work for you. That’s the purpose, right? I don’t see a lot of companies on there beefing out their pages and in this case, maybe they would need to. I’m curious—this time I’ll start with you, Einar. What are your thoughts on the LinkedIn gig marketplace?

Einar: My main thought is what happened to LinkedIn and Twitter? For the first time in years and years, they’re doing something new. I was surprised to see this. I don’t really expect to get anything new from LinkedIn other than a crapton of email which seems impossible to unsubscribe from in every way, shape, or form. It depends on the kind of gig, I think. That’s my thing, I haven’t really looked at it. Are we talking Fiverr-type gigs here or are we talking more like lawyers?

Rob: I think it’s going to be more similar to Upwork because Fiverr is what? It’s $5 and it’s super small things, but Upwork is more like, I’m going to hire a freelancer maybe for this entire design project. Maybe I’ll hire someone for years to be an executive assistant, a VA, or whatever. If I were LinkedIn, that’s the direction I would certainly be going.

Einar: That makes sense because one of the issues with Upwork and whatever is if someone is terrible—they could be great for a little bit and then they could be terrible—if they’re really bad, you can burn their ratings, but they could just start up a new one and do the same thing over and over again, versus with LinkedIn, it’s harder to just disappear and then respawn as five different people.

I certainly think there’s a reputational thing that comes with the fact that LinkedIn has become this de facto online CV, resume-type service that I think is helpful in terms of reputation management. I could see them being reasonably successful.

Rob: I am happy to see a competitor to Upwork come about because there really isn’t another big player in the game. I do like what Dan and Ian are up to. They’re from the Tropical MBA and they’re working on dynamitejobs.com, which is Upwork with a twist. I love the way the boots are on the ground, we have a small community, we see a need, and they have both sides of the market in their podcast listenership and their Dynamite circle community. I think they can get traction.

It’ll take years and years to get big, but LinkedIn can start obviously very big because they’re at scale already and they already have tens of millions, hundreds of millions of profiles. I don’t even know what the numbers are, but it’s a lot of folks. What are your thoughts here Tracy?

Tracy: My biggest criticism of LinkedIn has been due to my experience of being a freelancer and a contractor for many years. Going onto LinkedIn and having it be so company-focused, and where did you work? I would always say I’m working for myself. I was trying to list out the projects I was working on and it was a terrible experience. I wish that LinkedIn would have a better emphasis on the projects you’ve worked on, whether that was at an employer or your own projects.

What I’m hoping with this news that they’re building a gig marketplace is that there is going to be some changes to the platform that allows for better emphasis on the things that people work on. And this is a big focus that they’re working on and better showcase the things that they’ve worked on. I’m optimistic. I like this news. I hate LinkedIn, honestly. I don’t use it very often regardless of the messaging.

I hope that this will help improve the LinkedIn platform because they’ve had, in my opinion, a lot of issues in terms of the way the work is displayed that’s leading to those other startups trying to fill that need. I feel like this is a good idea for LinkedIn to build into it because they’re definitely lacking in this area.

Rob: I hope they give that founder of UpCounsel a lot of say in how it’s built, because LinkedIn to me feels like an older, clunky product. I don’t want to throw stones, but it’s owned by Microsoft now and back in the day that’s how Microsoft felt compared to Apple.

If he has more say in how it gets built, because UpCounsel felt like a startup in a good way, it had good design, and at least my memory of it was that it was a well-functioning product. So if he’s tied into the legacy of LinkedIn, I think it’ll be a problem. But if he can make choices and build something truly from first principles or from scratch, he’ll be better off.

Tracy Osborn, thanks so much for joining me today. You are @tracymakes on Twitter.

Einar: Not verified.

Tracy: Yup, not verified. I almost got there before Einar, I knew he was going to do that.

Rob: And Einar Vollset, you are @einarvollset on Twitter. We have done a first close, as Tracy mentioned earlier. We did a first close on TinySeed’s second fund, but if you’re out there and you’re thinking, with all these crypto-winnings and the stock market going haywire, I would love to diversify—I’m a credit investor—into a broad swathe of early-stage, B2B, capital-efficient SaaS companies.

Head to tinyseed.com/thesis to find out more about our whole investment thesis and what’s unique about it, and the unique angles that we’ve taken. And, tinyseed.com/invest if you just want to hit up Einar directly. There’s a short form where you fill out a few things, but then you can get on his calendar and talk to him more about what we’re doing. Tracy and Einar, thanks so much for joining me.

Einar: Thank you.

Tracy: Yeah, this is super fun.

Rob: Thanks again to Tracy and Einar for joining me. If you have your own thoughts on these news stories, head to @startupspod on Twitter. Every week, we have a tweet or two, a whole thread that goes out, talks about the episode, shares a little audiogram, and you can feel free to weigh in there.

Respond, comment. I’m always monitoring that and can interact there as well. I would love to hear your thoughts. I’m glad you joined me again this week, I’ll be back in your earbuds again next Tuesday morning. Thanks so much again for joining me on the show.

Rob: Welcome to this week’s episode of Startups for the Rest of Us. Thanks again for joining me this week. This is the show where we look at ambitious yet sane approaches to building startups. It’s not the Silicon Valley approach of raising buckets of money, not having any customers. It can be bootstrapped or mostly bootstrapped. But these are capital, efficient businesses that may not change the entire world, but they’re likely to change our little corner of it.

I’m your host, Rob Walling and today I have the pleasure of speaking with Dan Norris. This was such a good conversation. I let it run a lot longer than most Startups for the Rest of Us episodes. Dan and I have known each other, I don’t even know now. Probably a decade is a little long, but eight or nine years.

He and I have only met in person once, but I have followed his journey. He’s written several books. You’ll hear me talk about a few of them in our conversation, and he went from having a couple of failed SaaS efforts to then starting a productized service that grew quickly and he sold to GoDaddy. Now he runs a brewery, a very successful brewery doing north of $10 million a year in revenue down in Australia.

Dan and I talked through success, exits, and what changed in his and my life after we sold our companies. Dan actually turns the table on me towards the end of the interview, probably about 40 or 50 minutes in, and starts asking me questions about selling Drip and my thoughts on all kinds of things that I think will be interesting for you to hear. I gave a lot of thoughts that maybe I haven’t said in public before. I appreciated that Dan was willing to come on the show and spend over an hour with me.

Before we dive into this conversation, you should go to microconfremote.com if you’re an early-stage SaaS founder. MicroConf Remote is happening in just a couple of weeks towards the end of March. We are digging into five early-stage marketing approaches for SaaS. Each keynote is going to be a case study with numbers from a founder who has done this approach. We’re going to be approaches like an AppSumo deal or a Product Hunt launch. Again, we have actual founders, real-life SaaS founders who have done this within the past few years, have had success at it. They’re going to share their numbers and their thoughts on what they did right, what they did wrong.

I’m really excited about this approach. It’s almost going to be a bunch of mini-workshops. I think it’ll be very, very valuable for you, especially if you’re, let’s say, pre $5000 or $10,000 of MRR. All the way from the idea up to $5000 or $10,000. It’s for that earlier stage where you’re trying to get traction and you need maybe a one-off marketing approach to help you start to get some revenue and kick start your customer account. Microconfremote.com, if you’re interested. With that, let’s dive in to my conversation with Dan.

Mr. Dan Norris, thanks for joining me today.

Dan: Thanks for having me mate. It’s been a while since we talked, I’m looking forward to it.

Rob: Yeah. It’s been at least a couple of years. I was looking back. You were on this podcast episode 183, Five Startup Rules to Live By with Dan Norris. I think we were about your book The 7 Day Startup. To give people context, today’s episode 539, so it’s been a minute, sir. The last time you and I met in person was really the only time I think we had, DCBKK in 2014 if you believe it. Back when we used to do in-person events, remember those days?

Dan: Yeah. That was fun. I think they did one in the last couple of years, but I went to most of them. They’re always good. I meant to say congratulations on the podcast. It blows my mind, people who do that many podcasts. I had a podcast early on. I think I got to 100 and I was like no. I just lost energy for it. It’s such a difficult thing to just keep doing and doing, so well done with that.

Rob: Thanks. Mike and I did it for about 450 episodes and then he stepped back to focus on his other stuff, so I’ve been doing it for about the last 100. I think for me, (a) I do enjoy it and I think if I didn’t enjoy it, I just wouldn’t do it. But (b) it also became that streak where literally every week for 10 years, a new episode has come out. That’s the point of I think both of pride, but also a point of commitment for me that I wanted to be out every week.

Also frankly, the feedback. The fact that there are people listening and that I get emails, tweets, and comments that are like hey, this is good, this is not, great job here, whatever. That helps me realize this is having an impact. If people are listening but no one cared, that would also probably make me stop doing it.

Dan: Yeah, that’s right. I always loved that about podcasts. We do one for the brewery, which again, I’ve dropped the ball on because I just find it difficult to keep doing them, but we’re going to do another series of them. When we go to beer events in person, people always are talking about the podcast, even though out of the content we do, it’s got by far the smallest audience.

Rob: Yeah. But I’ve found that it tends to be more engaged than written content because people hear you in their earbuds, it’s very personal. I’m going to say you’re complimenting me on the podcast, congrats and I’m super jealous of you, six books. You’ve written six books and we will talk about your sixth book today called Compound Marketing. I want to talk a little bit about you selling your company before we get in there, but if folks haven’t read The 7 Day Startup, which I think was your first or second book. I would recommend they go check that out now as well as Compound Marketing.

They can buy those on Amazon or wherever good books are sold. I actually wrote the foreword to The 7 Day Startup, didn’t I?

Dan: Yeah. I don’t think I’ve ever been congratulated on or told people were jealous for writing six books. I don’t think anyone else really wants to write six books. Normally, when people say they’re jealous because I get to work in a brewery and drink beer all day, not that I got to write six books.

Rob: Right. Six books, no doubt. I mean, I was telling you before we hit record that I’m working on my third book and it’s just tough. It’s really hard. Every day I show up and either write something and I feel like this isn’t good enough, that wasn’t enough, or I don’t write anything, and then I feel like crap that I didn’t move the ball forward. I just can’t imagine having written six books. It doesn’t seem to be that hard for you, or is it just that you don’t care that it’s that hard and you push through?

Dan: No, it’s not that hard for me, but I think I always say cheat a little bit. I don’t read a lot of books. I don’t research a lot. I don’t dig into other companies too much. In most of my books, if I feel like I’ve got something interesting to say about what I’m working on and how that can affect other founders then I’ll do something. If I don’t then I won’t write something. It just so happens that I’ve had six different topics that popped into my head that felt that I’ve got enough interesting things in there to write about.

With Compound Marketing, I did look at other companies more so than I normally do because I felt like it would improve the book overall if I didn’t just talk about myself the whole time. It was a fair bit more work than other books. It’s also longer than the other books. The other books are pretty short, but it does come easily. It’s getting harder and harder, but some of the books—I think 7 Day Startup, I wrote like a week and a half. There were chunks of that brewery books and the content machine that I wrote on the fly.

I write 10,000 words in one six-hour stint. There were things like that that I’ve been able to do to make it a lot easier for me than normal people. But it’s still not super easy to write books.

Rob: Well, congrats on that. I’d love to talk a little bit, kick us off with some conversation before we dive into Compound Marketing about your sale of WP Curve. WP Curve subscription WordPress support service, a fixed monthly price for unlimited jobs. I believe, if memory serves me, that was the first business of that model that I had ever seen. Now, there’s Design Pickle and there’s this model for a bunch of consulting-ish stuff that used to hire freelancers for. Did you come up with the idea of this fixed monthly price for unlimited jobs?

Dan: Yeah, I think so. As far as I’m aware, the idea of the recurring business wasn’t something I came up with, but there was a lot of talk at the time about recurring software businesses. That’s what I wanted. I used to listen to your podcast all the time. All I wanted was to start a software company. I had an agency that was just a terrible business. I tried and tried to do software and I just couldn’t make it work. I just found it so hard. I just couldn’t come up with the right idea. I’m also not a developer. I just think it’s just not a good idea to start a software business if you’re not a developer. So many reasons I couldn’t do it.

I was looking for a way to just selfishly start a business that was more like a startup than anything I’d done before. It wasn’t like I‘d gone out and done a whole bunch of customer interviews and being like this is what people want, this is a gap in the market. It wasn’t like that at all.

I had a developer. I want to keep working with him. I was a few weeks away from needing to get back and get a job after seven years as an entrepreneur. I didn’t want to do that. I just said what if I combine the two together because I’ve got someone who can do the work. If I made it recurring, it’ll be growth, it’ll keep me motivated, it’ll be more like a startup, and ultimately, it will be worth more.

That’s what I did and it worked pretty well. A lot of other people followed, which is great. I encourage everyone else to follow as well in my writing the book and giving people a framework for doing and all that stuff. It was a good time.

Rob: You wound up selling that. You had a co-founder and you guys wound up selling that to GoDaddy. It was about four or five years ago?

Dan: Yeah, it was 2015 or 2016, something like that.

Rob: Was it that long ago? Yeah, five years ago. Now, talk to me a little bit about that. I know that you can’t talk about the exact same price, but was it more of—there are the acquihires where it’s like they absorb your team and it’s a lower purchase price point, or was it a strategic acquisition that really fit into this desperate need that GoDaddy had? Can you give us an idea of what that acquisition looks like?

Dan: It was a weird time. I was thinking about this because I thought you’d ask me about it, and I haven’t been asked about it since then. My life now has nothing to do with this world. I had to reflect on it. Basically, what happened was me and my co-founder, we never worked together. We’re on opposite sides of the world. We didn’t know each other before I started this business. I started it by myself and then brought him in via my blog randomly, very early on because I realized I couldn’t run a business that ran 24/7.

We did a pretty good job making that all work, but the business was almost too easy in the sense. We had people do the work and I did content from time to time, but there was no real work. There wasn’t a huge amount of work in managing the business like there is with my current business. Alex did a lot of that stuff, but neither of us really worked full time on the business. We both had other things going on.

We started thinking about the idea of selling. We had conversations with the guys from Envato. They reached out to us and they were like we’re interested in doing something. We gave more information. I had calls with them and all that. After that, you know what? I’m not game. I kind of forgot about all that, but I was listening to your episode with Josh Pigford I was like, that’s right. That exact same thing happened to us.

When that happened, Alex had reached out to GoDaddy at one point and just had a contact who happened to work in the M&A section or something. I can’t remember exactly how it happened. After the Envato thing fell through, we were like you know what, we were kind of getting excited about the idea of selling this. We proactively went back to GoDaddy and said we were just about to sell this. It’s fallen through. Are you guys interested in talking? They said, yeah, we’re interested in talking.

I flew over to California, we met with them. Alex handled most of it. I’m still unclear about why. The meetings were so strange to me. I was in this mode of working for myself in Australia then we got to the back of this massive meeting room where I used to live in the corporate world. It was just weird. I don’t really know why they were buying it. I don’t know if it turned out well for them. I don’t think it exists anymore. I think that’s pretty common.

They said they wanted to get into this recurring service, they wanted a team and all that kind of stuff. But this is a gigantic company. I’m sure they could have gone and hired a bunch of people in the Philippines. In the end, I think they got rid of their Philippines team anyway, which was one of what WP Curve was. I don’t know exactly why. I think at the time, it was one person there who decided they wanted to buy it and we decided we wanted to sell it. I don’t know how much more complicated it was than that.

Rob: What did that do for you in terms of finances? You sold to GoDaddy, so obviously it was probably some life-changing money. Oftentimes, I’ll say look, $250,000 in a sale is life-changing money if you’ve never had more than $10,000 or $20,000 in a bank account. For you, is it enough money that you didn’t have to work again? Was it like I can take a lot of years off and really figure out what my next thing is?

Dan: Well, yeah. We can’t talk about it because of NDA. It has been so long. I think it probably is very unlikely to get sued.

Rob: Sure.

Dan: I wouldn’t describe it as life-changing money, I mean, it’s more than $250,000. I wouldn’t describe it as life-changing. It was good for me because I was ready to leave. It took me a while to work out my next move, but in hindsight, I was already working on my next move. The day I met with GoDaddy was the day we opened the brewery. I just thought it was a small thing, but it eventually turned into a much bigger thing. I was on a path. I didn’t want to move to America. There’s no way I was going to keep working.

I wanted to get out of the business. I wasn’t going to do a thing where I stayed there for five years. It’s perfect for me. I just got a bunch of cash and literally left the next day. But I mean in terms of life-changing, at the time I was renting a unit around the corner from where I am now. It was costing me $540 a week to rent it.

Then when I got this money from the sale, I bought a house just around the corner from where I was renting. I didn’t quite have enough. I basically put all of it into the house. I didn’t do anything else with it. I didn’t quite have enough to buy all of it. I had to get a mortgage for about $300,000. The repayments on the mortgage end up being exactly $540 a week.

For me, it was literally not life-changing at all. I just moved up the street. Instead of renting my house, I was owning my house. I mean live in an amazing location. I never would’ve been able to buy a house in this spot. I’m 50 meters to the beach in one of the best suburbs in Queensland. It’s amazing. I never would’ve been able to do that without the money. But I still would be living here. It would be how much are you paying to rent, I think.

Rob: That’s funny how that works.

Dan: It turns out that also when I bought this place, I thought I was buying at the top of the market. I bought it for what they’re asking. I didn’t try to bargain. I just thought if I don’t buy it now, this money’s going to lose its value. The property is going to go up and I’m not going to get in. I bought it for what I thought was a lot of money. Since then it’s gone absolutely nuts and that’s a fluke, but it’s worth a lot more now.

Rob: That’s kind of how it goes. I was telling someone the other day after I sold Drip, I had a lot of money coming to the bank account and it gave me the luxury to dabble in some small things that I probably wouldn’t have the time or really wouldn’t have had enough money to dabble in before or to make it worthwhile.

Dan: But were they valuable things? For me, when I dabble in small things, it always a lot of the time ends up being a waste of time.

Rob: No. I mean I had not bought any cryptocurrency before 2016. When I sold Drip I was like, I have some money to play around with. I don’t buy individual stocks. I buy assets. I buy index funds and stuff. I’m going to throw 2%, maybe 3% of our net worth into crypto. That was 2% or 3% at that point after selling a company like that was not an inconsequential amount of money.

I kept saying it’s either going to go to zero or it’s going to 100X, right? It’s like an angel investment and that was where I felt like I had the luxury to do that. Of course, that has panned out well. I feel like it’s similar to you because you’re like, well, I wouldn’t have the money I’d be renting, so you would be living in the same place, but you wouldn’t have almost stumbled into making—you’ve made a bunch of money on your house now in equity. I feel like there’s a weird luxury you have.

Dan: A house is a weird thing to make money on. It’s the best thing to make money on because you don’t have to pay taxes on it in Australia. I don’t know what it’s like over there, but with houses, if you live in it here, you don’t have to pay taxes on capital gains.

Rob: That’s amazing.

Dan: At the moment, the market’s going nuts around here. But if I sell my house here, I’m just going to have to buy another one somewhere else. The real estate lawyers are going to get rich. It doesn’t feel like my life is changing, but obviously, it would be wrong to say I’m not in a different position than I was. I think in terms of how much we sold it for, I was really happy with what we sold it for. It was in line with—I’ve heard you talk about smaller software companies and the multiples they sell for.

It was in line with that, which was my thinking the whole time was if I had an agency that was turning over $1 million a year and making $300,000 in core profit for the founders, that’s basically what it was. We were turning over about $1 million a year. Founders were earning about $150,000 each and there wasn’t much left. If I was to sell an agency like that, I’d be lucky to sell it for a small profit multiple.

I always thought if I create a business that is more like a startup, it should be worth a small revenue multiple, and that’s ultimately what we got. I think that’s pretty good when you talk to other people with services businesses that are reasonably unusual. I think the model was good, the team was good, but the brand I always just come back to the brand because same as our current business, there are breweries that do more volume than us that are worth almost zero and there are ones that worth $100 million-plus that don’t do much more volume but just have an amazing brand. It’s just such an important thing that you just can’t ignore.

Rob: That actually is a great segue into your book Compound Marketing because you used a lot of the elements in this book to build WP Curve and to build Black Hops Brewing. The four things you touch on in Compound Marketing are brand, storytelling, content, and community. When you put that in a sentence, you say build a brand and tell a story via content to your community.

I know the story of WP Curve, and I sat and watched you build it. Your story being transparent in the entrepreneurial community and the word spread. Then people said WP Curve is cool. Obviously, you got enough subscriptions that you were turning over $1 million a year like you were saying. How did you apply this to Black Hops?

Dan: It’s funny because I’ve written the book now. It seems quite simple to follow that sentence and do that. There were things I did realize. One thing I realized was in the online space, this way of building companies was happening a lot. You had Josh from Baremetrics, there was Nathan Barry. You were doing it. There were so many people—Pat Flynn with the Income Report. There were many people doing this kind of stuff in the online world that wasn’t unusual anymore, it was quite normal. But in physical businesses like breweries, this was very rare.

I knew that coming into it because we had the problem of needing to build a brewery, not having any idea how to do it. We got on Google to have a look at what was around and just couldn’t find anything. It was hard to get any information. To me, that was a really good opportunity. I’d always thought, in the online world when you do it, there’s just so much noise and so much competition, even if you’re reasonably good at it. I wouldn’t describe myself was particularly great at doing any form of content.

You look at some of the guys who do this really well, people are really, really good at this in the online entrepreneur space. But a little bit less competition in the physical business area and I thought we would really stand out. I just applied all of that to Black Hops. We had a podcast, a blog. I wrote a book for Black Hops. We started releasing all of our recipes. We’ve done homebrew confs where we actually release our beer for people to brew it home. We’ve revealed our finances. We’ve done equity crowdfunding where we reveal all of our back-end information, just everything. Calls with investors we publish.

We just applied all the stuff that is not weed in the online world to the offline world. I thought that would be personally rewarding for me, and I thought it would be good for the business. It was because it gave us a bit of a point of difference. At the time, I wasn’t like I’m going to do these four things. It was just like, well we’ve got a cool story. I know we need to build a good brand because I learned that with WP Curve and how important that was. I sort of began to fall in love with the design after many years of doing it for other people.

The content was just in my nature. It was just something I enjoyed doing, and so I just did it naturally. On the community building side, again, it was taking that income report idea to this offline business where we’ve got all these different opportunities to build these little communities. Whether it be Facebook groups, social media, or in person at the taprooms and really just combine all of these things together.

I didn’t do it consciously from a point of view of having the four platforms. But reflecting on it, I just did the same thing I’d always done. It just has worked particularly well now and made sense to put it into a list of four things and write a book about it.

Rob: When you talked about creating content, the way you describe it just now is a lot about transparency like this is how we’re building the business. I think that can work but also you’re building a brewery and although I will drink beer, I don’t particularly care about how to build a brewery because I’m not going to build one, for me personally.

Do you find that when you create content about how you’re building the brewery with transparency that it applies to other brewers and other people that want to start a brewery business? It’s not all about transparency. There have to be other types of content. What type of continue is creating with Black Hops today that is applying more to your end-users?

Dan: The end-users, the thing they love the most is just every single beer we put out. I consider that to be content in a way—we put a lot of effort into the names, the designs, all of that stuff to do with launching a beer. Our community, our Facebook group, and online social media stuff are all about launching new beers. We’ll go to extreme lengths to make sure we put out something that people are going to like. We do a lot of that. You’d be surprised how many people who are really core craft beer lovers are actually interested in behind the scenes side of things as well.

Because we’ve done the equity crowd-funding, we’ve also got 600 investors. The 600 people investors and the 3000 people in our Facebook group are super interested in what’s going on. In fact, we just talked about the podcast before. I had a guy post in the group just a couple of days ago—a super fan, one of the investors, one of our early crowdfunding people in the group. I guess you would call him an influencer in the craft beer world. He brought a thread in the group saying, can you guys get back on the podcast. You’re doing this new project. I’d love to hear about it.

A lot of people do you like hearing about that sort of thing. But there’s a lot more we can do. Two weeks ago I did a photo competition, and I did that not in our own group but in a beer photographers’ group. This was a photographers’ group who are often sent free beer by people to take photos, and we never do that because we don’t really send out free beers to influencers, that kind of thing. We just want to make a good product for people to pay for it. I thought I’d do a competition in that group because I really like seeing the photos I was seeing there.

I thought it’d be cool if they took some photos of our beers. This competition went really, really well. It was a new audience. There were 50 people who signed up for it. There were over 50 photos submitted, a lot of which we can use on our own social media and help out our own social media. But it’s also helping that part of craft beer communities that are really passionate enough to spend hours and hours taking a photo of one beer.

For us, it’s really good content. We’ll keep sharing it over the next couple of months. It becomes a cool story. That kind of stuff that you’re doing for the really core people ends up resulting in a brand that other people enjoy for reasons that they might not understand. There’s a lot of love out there for our brand. The average drinker who finds out beer in a big retailer may not listen to the podcast, but we do get to benefit from them loving the brand because there’s a lot for it that comes up through this grassroots community.

Rob: A founder who’s listening to this, maybe a SaaS founder might be thinking, well, I’m more of a direct response marketer. I’m going to do ads, SEO. I’m going to convert people through a funnel, in essence, which is totally valid as well. It’s a different type of approach. What I’ve found is that coupling those two things—they’re multiplicative. When I look back at the businesses I built pre-Drip, they were all very direct responses. I like to call them left-brain engineer-y type stuff. I’m going to SEO this, I’m going to drive traffic and go through a funnel.

I started building Drip the same way originally but quickly realized that actually having a brand, telling a story, and having a community built around it—and of course, I was already part of the MicroConf community and had a voice through the podcast. But that gave us faster growth. I guess, maybe there’s some empathy, people like what you’re doing, and they like your product. I think that’s a big part of building a brand.

Then moving forward now, I’m working of course on MicroConf, TinySeed, and this podcast. All three of those are all about content, community, and of course, there are storytelling elements. I see people try to launch a conference event, an accelerator, a podcast, or even a SaaS app (for the most part), but I see folks try to do that without thinking about the brand, without connecting with a community. It’s really an uphill battle at that point because you’re just scratching and clawing. You’re more of a commodity player.

Does that ring true to you? I mean I interviewed a couple of founders maybe three months ago who do have a geolocation service API, and it is more of a commodity business. I’m not saying that’s a bad thing, but I do think that it puts a ceiling on your growth or on the level you can get to. For some people, that’s fine. Building a $300,000 […] SaaS Company that throws off $250,000 of net profit is a great business.

But in my shoes, I’m ambitious. I want to build 7-8 figure businesses. I think some folks out there want to too. I think it’s very, very hard to build something into the seven-figure run rate without some type of brand and community. What are your thoughts on all that?

Dan: I definitely agree with your last statement. I don’t tend to think there’s one way to do things. It doesn’t really ring true to me that combining the two worlds only because I’ve never really been able to the paid ads, direct response, and all that stuff. It’s just never been something I’ve been good at. I haven’t had any success with it. I’ve taken this other approach.

If you can do both then I think that’s probably good. I think that stuff can distract people a lot as well. I supposed you could say the same about content. Before WP Curve, I used to have a site that ranked number one in Google, and I bought it from a guy who was just mad about SEO. There was not content there. It was like a one-page website, just quite a while ago. It used to rank number one in Australia for website design, web developer, and all these terms. I bought it off him thinking this is going to really change my business.

At the time, I was paying for Adwords. I had a local consultancy, and I was paying $5 a click for some of these words that this guy was ranking number one in the free listings. It didn’t really change my business that much. I got a whole bunch of […] leads.

I tried to change the website so the brand was better on there. We have appealed to a higher-level audience, but it just didn’t really work. On paper, it looked pretty good, and it wasn’t a bad website for me to have bought, but it didn’t really realize what I thought its value would be because the quality of what was coming through there was just nowhere near what I was getting through my natural organic channels.

At that time, I think I wrote a post. A lot of the posts I wrote back in that time have all been removed because the WP Curve site is not there anymore, and neither was my old personal site. I got rid of it all. I wrote a post at the time about SEO, which was basically called Content Driven SEO, My Approach to Content Driven SEO, or something like that.

I basically just completely gave up on this idea of SEO. You mentioned Travis when we’re talking before. I was talking to Travis. I was doing the kind of stuff he used to do with all of the active legitimate SEO-type things that used to be what SEO people did. I just ditched all of that and just went all-in on content. That was my approach with WP Curve, and that’s my approach with the current business.

My business now is ranking better. It ranks for all kinds of weird words that you never would expect a small brewery to rank for. If you type in stout in Australia, stout in […] brewery, or local […] brewery—any of these terms, we rank first for. It’s not because we’ve done any SEO. We haven’t done anything analytically. It’s just doing the content. For me, that’s a better approach. I think if you can do both, it can be very powerful.

But there’s also no one way to do something either. I’ve always just been a fan of doing what works. If you’re listening to this and you are doing direct response stuff, you’re doing paid ads, and you’re crushing it, I wouldn’t change anything. I would just keep doing that. The only thing I would say in the defense of what the way we build our business is—and this is going to change over time. I think we’re going to do some more paid things because I think if you never do it, when you do, do it, you probably get a fair bit of benefit. But I think if you do it all the time, it kind of waters that down.

To date, we haven’t really done any paid ads at all. Our industry is one where, on average, companies are spending about 11% of their top-level turnover on marketing. For us, that’s over well over $1 million and we’re finding almost zero. In a business where the margins are just so tight, if we were to spend $1 million a year on marketing, we would go from a company that’s comfortably profitable to one that’s break-even, and it’s not something I want to do. It is an enormous advantage to figure out a way to market a business where it doesn’t cost you 10% of your turnover.

Rob: That makes sense. You’ve really taken some high-leverage, capital-efficient marketing approaches that you’ve learned from the startup world (I would say) and brought them into this industry where that’s not really the way it’s done.

Dan: It’s changing too. It’s really changing the way that people do things. It’s actually a really good industry to craft beer. There’s a hell of a lot of innovations, a lot of smart people, a lot of really creative people. A lot of other people are doing what we do now which is great. It’s really helpful for other people getting into the industry.

If we can help other people, it grows the industry as a whole, and that grows our business as well so that’s been really good. But then you see other businesses just take a completely different approach that works equally well for them as well which is cool, and with a lot of creativity and applying some things from other worlds. There’s another brewery down here where the guy used to work at Billabong in the surf world. He’s brought a lot of that stuff across the branding, video content, and those sort of things. They are absolutely crushing it as well. I think all of that is great.

Rob: Through TinySeed, we’re invested in one business that is a lot of SEO. They have 425,000 uniques a month that is pretty targeted. If a founder doesn’t want to create content and build a community, he wants to do SEO and he’s really good at it. He’s in a space where that works.

For you, for someone who’s written six books, used to run a Facebook community, has been really transparent with businesses he’s building, that’s your superpower because that’s hard to do. You and I take that for granted, but a lot of people either don’t know how or don’t feel comfortable doing that. They don’t feel comfortable sharing it. It feels weird to them or they’re not very good at it. It’s hard to create compelling content. You’ve really learned to do that well.

Dan: I’m glad you said I’ve learned to do that well because everything’s hard and people can learn to do it, that’s for sure. It might be easier for me to write a 2000-word blog post than it is for the next person. But if you’re going to be a founder, you’re going to have to figure out some way of marketing your business that works. You’re probably going to end up trying 1000 things like me and choosing 1 that works.

The one thing with content that I like, when I used to do the SEO stuff—way back in the day, I had a Twitter account. Remember Tweet Adder? That way, you do like to add or follow and you do like paying for links, this kind of link farms—this is all just not good for anybody. It’s just pointless and it doesn’t make you feel good. There’s a more organic approach.

If you’re going to do a lot of content that helps other people, the worst thing that’s going to happen is you’re going to use up a bit of your time, but as a founder, you got to spend your time on something. Something’s going to be hit-and-miss.

That time, I don’t really count too much, but you’re going to help someone else. Even if the marketing doesn’t work at all, even if it’s a complete disaster, which you probably want to be because if it helps someone else, ultimately will come back to your brand. Let’s say it’s not particularly good for you, it’s going to help someone else, so it’s a good way to spend your time.

Rob: I want to switch up the conversation. You tweeted a few days ago when you booked this time that we can get together you said, “Just booked in for a chat with the Oracle @robwalling – what should we talk about?” Why are you calling me an oracle?

We got some responses to that. I just wanted to talk through a few things, see where the conversation goes. Dustin Overbeck said, “Talk about what life is like post-exit for each of you, and what you’d have done differently knowing what you know now.” What are your thoughts on that?

Dan: I’ll talk about that. The reason I call you the oracle was because when I used to want to be a software startup founder—I do still currently secretly want to be a software startup founder—when I really wanted to be back in the day, I would just listen to all of your stuff and be like, Rob knows everything. That’s why I started calling you the oracle.

One thing I would do because this comes up with current business, ours is the kind of business that it’s really, really rare. I suppose you said the same about software where it’s really rare, very difficult to build it past a certain size without selling it.

There are not many companies that have been able to build breweries in Australia that are bigger than ours that are independent. There’s one family-owned one that’s been around for 150 years, so let’s not count that because that’s a really different story. There’s another big one that I can think of that’s had a few good investors. All the other ones that I can think of have got VC money or they’re sold. It’s just a difficult thing to do. It costs so much money. It’s hard to get the money together unless you reach the start with which we want.

The idea of exits comes up all the time. I don’t want to sell this kind of business mainly because I enjoy doing it, but also because I just really worry about what I would do if I wasn’t doing this. I felt it when I sold my agency between an agency and WP Curve. That year, I was so lost. I didn’t know what I was doing. I started so many different things. It was just scary.

A lot of people probably look at a founder that had success and be like, oh, they’re just going to do the same thing again. I just don’t believe that. I just think that we have an enormous amount of luck with the current business. We had really, really good timing. It’s going incredibly well. I just want to keep doing it and I do worry about what I would do if I wasn’t doing it.

I had the same thing with WP Curve. It was really, really lucky that I had Black Hops. It turned into a business that could support me and loads and loads of other stuff. At that time, I thought it was just going to be a fun little, local bar thing, and I wasn’t even working in the business at all.

I started doing all kinds of other things. I have tried to buy into an accountancy business. I started these explainer videos. I thought maybe I’d do my personal content, which ultimately, I didn’t feel like I really enjoyed that much when I didn’t have anything to talk about because I wasn’t working on anything. I was lost there for six months.

Listening to Josh on your show the other day reminded me again—without being offensive to him—it just seems like that should be working on stuff. I just feel like you sell something and you’re just going to be lost until you stumble across something else.

I’m super nervous about that, so I probably wouldn’t want to sell and the money wouldn’t change anything. I really think the money would not change anything. I got my enjoyment out of working on these projects, going into work every day, working with people, doing fun new things, and that kind of stuff. I’m not going to go, buy a big yacht, and spend all down a yacht. That’s not going to make me happy.

What I would change or what I would consider if you were looking at it would be I guess the two points. One is this idea of life-changing money. I’d call you out on that a little bit because I don’t think a quarter-million dollars is really going to change your life, depending on who you are. If it’s $1 million, $2 million, $3 million, I don’t really believe that’s going to massively change your life. If it’s tens of millions, maybe it will, but then I worry about what you’re going to do you don’t have anything productive to work on. I’ll be thinking about those two things.

Rob. Yeah. That’s good advice. For me, when I used the life-changing term, someone who grew up solidly working-class, not enough money to do a lot of stuff we wanted to do as kids. Money has always been a big concern. The first time I ever had $10,000 in the bank, that was a huge sigh of relief. The first time I ever had $100,000 in the bank, it was life-changing to me.

It wasn’t in the sense that I went out and bought a car. It was that I looked and I said, I could live for a really long time on that. I’m becoming less and less beholden to anyone else. At the moment, I have enough money in the bank, sold Drip. I have enough money in the bank. I don’t have to work again. For me, that was a life-long goal. It sounds like that wasn’t your life-long goal, but for me, I wanted to know that I could work on whatever I wanted whenever.

Dan: I don’t trust myself enough for that to be a good idea.

Rob: Yeah. I’m relatively Type-A. I am pretty motivated. I’ve always worked on things, on side projects, or main projects since I was a kid. I wrote booklets when I was a kid and sold them. I’m that weirdo.

When I think about selling a company and being like, I never have to work again, I always plan to work. I knew I’d do something else I just didn’t know what it would be. But whatever I did, I knew it could be risky and more ambitious because I had the backstop. That’s what I mean.

TinySeed will not pay off for years and years. My first investment was in 2011 I believe in WP Engine. We got all cashed out in a big private equity round. I believe it was 2018, maybe 2019. I think it was seven years. I’m just seeing the first dividend check from a startup that I wrote a check for in 2013. That was seven or eight years. But now that it’s happening, a lot of it is happening all at once. There’s a lot of them selling and there’s a lot of them starting to kick off dividends—the ones that decide to do that.

When I look at TinySeed, I literally took a stipend. Einar and I both did for the past 2 ½ years. It was not something I could have done if I didn’t have money in the bank. I couldn’t have started TinySeed, or I would have needed to be single-living in an apartment. I couldn’t live with my family in the house that we have in Minneapolis without the money.

For me, it’s made a difference, I got to be honest. If you talk to anyone who knows me, I don’t buy stupid stuff. I don’t buy expensive crap. I have a nice car now, but I bought it used. I buy $200 watches even though I want the $2000 watches.

Dan: You find it tells the time, right?

Rob: Exactly, but I like watches because it’s the only thing I can accessorize.

Dan: It sounds like whatever you sold Drip for was a lot more than I sold WP Curve for. That aside, the second part of the equation where you’ve got something else to move onto sounds like that fell into place for you very nicely, whether that was by design or by the fact that you were in the position that you’ve very happy doing this new thing with your time. That’s perfect.

For me, if I wasn’t doing this and my fallback option was writing books and doing the entrepreneurial community—that’s what I thought I would do after WP Curve. But then when I did it, I was like, I don’t enjoy this. I’m just one guy out of a sea of millions doing this stuff. It’s not really for me. I don’t really like it. I enjoyed telling stories about stuff I was working on, not just becoming a full-time business coach guy. I hated that.

The money itself is interesting. I didn’t grow up with a lot of money either. I just thought about this the other day. When I went on my honeymoon—I think I wrote this in one of my books—I read that Think and Grow Rich book. It said, write down, state your goal. I wrote down $100,000. I wanted to turn over $100,000. This was when I got married. I’ve been unmarried since then, so I’ve forgotten the day. It is no longer important as it once was. It was probably 2010 or something like that. It was a while ago. Maybe 2008, 2009.

The number I wrote down was $100,000. This was, to me, a very, very big number. If I could have my business turn over $100,000, that would be the end-of-the-book goal where you state this goal that sounds impossible that you achieve and it changes your life.

Our business last year turned over over $10 million and I didn’t even notice. I’m doing a presentation for investors now because we’re raising more money and I went back through the finance because we do the financial year. We don’t do calendar year. But I went back through the calendar year finances, and we passed the milestone of $10 million. I was just reflecting and I was like, my God, I used to be excited about $100,000. Now, I’ve passed $10 million in revenue and I don’t even notice. It’s crazy.

You just get used to whatever the number is and you get used to whatever the thing is. I might be living in an awesome suburb now but I’m just used to it. I don’t know if I’m any happier.

Rob: There are two things. There’s the arrival fallacy which is thinking, I will have arrived once I have $100,000, $1 million, once I’ve launched this company, or once I make it right. It’s a fallacy because you do get there. Then if you’re ambitious, you want to end up for the next thing. I’ve come to grips with that, and I feel fine with it now.

When I was younger, it rattled me more like, why am I never happy? You are happy for a month or two and then know that you’re going to do the next thing. Don’t kid yourself that you’ll actually have arrived because you’ll arrive for a month or two and then want to do something else.

Dan: It’s hard to just not fall into the trap of being like, oh, what’s the point of achieving something if you’re going to get there and not actually arrive?

Rob: Yeah. It’s different for everybody. For some people, it is that safety. I’ll give my career as an example because I’m an expert on it, I lived through it. I remember being like, I just want to have a job writing software that supports me. Boy, if I had that, that would be amazing because I just want to write code all the time.

I got that job. Do you know what? It was really cool for about six months, then I was kind of bored. Now, I wanted a job where I could work from home. This was in 2001 before work from home was a thing. Sure enough, I was able to work from home, and then it was like, well now, I want a software product revenue. That took five or six years to get to. It was enough that I could quit my job, and on and on and on. Then enough that I never have to work again. These were the milestones.

Early on, I would achieve them and think, man, then I’m going to be happy forever. What I realized, later on, is I’m not going to be happy forever but, (a) I will be happy for the short term and (b) I’m making progress along the way. It’s doing something that helps improve our life as a family. It helps improve the lives of those around us if you start a company and employ people. Otherwise, it’s like, why should I even start a company then? If I’m never going to be happy or I’m never going to arrive.

But there are reasons to start companies, right? To give back to the community, to create value for people, to create wealth for investors. I think everybody has their reasons. Legacy is another thing. I’ve started talking about that recently. I’m getting up there in the years here. I do look ahead and think, hey, someday I’m going to die, what do I want the world or the startup’s space to think about me? What do I want people to say when I’m gone? What do I want to leave people with? What is the legacy that I’m creating?

It’s way too early looking back at my 29-year-old self. It’s like, slow down. Just figure out how to make enough revenue that you could quit the day job that you hate so much. Just because I didn’t arrive at these steps doesn’t mean that it didn’t leave me better off and happier personally. I have been happier longer-term at each of these steps than if I was still working that same W-2 full-time job back in 2000.

Dan: Yeah. I guess happier in between if you know that you’re not going to get this big burst of happiness at a certain point.

Rob: Yeah.

Dan: I want to ask you not so much legacy. Legacy isn’t really something I really ever think about, but when I’ve heard you talk about the sale of Drip—and I’ve been through this as well—it sounded like there were just nights where you just stay awake and not just think man, you’re leaving so much money on the table. You could’ve been in a position that had multiple millions of dollars, now you’re in a position where you’ve got zero, and you’re just not going to be able to live with that. Is that accurate? That was part of the thinking?

Rob: There was thinking, which I regret a little bit.

Dan: That was going to be my question because the downside is you see the people who pushed through that and ended up building up to something way bigger than that they could’ve imagined. Do you look at that and be like, maybe I should’ve pushed through that?

Rob: Here’s the thing. I have never, never regretted selling Drip. I’ve never woken up a day and thought, oh my gosh, I wish I was still running that. I wish that was still my company because it was just a moment in my life and it was stressful. I didn’t sell because of the stress, that was a part of it. There were all these components.

The moment was like, I never have to work again, huh. Again, I never have to work again in my parlance is, I can work on whatever I want because that’s really what I want to do. There was a stress component. There was that component.

When you ask me about what I wished I’d done differently or what I regret, I think I stressed out too much. I was a little bit of a sky-is-falling person mentally. I’m not that way anymore but I would wake up and say, this could go to zero. All my entire life that I’ve put into this thing will go to nothing. But that’s really, really unrealistic that that would’ve happened. Even if there was a massive recession. Even if competitors continued to crank on us. Even if we got on the blacklist, which we did now and again. It wasn’t going to go to zero. It may be slowed down.

The bigger concern was that at the pace it was growing, it was worth a healthy multiple. A lot of entrepreneurs write it over the top. If you flatline, or you’re growing it 10% a year or something, the business just isn’t worth that much anymore. That was a concern for me, but frankly, it really wasn’t very healthy nor helpful for my mental health for me to be thinking about that all the time. It just wasn’t.

Dan: Sorry to bring this up. I feel like you’re getting grilled, but I am curious because you hear these entrepreneurs who go through the struggles really early on. Almost any big company you can think about like Facebook, the biggest. I think there was a point where they could’ve sold for $1 billion?

Rob: Yeah, something like that.

Dan: At the time, no one could foresee that it was going to be as big as it is now. The size of this thing just blows your mind how much attention it has gotten. Surely, Mark Zuckerberg couldn’t even see how big it is now.

What you were doing building emails, email is still so relevant. With the stuff that’s going on, they just seem more relevant than ever. These email companies seem to be going better and better. Do you ever reflect on how big these things could’ve gotten?

Rob: What’s interesting is I’ve watched for a year and a half when I worked there how big it got. With the venture injection of lead pages, it had raised $38 million. It started growing even faster than when I was running it. I don’t know the revenue today, but obviously, when I was working there I did. I saw that business triple the next year and triple again or whatever it was. It was fast growth.

It’s an interesting question, but dude, I don’t really want to run a big company. I don’t want to manage 50 people or 100 people. I had no desire to be the CEO of a 100 person company. I’m very much more a starter.

If you look at all these years with MicroConf, Producer Xander has helped us for seven years now. He got interviewed on a podcast. The host said, wow, you’re going to do seven or eight events this year. You do this in person. How big is your staff? Xander’s like, it’s just me and the founders. That’s it. That’s how I like it.

We hire some contractors […] same thing. The TinySeed team is just Tracy, Einar, and myself. Obviously, we will hire. We will get more people and stuff, but to me, I’m invigorated by building not by being on a large team. It’s that much of a detriment.

One could argue, okay, maybe you needed to grow more and then hire someone to manage everybody. Then you could just be the founder who’s doing stuff and no one reports to you. I have heard of founders. I think Dharmesh Shah did that with HelpSpot. I think maybe Jason Cohen was in that situation with WP Engine.

Dan: Your interview with Rand Fishkin was like that but almost like the downside of that approach.

Rob: Yeah, exactly. That’s what I’ve heard. I hear you. Would it have been interesting to take it further? Yeah. Do I feel like I made a mistake selling? No because I’m so happy with what has happened since then in my life. I would be stagnant right now. I wouldn’t have progressed, circled back, and doubled down so much on this podcast that I didn’t have the time to focus on that, on MicroConf, and then to launch TinySeed.

I got to be honest, Drip and all the apps before it was things that I enjoyed doing. They were definitely a means to building a better life for myself and my family. MicroConf, TinySeed, and this podcast really are so much more than that for me. They’re my life’s work if you think about it.

I’ve been doing them for more than a decade. The podcast has always been free even when we didn’t have a conference, we didn’t have any way to make money off of it. We’re just doing it because I enjoyed it so much. Same with MicroConf. We basically broke even the first few years we’re doing it. I was essentially working for free on it. We have to charge to pay for stuff.

That’s a long answer but that’s how I think about it. If I had stuck around another couple of years and sold it for 10 times more, I would like that more money, of course, but if there’s no difference between doing that and regretting it, I don’t regret that I didn’t do that.

Dan: Right. You feel like you got the balance right where you’ve gotten out at a time where it’s a life-changing amount. You’ve been able to do other things. It’s worth it.

Rob: That’s how it feels anyway. It’s hard to know.

Dan: It is hard to know. It’s something I think about because this business that we’ve got is difficult. It can be really difficult. We’ve been doing it for six years. It’s been a long time. It’s big now. We got 60 staff, we got 3 sites, about to be 4. It’s not a small thing, very complicated to run a physical products business. There’s always so much going on.

When COVID hit, we just got to the point where things were going well. We literally just sat around with me and my two co-founders and we’re like, I don’t know what to do. We had these things on our agenda to talk about. We tried to talk about some of them, but literally, our three top rooms and all of our customers’ businesses were shut down overnight.

It was like there’s nothing we can talk about that’s going to help at all. We’d probably get out of business at this point. We’re going to lose the money of our 600 investors. We’re going to lose all of the money we’ve put in. All of this is going to get a zero.

The crazy thing is that in the 12 months of 2020, we grew by 100%, which we’d done every year in the previous 6 years. We’ve maintained our really high growth, which is tough for the physical products business. We became profitable and very comfortably profitable. Our brand went to a whole new level.

It ended up being the best year we’d ever had by a mile, which we obviously couldn’t predict at the time. I felt like at least I’ve been to the brink where it’s like, I know what this feels like if I’m about to lose everything.

I also think that selling, to me, is in a way a bit of a failure as well. I want to just talk about breweries because I got a question for you as well. With the breweries that I think of, there are success stories where the breweries had become profitable, listed on the stock for hundreds and millions of dollars, and then sold. That’s a great success story as far I’m concerned.

But the ones that sold—these breweries started as independent breweries because they want to compete against the major multinational corporations. The independent breweries don’t feel like the majors are doing a good job. They don’t feel like they’re making really good beer. They don’t think they’re community-friendly. All that stuff. They’re fighting against them.

What almost always happens is they end up selling to them and then at the end of that say, oh, it’s been a good run. This company is the right fit for us. It’s like, that’s […]. You’re selling to them either to get rich which, to me, I don’t think is the normal reason. I think the normal reason is you’ve just gotten to the point where you can’t do this anymore financially or maybe psychologically. Probably 50-50 in that. To me, that’s a failure.

My question to you is, I’ve always wanted to be a software startup entrepreneur and the dream really is to start a business, it’d be profitable, it’d not be so stressful that you have to sell it, just make money and create software. There must be tens of thousands of people or more who listen to this podcast who want to do exactly that. Is that even a realistic dream for people?

Rob: To build a business to sell it?

Dan: That to not sell it.

Rob: Oh, to not sell it. Absolutely. I will say, for the record, I don’t view building a business and selling it as a failure. I think you and I don’t view that the same way. I think that building a business for the long-term, especially a software company, absolutely. Most people don’t. What’s interesting is most people don’t. They see the example of Basecamp or, let’s say, Mailchimp and they say, you can bootstrap a business and I’m going to do it forever. That’s cool.

Dan: That’s the thing. Basecamp is so often brought up as an example of how to do this, but they’re just such a random example. They were literally the first people to do it. Is it even something you can do? With your decision to sell, how much of that was motivated by the fact that there’s so much competition out there, there’s so much pressure on the process, and all of that?

Could you even keep doing this without getting VC money, which introduces a whole new level of complication? I meant much of those things. Could you have just kept running it and been comfortable, happy, profitable, and just done that forever?

Rob: Yeah, we could have if I did not have aspirations beyond it, for sure. One of the other things that if I have any regrets or I would have done differently is I think we were a little undercapitalized. I should have raised an angel round. I would not have raised venture capital. I have no desire to go on that treadmill, but I probably could’ve raised $300,000–$500,000 pretty early on at a good valuation. That would have made things so much less stressful.

I saw, once we got acquired, how much money actually helps make you less stressed because you can just pay for problems to go away. That was one thing I would have done. Absolutely. Drip was growing. It was bootstrapped, growing, and profitable. There is no doubt.

There was competition. I don’t even remember what our growth rate was when we sold but it was 10%, 15% a month. It was a healthy growth still. Are there plateaus? Yeah. You can look at anybody on that Baremetrics public metrics thing where you got to demo.baremetrics.com. Is Baremetrics actual metrics? But convert is on there.

You can see their plateaus, but you can build a great SaaS business, and they’re highly profitable. Growth is expensive. The faster you grow, usually, the less profitable you are, but once you start to slow that growth down, that’s when a SaaS company—even at scale, with 20, 50, 100 employees—can throw off 30%–50% net profit, gross margins 80%–90%, and net profit can be that.

If you built a business to $10 million, do we know examples of it? Absolutely. Come to MicroConf.

Dan: Do you know examples of it? The other piece of that is the funding piece. I remember when I used to listen to your podcast and other podcasts in this world, I didn’t know anything about raising money. I still never ever raised money until we started Black Hops because we just couldn’t afford to build a brewery ourselves. Could you do this without raising money?

There are probably a lot of people who are listening to this who don’t even know where to start and don’t want to get into that world at all.

Rob: Absolutely. Most people don’t. We do a State of Independent SaaS Survey through MicroConf and we just put the report out. Of all the people in that survey running SaaS companies with revenue, I believe 12%, 13% had raised some type of funding. The other 87% had not.

Yes, I absolutely know people doing seven and low eight figures who have bootstrapped and who are shockingly profitable. Again, 40%, 50% net margins. You can move faster with funding. The way that you do it if you don’t raise funding? You just move a little slower. You have to be happy with that.

That was something I always struggled with is, I was in so much of a hurry. I wanted to get big, get faster. Not at VC pace because I didn’t want to do it recklessly. It was still organic, but I was like, I want to be $1 million, I want to be $2 million, I want to be $5 million. I was a little more impatient. I don’t know if it was healthy or not. Yeah, absolutely.

Dan: I’m the same with that. I’m fearful of no growth because that actually happened to us with WP Curve. We didn’t really have any plateaus at all until we got to about $1 million in recurring annual revenue. Mostly recurring, we had some one-off stuff but it was almost all recurring. Then we didn’t really grow from that point on. That’s scary.

In that case, it was a profitable business. It was comfortable. We didn’t have to do a lot of work to keep it going. It was great. Slowing growth maybe is not as scary, but the idea of a business stops growing to me is super scary.

Rob: It is because it affects a lot of things. To put a pin on it because we’re running long, when I think about can you build a SaaS company, bootstrap it to profitability, and then run it for 10 or 20 years? Absolutely. There’s no doubt and I know a bunch.

Again, if you come to MicroConf, get in MicroConf Connect—for folks listening if you want to meet other folks doing that. The interesting thing though is if you want to do that, great. That’s actually one of the reasons we started TinySeed so that you can take TinySeed money. You’re still mostly bootstrapped. Taking $120,000 doesn’t change most businesses.

You’re doing $20,000–$40,000 a month and you take $120,000, it just doesn’t actually change your business that much. The money doesn’t change it, but we’ve supported companies both that want to run it for the long term and pull dividends out or companies that do eventually want to sell.

A lot of founders think they want to run it long-term. That’s cool and you can do that. Let’s say you’re running this business and it’s doing $2 million a year and a SaaS company. It’s throwing off a 33% net margin. What is that? About $678,000 a year in net profit. That’s awesome. It’s a great business.

If you were growing, you could sell that business in the realm of $10 million, $8 million–$12 million I would say. $12 million may be high but let’s say $8 million–$10 million. If you really want to run it and that’s your thing, then obviously do that. But it’ll take you 15 years to make that much money off that business as it stands.

Obviously, it’ll probably grow some more. You’ll make more money than that over time so it won’t really be 15 years. That’s the point where a lot of SaaS founders find themselves and then they realize, oh, I thought I wanted to run this forever. Either you get tired of it, it’s stressful, there’s competition, you don’t have the passion for it anymore, or maybe it’s just like, man, my husband or wife really wants me to take six months off, spend more time with my family.

That’s the decision point that some founders find themselves in. It’s a hard decision. It depends on who you are and what your goals are. That’s how I think about it.

Dan: That’s a good point. Wanting to do something different is just a huge thing. If you are an entrepreneur or a founder, you’re attracted to the idea of doing new things. That’s something I’ve always struggled with.

After I do something, sometimes it could be weeks, it could be months, it could be years, but eventually, I just get sick of it. Thankfully, it hasn’t happened. I have ups and downs of motivation with my current business, but it hasn’t really happened with this business. Maybe as you get older a little bit, you lose a little bit of that hustle. Maybe that’s what’s going on.

Rob: There’s hustle but I also think maybe you get wiser and you start doing things that you think will make you happier long term rather than doing them perhaps for short-term gain, for monetary gain, for it’s just a great business idea so I’m going to do it. Then you get in, two years in and you’re like, it was a great business idea but now I don’t care about the business anymore.

You didn’t start a brewery for that. You started it because you’re passionate about it. It feels like you’re living a pretty good life, man. I’m super happy for you just having watched you on this journey for all these years.

Dan: Thanks. I feel incredibly grateful. Really, really amazing. I miss this online startup world a little bit, but you’ve given me some hope because one day, when I sell my brewery or get someone else to run it, I can get back into my dreams of being a software startup founder and I’ll come to MicroConf.

Rob: That’s awesome. You are @thedannorris on Twitter. Folks can check out your new book, Compound Marketing, as well as The 7 Day Startup if they haven’t read that. I’ve read both and really enjoyed it.

If folks want to drink some beer, Black Hops Brewing. Is Black Hops only available in Australia, or do you sell in other countries as well?

Dan: Yeah. Just Australia. We got a very, very healthy local market of beer drinkers in Australia so there’s no need to get outside of Australia.

Rob: Totally. Thanks again, man, for coming on the show. I really appreciate it.

Dan: I enjoyed it. Thanks, mate. Good to talk to you.

Rob: Thank you again to Dan Norris for coming on the show. I really enjoyed that conversation. I hope you did as well. It’s about time to wrap this one up. I’ll be back in your earbuds again next Tuesday morning.

Rob: Welcome once again to The Startups For The Rest of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing ambitious software startups. That’s a throwback intro. If you’ve been listening for more than a couple of years, you might remember that phrase from the prior intro.

Thanks for joining me today. I’m your host, Rob Walling. This is episode 538, where I welcome Einar Vollset back on the show. He’s my co-founder with TinySeed and we talk about listener questions today. We zip through (I think) maybe 6–7 questions, about when to sunset a product, filling out enterprise security assessments, acquiring a company where the previous owner had sold lifetime deals and not disclosed it.

Before we dive into that conversation, I wanted to let you know that our next MicroConf Remote is coming up at the end of March. You can head to microconfremote.com for info about that. We’re diving into early-stage marketing tactics. We’re going to have five sessions where each one is a case study with numbers looking at a specific early-stage SaaS marketing tactic.

If you’re at the place where you’re scratching and clawing for first users or first customers, I’d say, if you’re maybe a sub-10,000 MRR this MicroConf Remote is designed for you. Microconferemote.com to check it out and get your ticket. With that, let’s dive into listener questions with Einar Vollset.

Einar Vollset, welcome back on the show, sir.

Einar: Thanks for having me.

Rob: Absolutely. You may be hitting that Steve Martin on Saturday Night Live mark, where you perhaps are the most frequent guest.

Einar: I don’t know. I think I’ve been like three, maybe four, or maybe it’s more than that. I don’t remember now.

Rob: I think it is.

Einar: It could be.

Rob: Yeah, because you were on at least one of the startup news roundtables, then QA, and then we talked about company types, remember? LLCs versus C-Corp and all that.

Einar: Oh yeah, and then we did one on the PPP-type thing, didn’t we?

Rob: Yeah, I think so. There’s a lot. It’s good to have you back, but for folks who are less familiar with what you’ve been up to, your experience, you have a PhD in Computer Science, but I won’t hold that against you. You actually taught at Cornell for a couple of years, you were in Why You Did Startup, you were in YCombinator in the 2009 class. You have a lot of experience with enterprise sales, with cold outreach, cold outbound email. Live experience in M&A, specifically the sales side of SaaS. You founded a company called Discretion Capital, that is basically the  kind of the go-to that I refer people to if they’re like, hey, I run a SaaS app doing 7–8 figures. I’ve been approached by private equity or by a strategic, and they’ve made me an offer. There are people who do this for a living and you are one of those people with a lot of expertise in it. Obviously, there are other folks working there because you and I are focused and working hard on TinySeed.

Einar: Correct

Rob: We just closed Fund II.

Einar: Our first closed. Let’s call it the first closed. Come on, give me some more time to fill this sucker up.

Rob: I keep saying closed, and what I mean is first closed, so doing well with that. Then obviously batch three applications are in and we’re working through those. While we don’t have enough going on, I figured I’d pull you on the mic, and we’ll answer some listener questions today.

Einar: Why not?

Rob: All right. With that, let’s dive into our first question. It’s a voicemail from Phil at itscircletime.com.

Phil: Hey, this is Phil from itscircletime.com. We provide online classes for kids across the United States of America and Canada. We match them with high quality teachers that will help them socialize and continue their education. When we launched the company earlier this summer, we started with the preschool-targeted audience, bringing the Circle Time experience online, meeting up to 10 other kids of their similar age, 3–6.

Since then, we started a new course called Kinder Prep. It’s targeted towards 4–6 year olds who are entering kindergarten or are struggling and maybe they’re distance learning. This has blown up well beyond we could ever have hoped for, which is awesome. Now our run track for $450,000 a year and the run rate in only about four months of our history.

However, now our new service offering is dwarfing our original in revenue. I’m curious, when would you consider possibly sunsetting or winding down something? Even though it’s only making $8,000 of our monthly revenue, that’s about a third of what the other product makes, and the new one is growing leaps and bounds. Anyway, just want to pick your brain and see what you thought. Thank you.

Rob: Thanks for that question, Phil. Phil sent this voicemail in about a month ago. We are able to get to it already because voicemails always go to the top of the stack. If you’re going to send us questions, send it to questions@startupsfortherestofus.com. You want an answer quickly—at least within a month or so if that’s quickly—send in voicemails.

Some of the other written questions we’re answering here are from October of last year. I’m sorry. It’s been a little bit of a backup, Phil gave a little more context in writing and he basically broke it down, like we had this offering, it grew to $8000 or $9000 a month, then we added a second offering and that far outpaced it, and it’s three times the revenue. Pretty close one, it’s 75% of the revenue is the new course.

He said the original service is only doing $8000 or $9000. It’s a lot more complex, it has three membership plans versus the new direction with a single plan. His question in the end, he says, “I guess my core question is what factors would you look at when trying to determine when or if it is a good time to sunset a product or service? I’m in between a rock and a hard place with this issue and I’d love to hear your advice.” So many thoughts. What do you think, sir?

Einar: I’m a great believer in focus through degrees. It depends a little on how much time is being taken up and efforts being taken by the original product. But from what we’re hearing, this is something that’s three times as large in a much shorter time. Anything that detracts from that growth I would be wary, even if a bunch of time has been sunk into the prior product.

Rob: I’m up in the same boat. He said that the new product that is taken off is also three times the price of the previous one. That instantly makes me think, could you triple the price of the first one and have similar numbers? My inclination is usually entrepreneurs want to do too many things. We have shiny object syndrome and, as you’re saying, focus is (I think) a core value that we both share in that respect.

I would wrestle with the idea that either the new one just has better product/market fit and you go all in on that. I just cannot imagine having something that is making three times the money and it’s three times the price, meaning you have far fewer customers. Or I guess you have the same amount of customers doing three times the revenue. I cannot imagine not sunsetting the original one or at least tweaking the original one, like I said, by tripling the price for new people. Or messing around with it to see, can I get the same profitability or the same level of effort out of this?

He also said there were three membership plans. This is more complicated with the old one, so do away with those and go to a single plan. Maybe you ran for other people for now who are already in it and just try it with new folks, or maybe you don’t. That’s the hard part about this. There’s a lot of details to it and my gut feeling is you’re going to sunset the previous one, unless you can figure out tweaks to make it as profitable and as easy to run. If not, there’s no reason to spend equal time on two parts of your business if one business is making three times the money.

Einar: I agree. Once you found something that’s growing three times as fast, I don’t know if it’s still going three times as fast, but certainly at least that, by the looks of things, you would be silly to divert your focus onto something that isn’t doing as well. That’s my view.

Rob: I think you brought up the sunk cost fallacy, which is a good thing to think about. A lot of us get attached to our first idea or we get attached to something that’s working. It’s hard to think about all the hours we put into it. You don’t want to do that in this case. Thanks for the question Phil. Hope that was helpful.

Our next question is from Matthew. The subject line is Split Personality Marketing. He says, “Hi Rob. While listening to TinySeed Tales Season Two, I was listening to Brian and Scottie talk about their move up market with Gather.” I’ll cut in here, Gather, TinySeed, batch one company and they have SaaS for interior designers. Back to the email. He says, “I got to wondering if it’s possible to target a whole new audience as you grow by spinning out a ‘new’ product or even a ‘new’ company that’s just a white label version of the original product, probably with different default settings, different features enabled, and different marketing/support channels.

In some ways it would be a bit like turning the enterprise plan into the enterprise product. I’m guessing it could be dangerous to split your focus, but if you know anyone who’s tried it and succeeded, or tried and failed, I’d be fascinated to hear their take. Intuitively, it sounds like a terrible but seductive idea trying to have it all, but I can’t help feeling empathy for the smaller fish, Brian and Scottie mentioned who are still arriving at the Gather site, but being turned off or turned away by their move up market.” What do you think, sir?

Einar: I’m not sure about this one, I have to admit. My gut feeling is, why isn’t there room in the existing brand to have a wide range of price? We’re talking about price differences. Presumably, that’s what’s going on here. I’m a little unsure exactly what he means by white labeling and making a new company or a new plan. Presumably it’s a price and positioning thing, and presumably mainly a price thing. My question then is, why isn’t there room in the existing brand to have a very wide range of prices?

I think a lot of people are almost anchored to their own price in a weird way, like people say, oh, I have a $19 a month, a $49 a month plan, and a $99 a month plan. But we have some bigger customers or if you position slightly differently, maybe we can charge $1000 a month or $2000 a month. That’s probably true. It’s probably more often true that not if you’re selling to the enterprises.

I still think the easier solution is just lean into an enterprise plan and have it be a call us–type situation, where maybe you thought about the things that make it an enterprise plan, whether that’s single sign-on, or custom contracts, or whatever it is that makes it a whole different price point for enterprises.

That would probably be my main question. If it’s the same product, it’s just a different branding and the different price, then why not build that into the existing product? Unless it’s specifically positioned as the cheaper alternative in the market, which then you have a problem. But then, you have other problems, in my view.

Rob: I think he’s talking about, remember when Brian had first started TinySeed, their lowest priced plan was between $29 or $39, I forget. By the time they were 6–8 months in, I believe those prices were like $200–$250 now. That’s what he’s talking about. They did at the enterprise but they just left out the bottom of the market.

Einar: But I think in some cases like that, there just isn’t a bottom of the market. Particularly for B2B SaaS stuff, if you’re meeting somebody particularly with something like what Scottie and Brian have, this is a software used full time. A lot of the time you’re using the software if you’re in this industry. Who are the people who are spending that much time in on some software, and it’s critical to their business, but they’re not willing to spend $200 a month? Does that really exist or are these sort of wannabe businesses almost? I would buy it if it was $39 a month. Would you really though? Would you use it? I don’t know.

Rob: To Matthew’s question of forking off this higher price plan and making it its own entity, I think that is an absolutely catastrophic idea. I hate it. I hate it with the heat of a thousand burning suns. The one thing that we have as entrepreneurs is our time and our focus. I guess that’s two things, but that’s the most important thing.

Can you imagine? Okay, I’m going to go register another domain name, because it’s not the code, it’s not the product. That’s the problem. My guess is Matthew is a product person or an engineer. We think, oh, if we have this code, why can’t we just have two of them. You need two sales teams or two sales people, you need two support email inboxes, you need two people supporting it, you need a domain name.

Now, how do I get drive traffic? Well, SEO. SEO is hard enough on one site. Now, we’re going to split our focus? We’re going to create content, on and on and on. It’s all the things you don’t think about. Sure, copying the code and flipping a few bits to the defaults are different. That’s fine, that’s done, but it’s everything that’s not the product, that is like you’re running two companies now. Frankly, you’ll grow twice as fast, if not faster if you just focus on one of them. This is like trying to make a decision and avoid loss. So many decisions involve some type of loss.

Einar: It’s a trade off.  I think it’s one of those things. To me it sounds like if I were to guess, I think he’s just sort of scared of having a higher price plan or having an enterprise call us–type plan and ask for 20 times as much for the enterprise plan. That’s what it smells like to me. Then it’s like, okay, I’m going to make this whole different brand and it’s the high-end brand. Unless you’re a Toyota and Lexus, I don’t think it is a good idea.

Rob: That’s the thing I’ve been talking about a lot on the podcast lately. There’s low-touch funnels or no-touch funnels. People come, they sign up, they self serve. Usually it’s $50 or below-ish. Those are great little businesses. Frankly, if you have a super high volume, it can be a great medium-sized business. You can get into the definitely six figures and often low seven figures.

Then there’s the high-touch businesses which are going to be more enterprise-y. And then there are dual funnels where you have a low-touch funnel and a high-touch funnel. Imagine we are recording right now on software called Squadcast. You can imagine Squadcast has people recording fly fishing, very almost hobbyists, not almost, but they are hobbyists who are paying whatever their lowest price plan is on Squadcast, $9 a month to record the podcast.

You can imagine a Squadcast gets approached by a large podcast network and they should be paying or are willing to pay thousands of dollars a month. That is an amazing, amazing funnel to have both of those.

We have other TinySeed companies who are in that position. You heard Craig Hewitt talking about it on his podcast, obviously the lowest price, Castos. Once again, we are hosting on Castos. The lowest price plan there is (I believe) maybe $19 a month. But then, they also have this private podcasting. They’re catering to these enterprises and (I think) people with big personal brands, Those are much larger deals.

If you have the dual funneling and you can make that work, that to me is the golden ticket of SaaS. Again, you can totally make it with low-touch, you can totally make it with high-touch. We see companies succeeding with only one, but the idea of having both but splitting them into two separate products to me gives me some heart palpitations here thinking about it.

Einar: Shopify has the same thing. They have their low-cost, self-serve, start dropshipping thing, and it’s easy. Then they have Shopify Plus or Pro, or whatever it’s called, where it’s $2000–$3000 a month to get a Shopify Pro account. The fact of the matter is, I think a lot of the Shopify Pro—I think it’s called Plus—customers started out on the lower stuff and then they graduate. They grow to trust the brand and then they step off to the Pro Plan or whatever.

If you were to separate it and it’s like, Shopify is only the low-end stuff, then you might actually put off some of the larger shops, where all the medium-sized shops were like, well, let’s not go Shopify because they don’t have a top-level plan or the enterprise version that we might eventually need. So yeah, I agree. I don’t think it’s a good idea.

Rob: Yeah, and I think for Matthew, part of his question was he almost felt bad for the individual interior designers who are hitting their site and being shell-shocked, the price raised, the $200–$250 price point. Like you said earlier, if they’re serious and they’re in this software all the time, it’s that important then they should be willing to do it. Maybe if they really do want to pay $40 a month for something, then you just refer them out to your cheaper competitor who is staying down market0 That’s the other option.

We used to refer to Drip. Some people come to us, they say, oh well, I only have a 1500-person list and we’re a non-profit. Oftentimes it was like, well we can either give you a discount or go to MailChimp. They’re free. It’s free up to 2000. We were not in it to make $50 a month from everybody that came through. Sometimes they were just better options. I hope that was helpful Matthew.

Our next question comes from Olivier and he has a success story plus questions. This one’s actually funny. He said, “Hey Rob. I just wanted to thank you for taking a long shot in episode 515 at the 28th minute mark when answering a listener question. The question was from Martin and it was about where to look to find a co-founder for his startup activity messenger. You said he might want to look at his first couple of clients, and here I am one of his early clients who is now officially co-founder of Activity Messenger.” Rob Walling, founder matchmaker. Am I right?

Einar: Nice.

Rob: That’s super cool. I love to hear stuff like that. He says, “I’ve been running a kids sports business for the last 10 years with another partner that has been mostly running by itself for the last 2 years.” As a reminder to listeners, Activity Messenger is aimed at kids sports businesses. It’s a product built for people like him. He was using it as a customer and now he is involved as a co-founder. He said, “I have two questions for you. The first is any tips on how I can use it to my advantage of the fact that I am a client as well as a co-founder in marketing sales or during on-boarding calls?” What do you think about that, Einar?

Einar: I would lean into that. I’ll be like, yeah, all these boffin software guys. They don’t truly understand the industry like I do because I’ve been there and done that. Certainly, I think that makes sense. And the content stuff, all that stuff, I would certainly lean into that. People like to see, oh, people like me are using this stuff. In general, that’s why you have customer testimonials and things that say, oh, companies like ours use this. But if you have a co-founder or someone in the business who’s been in the industry, sort of can speak the lingo, and be that side of things, I do think that’s helpful.

Rob: Yeah, I think that’s hit the nail on the head with. I was in this situation with my sports business. This is how it served my needs. I mean you can do that as examples and you have credibility. The other thing that I used to do because I don’t like sales, I don’t like sales calls, but I’ve done them when I need to, especially in the early days of Drip. I did some for HitTail too. Especially in the early days of Drip, I would get on the call and I’d say, hey, I’m a co-founder. I’m not a salesperson. I’m actually a developer-turned-software entrepreneur. I’m not gonna do the sales thing to you. I’m going to talk to you about the product, ask me questions.

It instantly disarms people, whether it’s right or wrong. There’s a stigma with salespeople of, they’re gonna try to talk me into blah-blah-blah, but I was like, look, I weigh in every day on what features should be built and I’m a user of that. We built this to solve our own problems with this other SaaS app. There was instantly some credibility and a bit of (I believe) I got the benefit of the doubt on a lot of those calls because I was not only a client but a co-founder as well.

Einar: Yeah, and I think you should lean into that. That’s probably a good case for that industry as well.

Rob: His second question, I’m not sure if how much I have to say about this one but he said, “I’ve had extensive success in marketing and sales in the sports and leisure industry, selling an in-person service in the B2C world. Any tips on how to translate those skills into SaaS in the B2B world?” I have some fleeting thoughts but no major connections for me moving from one to the other.

Einar: No. Marketing and sales. I guess maybe marketing is more similar than sales. I’ve never done B2C sales. I’m not really familiar with it, but the way that I think about B2B stuff—particularly high-end B2B sales—is that it tends to be almost like an outsource consultant. That’s what you are. Your stance should almost be like, we have this solution. If you use this solution then you’ll be better off. I’m the one who understands enough about the problems you’re facing to be a trusted advisor and choosing what software to go with. I don’t know if that translates from the B2C world […] to sports and leisure, I’m afraid.

Rob: And he wraps up his email. He says, “I’m also a father of two young kids and I love how your podcast is geared towards people who don’t have 80 hours a week for their startup. I really appreciate the episode you mentioned recently about raising entrepreneurial kids on the ZenFounder podcast. It’s one of the most popular episodes. I’d love more of those. Thanks for taking the time.”

Yeah and congrats, sir. It’s super cool to hear the success story of you guys pairing up. I would love to hear updates. You can email them in or send them as voicemails whenever good things happen and let us know your progress. I’m sure people like to follow that story.

Our next one is a good one. I think you might have feelings on this one. What’s funny is these all come in via email and I actually responded to him via email because I was so worked up about this. I’ll let you answer and then I get to tell you what I emailed. It’s from Dan and he says, “Hey Rob. We recently acquired a SaaS that’s making about $4500 a month,” so $4500 MRR. “We’ve since discovered that there is a significant number of lifetime users in the app. The previous owner sold them a lifetime plan for a one-off fee 2–3 years before the business changed hands. Now we’re wondering what to do with these users. Can we offer them a deal and ask them to pay something on a recurring basis or do we just eat the cost. I wonder what you would do. Grateful for your advice and everything you do.” What do you think?

Einar: Yeah.

Rob: My first two sentences in my response to him is that the seller screwed you. This is a […] move to not disclose. And depending on what contracts you signed, this could be seen as a breach of contract or fraud for not disclosing.

Einar: Lifetime is funny. You do the M&A stuff then there’s this concept of working capital and how you account for things. Do you do cash accounting, do you do accrual accounting, all of these stuff. Then, not as extreme in case of this, if you’re selling on January 1st (say) and on December 30th the year before, you hold a big annual sale and you sell $1 million worth of software, if you then sell the business on January 1st or 2nd, then the buyer, very sensibly would argue that okay, you have to leave the vast majority of the cash for the sale that you just did in the business because we are the one who have to service this. We have to provide the service that’s being used.

This is the kind of thing that at least $4500 MRR is not, probably, I don’t know. This depends how the deal was done, but usually, these kinds of things are in place. But for a bigger deal, like $2–$5 million ARR, $10 million ARR, certainly these are things that would be taken against reps and warranties, like how clawback closes to say if you found this out afterwards, you could go after the seller and say, hey, you didn’t disclose that 20% of your customers aren’t paying us and we were supposed to service them for life. That’s a pretty big piece of information to leave out in the sales process for sure.

Rob: Yeah. As I said, I’m pretty bummed about it. I actually asked him for some clarifications and I said how many are there, do you get support requests from them. And he basically said, “We do get customer support requests from them. We’re paying for an agent to answer from everyone and those are included.” I was asking what the actual costs or is this negligible. He basically said, “We have 197 active subscribers in Stripe who are paying customers, then we have 122 lifetime customers paid a one-time fee.” It’s hard to tell how many of these are active on a regular basis, but like I said in my previous point it looks like quite a few are active judging by the volume of customer support requests.

I feel the same way. The seller screwed you. I said, “I don’t know your purchase price, but depending on how you feel about this, it might be worth freaking out to the seller and basically saying, you owe us some money back, like you breached the contract.” Basically talk to a lawyer. If you paid $30,000 for this, then it’s probably not worth any of that, but if you paid $150,000, $200,000 for this then it starts to become a thing where getting a lawyer to write a letter is an issue.

Einar: It depends how you did it. A lot of the time, these templatized deals for the smaller stuff, there is some stuff in there that’s, like did they make reps and warranties in the asset sale or whatever that they now have breached? It could be that there are certain things in there that says, yeah, we disclosed all XYZ. There could be some remedies there. Purely tactically going forward, the question is yeah, I agree. I think the seller at least was a little coy about the truth.

Rob: Disingenuous? Yeah.

Einar: But I think going forward, it’s like, okay, what would I do with those customers. It’s not the customers fault. They paid for a lifetime thing. Should they be punished because the company has changed hands? My gut feelings says no.

Rob: Me too.

Einar: It depends. Is there something you can do to not keep upgrading those people? If you’re adding features, then just don’t add it to these guys’ plans. Eventually, some of those people will be like, hey, I want this feature. In which case you’re like, great, now you need to upgrade out of your lifetime plan or whatever. That’s probably the approach I would take.

Rob: Yeah. One other piece of advice I gave him was, “In your shoes, I would try to assess the actual damage so if you have a last login date in the database, you look through the 122 customers to see how many have actually logged in.” My guess is it’s not as many as you think because churn. It’s just simple churn. Even when you’re paying for things, often people stop using it. If you only have 5% of those people churned per month and somewhere sold 4 years ago. That’s 2017, over three years.

There’s a strong possibility that maybe it’s only 30 people. Thirty of these lifetime, 50 of these lifetime are still using it. I wrote this whole email and then I said, “My gut is that this is not worth pursuing, and if the company made a lifetime deal…”

Einar: Not from the legal side, yeah.

Rob: Like you said, get the existing customers to pay more. I think your time is better spent marketing and sales rather than looking backwards. This is a one-time thing, it’s a big shock, but if you start adding 10–20 new customers a month, which maybe you should, 10, 20, 30 a month, then this will become inconsequential. Again, not knowing every detail and there’s a principle to it. This is where that emotional side comes in. The principle is holy […] in my pants off right now.

Einar: I’d be pissed will be my principle.

Rob: But is it worth the time, effort, and the energy to go back into it. That’s where I would try to determine how many are actually using it. All right, hopefully that was helpful, Dan. Super bummed for you man. Don’t sell lifetime deals if you’re in SaaS. AppSumo is probably the one exception I would say and if you’re going to sell, then you disclose when you exit. That hey, we do have these users and you can give reports of this is how much they used on whatever basis. And also know that if you do an AppSumo deal or you sell lifetime deals, there’ll be some type of ding against you. You may have to give something back to the seller as you’re going through. Hope that was helpful.

Next question is about something that we hear about quite a bit. It’s how to do enterprise security assessments. It’s from Philippe. He says, “Hey Rob. First of all, thank you for the amazing show. I’m a new listener but already in love with your show and consider it the best podcast for running a business. I’ve discovered so far and I’ve tried a lot. I have a specific question on enterprise security assessments.

I run a SaaS app. We’re a small startup, started as a hobby, we’re now 6 people, $25,000 MRR, we’re averaging 7% month over month growth for the past 2 years. Every now and again, we get some individual users from big enterprises and they usually send us a big information security self assessment questionnaire with 150 questions or more that if we passed, it gets us on their internal list of approved vendors.

Unfortunately, most of these questions are clearly targeted for bigger companies that have a lot more resources and we need to answer it negatively as we just don’t have the time or human resources to have all these complicated procedures and policies they ask for.

So far we’ve had mixed success in answering these assessments. Sometimes, we have passed but sometimes we have not, basically failed or have been rejected. One time, we actually got a simplified list of requirements to work against. But every single time, this was a ton of work for us, which is not justified by the single or few licenses that the individual and these companies need.”

That is the key statement, that entire thing out there. I’m going to let you answer this one first. But let me finish it. “On the other hand, we always feel we need to do it as this is our step in and once we’re in, we can expand much more easily. Though even that is not always true, as it turns out different departments in the same company have different procedures and so on.

My question is do you have experience with this, is there a way around it for small businesses like ours. We’re thinking of preparing our own document that answers the main questions we find relevant and offering that to them instead, but we’re not sure if that would work. Any thoughts are helpful.” You get the first crack at this one.

Einar: We see it all the time.

Rob: Yup.

Einar: A super, super common thing. I think you’re right. The key thing is here, yeah, this is inevitable if you’re going to sell to large enterprises. Inevitable. In some cases, it’s because they have their own internal policies that they might be doing certain things that they’re promising to the public markets that they have to be able to do in terms of compliance, following some legal requirements on the national or supranational level. There’s a bunch of reasons why these guys will never say like, oh, you’re a small company. That’s totally fine, don’t worry about it. I think that’s the start of this.

The second piece is how do you get around it? Certainly, once you have seen a bunch of these, there’s an option to have your own answers to most of the questions most of the time–type of thing and hope that that works. But honestly, what we’re seeing with TinySeed is most of the time is that they need some sort of a certification.

A lot of the time, particularly if you’re pricing right and selling the right sized plan to these businesses—which is the key thing—then it’s probably worth doing something like SLC2 Certification or something like that. If you’re certified for these kinds of things—the SLC2 is probably the ones we see most often—then in some cases, they’re like, oh, that’s okay, we don’t need this questionnaire then if you’ve checked the box.

A lot of the time, on the enterprise side it’s like are they ISO so-and-so certified or SLC2 certified? If not, answer this giant list of questions. In many cases, it’s easier just to get certified beneath that cost because—this I think is the key thing you are leading to—if you’re going to jump through the hoops of answering 150 questions and things, why would you even offer to sell an individual plan or something?

For most of these people, they don’t care. If they’re having you jump through the hoops of doing this kind of security assessment, then price is immaterial to them for all intents and purposes. If you’re at the end of that, sell them something that’s $29 or $79 a month, then you’re probably leaving probably a couple of thousand dollars a month on the table for no reason whatsoever.

Rob: Yeah. That was going to be my kicker is, if you’re going to do this, minimum annual contract value $25,000.

Einar: I think so.

Rob: That just becomes what it is. Maybe it’s not that hard, but maybe it’s $18,000 or $20,000 or something. It has to be worth your time. The offer of we’ll do this and we’ll buy a few licenses and then you’ll be in the company. Nope. Sorry, can’t do it. Can’t beat it. We don’t do RFPs and leave without a minimum contract value of X amount. Again, somewhere between $20,000 and $40,000 is probably where I would put that.

You’re right. The SLC2 is like the silver bullet for this. The struggle is, isn’t it $30,000 up front? I believe it’s very expensive.

Einar: Yeah. What he is saying in terms of the size of his business and the growth that he has, I think it’d  be worth it for him. I think it’s a pricing thing. I’m guessing you haven’t got your enterprise, Philippe. You don’t have your enterprise pricing right, that’s why you’re concerned about this. You’re either selling the wrong kind of plan or you don’t have an enterprise plan that captures all the value that you’re providing to these businesses. Once you solve that, you’ll be like, oh okay, yeah, we’ll do SLC2.

That could be the only difference. You literally could be like, maybe the large enterprise, the Fortune 500 or whatever are perfectly able to get by within the constraints of your mid-price plan or whatever, but if they need this security assessment, or they need single-sign-on, or they need some other custom contracts red lining your terms of service or something, that’s what kicks them in on the enterprise plan and now it’s 20 times more expensive.

That sounds insane, particularly most developer-type entrepreneurs, but it really isn’t. They’re used to it. They’re just like, oh yeah, sure. We just need this, and it doesn’t matter to us whether it costs $49 a month or $500 a month. It’s immaterial, but it’s obviously not immaterial to you.

Rob: Like you said, it doesn’t make sense from a distant pure logic perspective, but that doesn’t matter. That’s how it is. We see this over and over. This is some of the most common advice that we give and some of the most common mistakes we see with new companies. In MicroConf and people who write in here, and then in the TinySeed batches, the pricing is too low especially on the enterprise.

A couple other suggestions, Philippe, is episode 463 of this very show. I sat down with David Heller of Reimbi and we spent the whole episode, Troubleshooting Enterprise Sales. That’s the name of that episode. Part of that was this question of the security handouts. We had similar conversation, but it was basically build your own handout to be like, hey, this answers most of yours. He developed a lot of templates or templated answers, shortcut things that he could use to fill in because the questions are common but they’re not all identical. You can’t have a whole doc that answers them all but you can probably get 80% of the way there with just putting a bunch of stuff in Word docs and then pulling from there.

As Einar said, the real way around it is to get this SLC2. It’s just expensive and then you have annual maintenance, and it’s overhead of all the stuff. You have a million of these documents and procedures and such. If you’re not there yet, then yeah, you just got to struggle through and make it worth your while in the meantime. Thanks for the question, Philippe.

I think we have time for one more today. It’s from Alan. He says, “Hello. First of all, I really love the podcast and everything you do. Keep it up. I’m a full-time employee at a software company. I’m in a senior role and I’ve been here for over five years. I’ve come up with a SaaS product idea after finding a problem in my company’s engineering process. I’ve started creating a product to mitigate this problem. It solves a niche problem in general software development. So it isn’t related to my company’s product. It’s not competitive with them.

I’d love to use this product in my current company, but they help me manage the technical issues and to help validate and grow the idea. Should I have any concerns with what I’m doing? Can my company claim my idea as its own? What should I do now to protect myself? Any other things I should consider? Does it make sense to validate a new side hustle idea out of a company while working full-time at said company? Thanks for everything. Who knows, maybe I’ll be in TinySeed batch three.”

This was sent last October. The application process is over, but maybe batch four. Applications are open for that in July. Thanks for the question Alan. Einar, aside from looking at your employment agreement as the number one piece of advice because it’s in writing.

Einar: Number one piece of advice, yeah. Reading this, it’s like, yeah it’s finding a problem in my company’s engineering process. Immediately, that to me is a big red flag, okay. Started creating a product, solves a niche problem. It’s not related to my company’s product. Okay, well yeah, but there’s all these things around, did you do them in their time? Did you use their laptop when you were working on this?

I think it does depend on where you actually are, both which state in the US or which country and depending on how the laws are there. I would be concerned about this. Like he says, it’s not related to my company product, but he did come up with it because of a problem that he found at work.

You almost need a letter from the employer saying that hey, yeah, we’re fine with this. We don’t want to claim the IP. I can imagine if he did come to us and applied, we would be concerned with the IP that […] I think with the existing company, being this is our IP. He doesn’t have a right to spend it out. What do you think?

Rob: I would certainly look at the employment agreement. I think building something to solve a problem at your current company without having pretty explicit permission—by that I mean something at writing—is not a good recipe. Just building something on the side to solve other problems outside of your company, that’s different because it’s so much more clean cut, you can look at your IP, everyone in your employment agreement, and you can go to HR, the CEO, or your boss, whatever the structure is, and basically you disclose. That’s what you do.

You say, I’m working on a site project. It’s not competitive. This is the name of it. They have a form that you fill out and you say, I’m working on an XYZ project and I want to retain ownership. I’m not using company hardware and I’m not doing it during work hours. Some companies now have a policy that I’ve heard—I don’t know how enforceable it is in which states—that anything you build even in your off hours, on your own stuff they own—not to me, that’s […], but whatever; that’s over reaching—if it’s legally enforceable, then that’s a tough position that you find yourself in.

Definitely look at what you’ve signed and then consider your options. Once Drip and Leadpages merged, I knew two people who started side projects. Neither of them reported to me, but they went to HR and basically got explicit permission because they didn’t want the IP issue. They didn’t want there to ever be a question if they wanted to raise funds or sell or whatever. You need to have clean IP.

The thing that concerns me is the build it and manage the technical issues at my own company. It’s really gray and I don’t like gray when it comes to law. I don’t like gray areas when it comes to IP.

Einar: It’s like, well, it’s the utility tool that you built and used at work, do you think your work would value it? That’s what I would think.

Rob: Yeah. Thanks for the question Alan. I hope that was helpful.

If you have a question for the show, email questions@startupsfortherestofus.com. Best if you attach an audio file; it’ll go straight to the top of the stack. Otherwise at this point, it looks like we have about 12 or 14 questions in the backlog and I will get to those, again, as soon as possible.

Einar Vollset, you are on Twitter, @einarvollset and of course, people can go to tinyseed.com/thesis if they want to look at the amazing document you put together about TinySeed’s investment thesis. It’s pretty impressive, honestly. If you haven’t read this, even if you’re not going to invest in TinySeeds, it’s pretty cool. Just the idea of you did data analysis because you’re a data nerd.

Einar: Thank you.

Rob: I say that with all the love. But just look at how things pan out and just that trying to take a more of an indexing approach into early-stage SaaS is really the way to go. That’s what allowed us and a big reason to raise this second fund that’s going so well. I’m excited about it.

Einar: Me too.

Rob: Thanks for coming on the show today.

Einar: Thanks for having me.

Rob: Thanks again to Einar for joining me on the show. If you like these shows, I would really appreciate a five-star review and wherever you listen to your podcast, whether that’s Spotify, Apple Podcast, Google Podcast. Is that what it’s called these days? Google Music? Who knows. Just click for a start button and try to hit the five. Really appreciate it. I believe we’re approaching a thousand worldwide podcast ratings.

You don’t even have to do a full review with the sentences, verbage, and compliments and things like that. If you hit the five star and you submit that, I appreciate it. I’ve been trying to move towards that 1000 rating mark.

Thanks for joining me this week. And I will be in your earbuds again next Tuesday morning.

Rob: It’s a bird, it’s a plane, it’s this week’s episode of Startups For The Rest of Us. Thanks so much for joining me this week, episode 537.

I talked with Rand Fishkin about his book, Lost and Founder, about his current effort—SparkToro, talked a little bit about his time at Moz the last couple of years—how things went there. We talked about funding, growth levers that are working today, all types of stuff.

Rand Fishkin probably needs no introduction. I do give him a little bit of an intro at the start of the interview, but I always love interviews with Rand because he just brings the authenticity. He’s super transparent and he just says what he feels. I’ve always respected him for that.

Before we dive into that, the 2021 State of Independent SaaS Report is out. You can head to stateofindiesaas.com or just head to microconf.com. There’s a report link up in the header. The report turned out really good this year, 60 something pages. We trimmed it down a little bit, we added some different graphics, lots of cool findings. People have been talking on Twitter, and we did a live stream a couple of weeks ago. You can actually find that on our YouTube channel, youtube.com/microconf.

As the kids say these days, smash that like and subscribe button if you’re not already subscribed to our YouTube channel because we do have videos coming out probably twice a month right now. More will be coming out once we’re able to do in-person events again and we’re able to add new talks to the coffers. Again, stateofindiesaas.com if you want to check out the report and youtube.com/microconf.

With that, let’s dive into my conservation with Rand Fishkin. Rand Fishkin, thanks so much for joining me today.

Rand: Rob, great to be here.

Rob: This is your first time on Startups For The Rest of Us.

Rand: I think that’s right.

Rob: That’s super cool. I know that you were on MicroConf On Air and you’ve been on ZenFounder many times, which is obviously the podcast that my wife, Sherry, runs. It’s great to have you on here and frankly way overdue. The fact that it’s 530 episodes and you have been on. I’m not sure how we let that happen. I know a lot of folks who are listening to this will know who you are as the cofounder of Moz and inbound.org.

You left Moz a couple of years back and you started SparkToro with your other cofounder. You’ve written a book called Lost and Founder. I love the tagline of this book, A Painfully Honest Field Guide to the Startup World. I listened to that book when it came out on Audible, and I hear people recommending it.

There was someone completely out of my startup circles the other day and they brought up your book to me. Hey, you do startups, have you heard of Rand Fishkin? I was like, actually, I have. It was super cool.

For folks who don’t know, you have a massive Twitter following. I believe 450,000 or more at this point. You wrote this book through Penguin Random House. Has the book changed your profile, or do you feel like the book was more of a venting process for you to get your message out to the world? Or do you feel like it has actually brought in a new audience of folks who may not have heard of you prior?

Rand: I think that it had the potential to bring a new audience. Lost and Founder, for reference. Penguin Random House—big publisher, one of the big four now after they merged—tends to want best-sellers. It’s not unlike a venture capital model where either you’re a really big success or you’re not that big of a deal to them.

Lost and Founder I think they hoped might be that and ended up not being that. It did not end up being a New York Times best-seller, all that kind of stuff. It’s had slow, steady sales. It sold around 25,000, 30,000 copies, which is decent for a business book, but not a runaway success.

I don’t think that it’s had a huge impact on my profile. If someone said, hey, I really want to raise my profile and my credibility, and get invited to more conferences—whatever that metric for someone is—would you recommend a process like what you did with Lost and Founder? I think my answer would probably be no.

Instead, you could do that more effectively through online channels today than through books. Books are sort of a prestige. If you have a best-seller, potentially very big audience-builders, but that’s difficult to do with a non-single subject book.

Lost and Founder is a here’s a journey with a bunch of lessons […] and all look at what it’s like building a venture-backed startup, especially the ones that aren’t unicorns. That’s been helpful to a ton of people, and I’ve gotten a lot of kind messages from folks, but they were almost all people I already had some connection to.

Rob: Fascinating. I like the fact that you pointed out it’s perhaps this single-subject thing that’s impacting it. I also think you’re far along in your career and sense of notoriety, having the following already. Obviously, it’s always possible to get bigger, but it’s not like you’re an unknown that then sold 25,000 copies.

That’s something because I’ve written a couple of books now, and my first one I self-published. It sold probably half of what Lost and Founder has, somewhere in 12,000, 13,000 copies, but it was in 2009. I don’t even know if I was on Twitter yet or if I had 100 Twitter followers. I didn’t have speaking invitations. I wasn’t a name in the scene yet. That book did break me in, but a big part of that is because it was so focused. It’s really focused on going from $0 to $5000 or $10,000 a month software product.

Rand: There are numerous reasons to get a book published. One of the best reasons is a desire to have people get a full reckoning and understanding of a deep, complex topic. Even if you only sell 1000 or 5000 copies, if they’re to the right people on that subject, you can really make a big difference in those people’s lives and in their understanding of the topic in a subject matter area, especially a niche one.

I don’t want to discourage people from writing books, they’re still a great medium. But I will say, I never enjoyed the single subject business books. The ones that you could basically read the Wikipedia summary of the book, then read the whole book and go okay, I got more of the same concept. But I guess there are these four keys to being a good manager that this person thinks there are. We went really in-depth on them, but honestly, I could do with the summary article.

Rob: That makes sense. That’s even a little different than what my book is. My book is the step-by-step process of idea validation and all that. I know what you’re talking about. You’re talking about the start with why.

Rand: Yeah, all the business meme books. The ones that you see on the shelves behind all the people on TV.

Rob: When you grew Moz—7 years as CEO, from 7 employees to 134 employees, revenue from $800,000 to $130 million, traffic from 1 million to 30 million annual visitors. I’m reading all this off your bio, by the way. People should check this out. If you’re listening to this, you go on podcasts, you do any type of speaking, check out sparktoro.com/team/rand or just go to Google and type in Rand bio.

I’ve seen bios like this before, but I really like yours because you have a breviated one at the top with a couple of photos, and you have a really long bio that I was reading through. I feel like I know you pretty well, I followed your story, I’ve read your book, and I was learning stuff. This is good. I know we’re not doing a lot of public speaking right now, but you have some really good data points if someone did want you to speak. Folks can do well to model themselves after this.

Did you model this page after someone else, or did you just think this is what’s logical and what should be here?

Rand: Basically, during my last 10 years at Moz, I was at the company that became Moz with my mom founding it in 2001 for 17 years. For those last 10, my profile was bigger and I was getting invited to a lot of events. My assistant, Nicky—who is not with me anymore—and I just recorded everything that everyone ever asked us for, and then used that to create the bio.

Some people wanted these kinds of photos. Some people wanted those kinds of photos. Some people wanted them in this resolution. Some people wanted this description, the longer description. They really want the full bio. They want to see some examples of your talks. We just put it all together into a page. That’s how that was built.

Rob: During this time at Moz, you’ve been very public. You’ve raised quite a bit of funding and that leads to issues. You go into it in Lost and Founder. You stepped down as CEO in 2014 during a bout of depression and then you left the company four years later.

I’m struck by that, that you stepped down as CEO of your company and then worked there for four more years. I don’t know if I’ve heard someone do that before. I guess I’m curious. First, why stick around and why didn’t you just want to distance yourself? The second one is, was that awkward? Was that a tough four years to not be running your own company anymore but working there?

Rand: There were three big reasons that I stayed. Those three were, one, I thought—for the prior 14 years before I stepped down—that Moz would be my forever company. That I would grow it and we would go public or sell. Moz would be the one thing that I did and then I would do investing, philanthropy, and blah-blah-blah after. Part of that is my own mental conception of who I was and what I was going to do.

Then the second big reason was when I stepped down, I talked to my chief operating officer, Sarah Bird—who’s been with me for a number of years—about taking the CEO role. I promised her, hey, I’m going to stay on. I’m going to be around to help you. She’s a non-technical person, had been with the company, and doing a great job in the COO role but felt maybe a little less than fully confident about everything taking on the CEO job, which is natural. I think that’s a good sign actually. If someone’s super confident, maybe they have some ego issues that you don’t necessarily want in a CEO role. That commitment was important to me.

Then the third one was that my board really wanted me to stay on. They felt that because the personal brand me had been deeply connected to the company brand of Moz for so long that it would be a hit to the company if I were to leave fully.

All those reasons were ones why I stayed. However, in retrospect, I would have left after a year, and I should’ve.

Rob: Why?

Rand: It did get very awkward because there were significant conflicts between Sarah and I. For folks who might follow me closely, I wrote recently about stepping down from Moz’s board. I was the Chairman of the Board of Directors since the company was founded. I left that role, promoted some other folks onto the board. Just deep awkwardness, lots of conflicts, disagreement. It was unhealthy for the company. I felt like I was staying and trying to impose whatever benefits that I could to keep it afloat even though I disagreed with all sorts of things.

After I stepped down as CEO, the growth rate sank significantly. It was trending a little bit down the last six months I was there so I wouldn’t put the fault entirely on folks after I left. But the last seven years certainly looked nothing like the first seven, which is really, really tough in a venture capital-backed business.

If you and I are private investors and we own 20%, 30% of a company that’s $50 million a year, growing 10% year over year, and profitable—we’re happy. That’s great. That’s fine. But if we are venture investors who basically need 98 of the companies we invest in to die and go away so that they stop wasting our board time and 2 of the companies to be unicorns and make all our money, those stuck in the middle, maybe it’ll make us a few tens of millions of dollars, maybe it’ll someday go bankrupt, who knows? They are really annoying. They’re just pests. You could feel that with Moz, the dynamics, and that situation.

It’s weird to have people email me. I got an email last week. It was like, hey, will you invest in this fund? Will you invest in this company? I have to be like, I don’t really have liquid capital.

Rob: That’s something I don’t think people realize that on paper, the wealth of a founder might be $10 million, $20 million, $30 million. But if it’s in a company—an illiquid private company—you just can’t get it out until there’s an exit or an IPO.

Rand: Right. When a company is venture-backed and growing at rates that are not venture acceptable, what happens? That’s a very, very weird situation. More companies get stuck in that than you’d think. Out of those average 100 investments that VCs make, the stuck in the middle is a really significant percentage, it’s probably like 20 of those 100.

A lot of those end up being some combination of fire sales, or for more aggressive venture investors. It’s often to fire the CEO and bring someone else in, or try and recapitalize the whole thing, combine it with another portfolio company. I’ve seen that a bunch of times. A lot of strange and awkward things can lead to—for a founder, founding team, customers, and employees.—just a bad situation.

Rob: I know a few folks who have made it a habit of buying “failed” venture-funded companies. Failed is we’re talking of a $50 million run rate company, but $10 million, $20 million, $30 million in ARR. Startups.com is one. Wil Schroter, I believe his name is. I interviewed him on the podcast six months ago.

I’m not going to say all of these were failed, but the previously venture-backed companies he purchased are clarity.fm, which was Dan Martell’s; Zirtual, which did crash and burn. It was a VA service. There’s at least one other where he basically said, yeah, I’m the second buyer, and they’ve already proven enough of the model.

Rand: Moz is a fantastic company in a terrific field with an incredible opportunity. It’s frustrating to me that that opportunity hasn’t been as executed as it could be. At the same time, I also have a lot of criticism of the model itself.

It should be just fine to be a profitable, growing tens of millions of dollars a year revenue company that’s doing a great job of serving customers and making a lot of people happy. That should be good enough. I feel very responsible for having basically signed these venture deals that said, that will never be good enough.

Rob: That’s why when you went to start your next company, you left Moz 2018, is that right?

Rand: Yeah, that’s right. Three years ago in a month and a half.

Rob: You wanted to start your next company, SparkToro, and you started that with a completely different model. I believe that’s actually when I reached out to you. You wrote a blog post and said, I’m starting my next company, and I’m not raising venture capital.

I remember thinking, I wonder if he’s raising angel funding. For those listening who don’t know, venture capital is one track. If you take institutional money from VCs, they do want that unicorn billion-dollar valuation. But there are investors out there, folks like myself—accelerators like TinySeed, we’ll talk about that in a second—who are willing to write checks. Maybe we raised $250,000, $500,000 in a round.

I’ve personally angel-invested in 13–14 companies and more than half of those are just this. They are B2B SaaS companies that will probably never be unicorns, but they will be amazingly profitable real businesses that have the potential to do $5 million to $50 million in annual revenue. That’s what you’ve started with SparkToro, right? That was more of your goal this time.

Rand: Yeah. The really interesting thing about this whole structure is when you step back from the micro-level, and you look at the macro level, it comes into stark relief like, why does the venture capital industry exist? How did they exist? How did they really make money?

We can get into it or not, but the answer is it was created as a tax dodge, and that is how it exists today. Venture capital is essentially an asset class that only makes money because rich people in the ’60s and ’70s lobbied the Federal Government to get capital gains tax rate applied to this certain type of investing. I think you have to hold it for five years or whatever, but you hold your early-stage investment.

The asset class evolves to work in this fashion and way. Now it’s become almost a cultural belief in Silicon Valley culture that you have to go the unicorn model. When you look at what unicorns do, it essentially exacerbates income inequality to the max.

The whole idea behind venture capital is we are going to take a bunch of mostly already wealthy people because that’s who starts venture-backed startups—the overwhelming majority, something like 90% come from family wealth. You’re taking already wealthy individuals who started the companies, and you are saying 1 or 2 out of 100 of you will make a lot of money Everyone else, you’re out of luck. And then most of the games will go to a very small number of people in those organizations. It’s just super messed up.

If you were to ask an economist, hey, is this a good thing for society? They would tell you, no, that is a terrible idea. Whatever you do, don’t make that the primary incentive structure of how investing should be done. What you really want to have a healthy economy is lots of small and medium-sized businesses because they can better weather storms, they have less nasty political influence, and they will create more income equality. So you’ll have a more equal society and you’ll have more competition, which is good for innovation and marketplaces.

Instead, what did America do? Venture capital.

Rob: It’s unfortunate that the model turned into what it is, but that’s the good news for those funds, those individuals, and those investors that are coming out of the woodwork and saying look, we don’t need that to be the case. I love what you did. We like that you did so much with your SparkToro terms, which you published on the Internet in open source. That is what TinySeed wound up adopting as our investment terms.

Rand: When you folks reached out and said, hey, we would like to use SparkToro’s models for TinySeed, that was a really, really proud and exciting moment, and it’s been very cool to see. I’m not sure if I mentioned this to you, but four or five other companies—not funds but individual startups—have also used SparkToro’s model to raise money themselves and used those open-source documents.

I certainly encourage anyone who wants to take a look—if you decide you want to use it—it can save you a whole bunch of lawyer fees and time to check those out as well.

Rob: That’s really cool. Let’s talk a little bit about SparkToro and about growth today. You launched over the past year about 12, 15 months. Has it been that long? The pandemic makes everything feel twice as long to me.

Rand: We are only in month nine post-launch.

Rob: Okay. You want to tell folks what SparkToro is and where the idea for it came from? Then I’ll ask you so they have an idea of where you are in terms of revenue headcount, whatever you want to let people know. Then, we’ll talk about growth, leverage, and that kind of stuff. I know people know you as someone who has grown companies on social media, SEO, and a lot of other stuff. I think there’ll be some good stuff we can dig into.

Rand: Absolutely. Long story short, SparkToro is a tool that anyone can try for free that helps you instantly discover what your audience reads, watches, listens to, and follows. If you are starting a startup and you’re selling some fancy, new landscaping management software to landscapers in Canada, you can go type in, my audience has the word landscaper in their bio and is located in Canada, tell me all about them.

SparkToro will say, oh, okay, we have the public profiles of 2200 landscapers in Canada, and here’s what they collectively read, which websites they visit. Here are podcasts they listen to. Here are YouTube channels they subscribe to. Here are people they follow on various social networks and accounts. Here are the words and phrases that they use in their bios. Here are hashtags that are popular with them.

Then you can go do smart marketing of all kinds. You could figure out content strategies from the words and phrases that they’re talking about in the last two months. You could figure out hashtags that you want to run Instagram ads against. You could look at the social profiles, reach out, and do some influencer marketing. You could go pitch those podcasts to be a guest on them or to sponsor them.

Whatever kind of marketing you want to do, we’re very agnostic to that. What we want to provide is data about that audience so that you can know them better and go do more thoughtful kinds of marketing of all types to reach them.

Rob: You just gave a pretty good example of how someone might use it, but when we were recently trying to promote the State of Independent SaaS Survey back a couple of months ago, I went in and typed, who on Twitter is talking about SaaS or using #SaaS. I was just searching around for stuff.

The big win for me was not finding people I hadn’t heard of. The big win for me was finding people I was like, I know that guy. I know that person with that big following. I forgot that they would (a) probably be happy to tweet it, (b) a supporter of the State of Independent SaaS. It was like a memory jogger. I did a little bit of cold outreach but I’m mostly focusing on relationships that I already had. It definitely yielded a few tweets out of that.

Rand: I’ve had similar success. Podcast marketing has been one of the big things that we’re doing slightly meta—having this conversation on a podcast. I mentioned to you, Rob, that one of the ways that SparkToro has reached a lot of its audience, potential customers, and just free users is essentially I’d go on a lot of podcasts and talk about all sorts of things related to marketing, advertising, startup growth, funding, or whatever.

Those listeners often turn into people who are like, you know what, let me try searching for who follows my social account on SparkToro, and let’s see what the tool can tell me about my audience. That has been a great growth lever for us.

One of the ways that I have been using SparkToro is literally to find podcasts that are connected to the worlds of people that I know. Then I’ll just reach out to somebody and be like, hey, Marie, I saw you were on this podcast, do you know the host? Could you connect me?

It’s just easy peasy lemon squeezy. Those types of relationships—a warm intro, warm outreach to someone you know who knows a host. Even in the market research world, I knew very few people because that universe is its own different thing.

I literally just started following some of those people on LinkedIn and Twitter, commenting and engaging with them on those platforms. No surprise, after a couple of, in one case, weeks and in other case months, we had a couple of conversations that were productive and interesting. That turned into hey, you want to come on my podcast?

Rob: That’s great. At this point, you’re nine months out of the gate. I know you had a very large launch list of interested folks who wanted to use SparkToro. I know you started launching it right as COVID started to impact the U.S. and impact a lot of your buying audience. Talk us through what you did there and how you feel the launch went overall.

Rand: We basically started our soft launch in February 2020, which was exactly when Seattle was getting the first cases of COVID. Casey, my cofounder, and I are located in Seattle. We were just starting to feel the effects.

We’ve gone into quarantine very early just foolishly hoping that, okay, if we all stay home for a few weeks, it’ll probably be fine. No, the reality was that as we started to send those first early access emails at the end of February and then into March, Casey and I were seeing two things happen.

One, very rapidly, the difference between the end of February and the middle of March in terms of signup and conversion rate from the early access email list, which is just a big group of people. It’s not like the first group of people we emailed was substantively different from the next group of people. But as we were sending out a few thousand of these every week because we wanted to slow roll it, we were seeing those conversion rates falling, the signup rates falling.

I emailed our investors and was like, oh, my God. I think you made a great investment because look at these signup rates from weeks one and two. Then week three fell, week four fell a lot worse.

In addition to the rates falling—people were just not being in the headspace to try a new marketing tool, which makes sense—the other thing that happened is a bunch of our emails started bouncing. I think at the height, almost 17% or 18% were bouncing. It was not a ‘this email address doesn’t exist anymore,’ it was, ‘so and so doesn’t work here anymore.’ Just an incredible amount of layoffs.

We’ve forgotten because, in many cases, the (whatever you want to call it) white-collar economy or the information economy has recovered quite substantially since then. But in March and April 2020, layoffs were huge. Every marketing agency was just cutting people left and right because primarily, their clients were cutting all their contracts. Everybody was panicking about what was going to happen to the world economy. Tragically, late-stage capitalism meant that the economy kept going relatively well. It was just the death count that was unlimited.

The situation for us, when we launched in April, we basically made the decision. We were like, okay, let’s make our free plan much more aggressively generous. We increased the number of free searches people could run, how the mechanics of that worked, and what we were going to show.

We decided to launch because we basically couldn’t wait to start getting revenue. We had hoped to launch in January. When it’s delayed to February, that was okay. March, COVID is everything, we put it on pause. In April we just decided, hey, we got to get out there.

The launch went okay. If you look at the first few months after that, our conversion rates were low but acceptable. We grew fairly quickly to about $20,000 in recurring revenue per month, which is not bad. But it was really not until September when we did a pricing change and some conversion-focus change that things accelerated even faster.

We worked with an agency called Conversion Rate Experts. Over the summer, they gave us a ton of feedback, ideas, and things to test. We ran a big survey with both our first 100 or so customers and a bunch of our free users, asked them what they were looking for, what their experiences were, what made them convert and not, all that kind of stuff.

From those questions, we redesigned our homepage, redesigned our product page, did some videos, did some educational content, did an email onboarding series—the usual conversion stuff—and then launched a new pricing plan and the conversion rate almost tripled. September, October, November, December were really good months for us. January is looking pretty good too. We became profitable, got to break even at the end of September, which was great.

Rob: Yeah, that is great. Triple, that’s insane.

Rand: We had a very low conversion rate.

Rob: Fair enough, but that’s great. Do you think there are any one or two things you’ll ascribe that tripling to, or was it all the things you just mentioned? You mentioned five, six, seven things you did.

Rand: I am not sure whether it was one or two things that we changed or the whole package. Unfortunately, because we didn’t A/B test it—we just don’t have enough traffic to be able to do that in any reasonable time frame—we can’t know. We made all these changes at once. Obviously, some of them worked.

If I had to take a guess, I would say changing the pricing was one of the most effective. Changing the homepage, copy, and sequence of signing up was another. The new description and positioning that the copy takes makes it more obvious what we’re doing and makes the value more obvious.

I also think that we had some good success with changing up how the app shows. Once you perform a search, it shows results in a certain way. The new version of that seems to be more effective just like the layout and positioning of where things are, of where the data that’s returned is. I think those are the most impactful changes, but it’s hard to say for certain.

Rob: Yeah. That’s a thing I often tell early-stage founders who may want to split test because I’ve heard it’s the best thing to do. It’s premature optimization when you’re that early and things are just flying all over the place. You just have to take your best guess, do your best, and see what you can change across the board.

Rand: Yeah. I think A/B testing and conversion rate testing, in general, is great when you have between tens of thousands and hundreds of thousands or more visitors to a page, and enough of them are converting that you can basically test in 12–36 hours. Anything under that and the testing itself will get in the way of you making real improvements.

I saw that at Moz all the time. We were getting hundreds of thousands of visitors. In fact, we were getting millions of visitors a month. We were rolling out these changes. The tests would run for 90 or 100 days, and it would come back and be pretty even. Was there one clear winner? Not sure. This is how quarter after quarter was wasted.

I very much regret getting into a testing-focused mindset at that company instead of an innovation-focused mindset. We prematurely did that. Moz was many, many times bigger than SparkToro.

Rob: Can you give us an idea—if someone’s wondering—of the size of SparkToro? I don’t know what you’ve been public about, whether it’s revenue or user count. I know your team is very small, but just so people have an idea of what you’re working with. It’s not nearly as big as Moz.

Rand: Oh, gosh, no. I’m not sure what our revenue total for last year is going to be exactly. Basically, we are profitable at right around $40,000 a month. We hit that at the end of September of last year. We’ve been growing a little bit over since. We’re still small so growth is relatively easier. But in terms of users, we’ve got about 30,000 free users, a little over 500 paid subscribers.

We have a very high churn rate for B2B SaaS, which is not surprising because our tool is intentionally designed to be a research tool that many, many companies probably only need to use once every 6–12 months. We’re pretty comfortable with that. We don’t need people to be subscribers all of those months.

Out of the 500, we’ve had 15 people who in our first 9 months have re-subscribed once or more. We expect that we’re going to have relatively high churn and people will come back to us in the future when they need that data and research again.

Then, there are lots of agencies and in-house content marketing teams that do that work all the time and so they tend to stay subscribers for longer. About 30% of our customers are on annual plans, which are fairly successful, maybe it’s 27% or something like that.

We did the—whatever it is—30% discount if you buy annually, and a lot of people have taken us up on that. We also default to annual on the pricing page, which has been helpful. For those of you who are in B2B, these little tactical things might be of value.

The team is just Casey and I. It’s still just us two founders, probably will be for about the next year. Maybe after that, we’ll grow the team a little bit, but we do use contractors and agencies heavily. I mentioned we used the conversion optimization agency. We used multiple designers and visual artists. We’ve used some contractors for UX. We used a contractor for some data scrubbing. We used an agency for analysis of our BETA Cohort, our launch preparations, and user testing.

We have a sizable number of people who contributed in all sorts of ways but they are all contractors and agencies, which I love.

Rob: What do you love about it?

Rand: I love the incentive model. No offense to full-time employees, but frankly, once you are on a team, your incentives are basically to get along well with the team, work with the managers, and those sorts of things. Whereas an agency is pretty exclusively performance-based.

This is especially true for marketing-focused agencies. You hire a marketing agency. They optimize your ad spend and conversion rate. If they do a great job and they keep doing a great job, you’re going to keep them on. If they don’t, you’re going to find a new agency or let them go.

In-house marketing team, I love them. I’ve worked with them. I thought I had phenomenal people at Moz when I was there, but the incentive model is very different. You are much, much less likely to fire a full-time person off of your team if the metrics aren’t going the right way, and you’re much more likely to coach them and work with them.

It could very well be that hey, you know what, other things in the company need to change. The product needs to be changed or the market needs to change before these things can really be affected. What would really be ideal is to take six months off and then come back. That’s what agencies and consultants are perfect for.

Rob: Right. I love that approach. That’s what I did as a bootstrapper as well. You just often don’t have the budget to hire someone full-time. I’m imagining in your situation, you raised that small, early round of funding for SparkToro, you have no full-time employees, and now, at this point, doing $40,000 a month.

Did you need the initial funding? Did you need it? I guess that’s really the question. Do you have any regrets about raising it, or do you feel like no, that was a great cushion for you guys to go full time? What’s your thinking looking back now?

Rand: Yeah. I’m extremely glad we raised it. I don’t think we could’ve gotten the company off the ground without it very frankly. SparkToro is built on a large, 75-ish million profiles of public, social, and web data that involves crawling billions of data points.

In order to build that, test it, get a design in UX, build the brand, and do the marketing, all those kinds of things, really required 18 months. I don’t think we could’ve launched much sooner even if we had gone full-speed ahead knowing everything that we know now. We were extremely efficient in our process. Basically, almost two years of being able to pay ourselves, all of the cost and expenses of spinning up all our instances, and doing all of our crawling and aggregation, et cetera—that would not have been possible without the investment’s round.

I’m very, very glad we did it. I don’t have any regrets. I’m glad I didn’t try and self-fund it with the $400,000 in savings that Geraldine and I have. That would’ve been a poor decision as well, very, very risky. No regrets at all.

Rob: That’s great to hear as an investor as well. The fear of a lot of bootstrappers is, (a) will it be an arduous process to raise it, and (b) do you have a bunch of bosses? You have a bunch of people bust in your traps to say grow faster. It’s the opposite if you find the right investors?

Rand: Yeah. The beautiful thing is I’ve sent—you’ve been on the mail list—four investor updates total since we launched, maybe five since funding. Every time I do, people reply with helpful things. We had some whatever biz dev type of conversations and someone in our investor group worked at Microsoft and now Amazon in those biz dev types of roles and was like me and my partners are happy to have a call with you, walk you through some of the stuff, and give you things to think about.

It was super helpful. A 45-minute phone call with Casey and I. Oh, man, it’s just great to get that level of experience in a region that we just didn’t have a lot of experience in.

Same story. Rob, you made some of the suggestions around our specific layout pricing page. That was incredibly helpful. We’re talking about five minutes of work on your end and maybe a couple of hours of work on our end to make those improvements—huge.

What I love about having individual investors whose mentality is, essentially, they want to emotionally, personally, and physically support you. They want to see you do well, be happy, have a successful business, and do whatever they can reasonably in a small amount of time to help you out with that. Amazing. That’s just a beautiful thing.

Is it cool to reward them for that by building a company that’s profitable and hopefully shares that profit? I think that’s a great idea. This model that we have—the SparkToro model—is very investor-friendly and entrepreneur-friendly as long as you don’t mind two things. One, you don’t mind the fact that instead of the goal being ‘be a unicorn or die trying,’ the goal is to get to profitability and then see what the business might become. The other one that you have to not mind is paying taxes.

Unfortunately, for some investors, that’s a no-go. But for the 36 folks, yourself included, who invested in SparkToro, that model worked out really well.

Rob: Right. You’re referring to being an LLC, which is a pass-through entity. Venture capital is one C-Corps where all of the money stays in until there’s an exit, in essence. Your venture-funded company is pulling profits out.

Rand: The big difference isn’t necessarily the structure, although that is part of the technical details. The big difference is paying capital gains all at once in one big transaction at the end of the company versus paying ordinary income taxes as you get paid back and then make profits from the company’s dividends and the company’s sale.

Rob: Yes. That’s a much better way to put it.

Rand: For some people, they look at the ordinary income tax rate, which they might be in tax brackets from the high 20% to the high 30%, and they go, that’s unacceptable. I want my capital gains to be 18% or something.

Rob: 15% on the low. Then if it’s over a lot, then it’s 18%.

Rand: It’s one of those like, look, if giving the government 12%–20% of your money is unacceptable to you, first of all, I don’t think you’re a very good civic person. Second, I don’t want you on my balance sheet anyway. It’s a good alignment of both economic interests and also gets the right kinds of investors that we want.

Rob: That’s the filtering mechanism. I hadn’t thought of it that way but it’s an interesting point. One of the earlier angel investments I made, the check was probably between $20,000 and $25,000. It’s a similar structure there, an LLC. They said, we’re just going to pull dividends out, we want to run this for a really long time. I believe that was maybe six years ago that I wrote that check and I got my first dividend check this month. It was for $5000. I’m thinking, they’re buying out my shares, I still own that part of the company.

The plan is just to pay us back many times our investment over the course of how many years they are in the business. It’s logical. It’s just how normal businesses are run. We call them bootstrap businesses because the norm in our space is venture-backed, which doesn’t do that.

Rand: It’s this really fascinating thing where I don’t think entrepreneurs grok how much the changes wrought by essentially, most of the Reagan administration and the Republican Party domination of the U.S. Finances. Economic models around taxes changed how entrepreneurship worked.

For the first 70 years of the 20th century, in the United States and most of the Western world, the idea was to build profitable, long-lasting companies that pay dividends. That’s how everybody makes money. The focus was on sustainability and you want companies that can last for a long time.

This is why you had the model that our parents had in the white-collar world at least. I don’t know what your background is, but my dad worked as an engineer at Boeing. He was basically hired out of college, worked there for 30 years, retired, and got his pension. Maybe it was more than that, maybe it was 40 years.

That’s super weird to us, but you can see why that model existed, which was essentially the incentives at the top—from an economic standpoint—were to survive as long as you possibly can, be as profitable. Be a good profitable company, but don’t focus on growth at all costs and growth rate over everything else.

Then, when tax structures, finances, and with The Wall Street world upended all of that—mostly in the ’80s—everything shifted. Everything around entrepreneurship shifted. You get the venture capital environment of the late ’90s and early 2000s. That’s still with us today.

Rob: Switching up because I want to get some growth tactics in for folks before we wrap up. I’m wondering what growth levers you’re seeing either working in SparkToro or what you’re seeing today. I know as a life-long marketer that you have to have your pulse on this ever-changing landscape. Maybe a couple of things you could talk about for B2B SaaS founders to think about.

Rand: Over the last 20 years, probably one of the best areas that you could put your effort and energy into was some combination of content marketing and SEO. That worked really, really well. It worked for me at Moz. It worked for a ton of B2B SaaS founders and companies. It worked so well because there was not a tremendous amount of competition in a lot of these niches around search engine optimization or ranking organically.

Google was pretty good about three things. One, giving you lots of data about the people who visited you. Up until 2015 or 2016, they were sending you the keywords that people searched for when they clicked on your result listing. The organic results were almost always very high. The results of your number one, two, three, you’re getting a significant portion of the click-through rate.

The content itself helped build links and reputation and got spread around. The social networks were very friendly to content marketing. You put up content on your Facebook page, Twitter page, LinkedIn page, whatever and you could get significant amounts of clicks.

In the last five years, all of those have trended in the opposite direction. If you post a piece of an update to LinkedIn on your profile, it’s 2015, and it has a link in it, LinkedIn will show it to lots of people. Today, you post that same thing with a link in it, LinkedIn will literally show it to fewer people because the algorithm does not want people leaving LinkedIn. They want people staying there. The same thing is true with Twitter. The same thing is true with Facebook.

We’re all complaining bitterly five years ago, seven years ago about like, oh, man, the average impression rate for visitors to your Facebook page was falling from 10%, 11% to 3% or 4%. People were just up in arms. All these small businesses were upset. Today, the average impression rate for an organic update on Facebook is 0.09%.

Rob: Wow. So unreal.

Rand: It’s just ludicrous, right? We basically all know how it works now that you can’t get a lot of organic reaches. It’s not impossible, but maybe only the top 1% or 10th of a percent is really getting traffic in these places.

In Google, a similar thing is happening. It’s not as bad. SEO still sends a ton of traffic. You can still get a click-through rate, but Google’s putting more and more ads above the fold. They’re putting more and more instant answers above the fold, more and more featured snippets that try and answer the query without sending any traffic. They’re not providing the keywords anymore.

Those trends have combined to make me a little more skeptical of relying on any of those outlets and much more passionate about building an audience on my own site as much as I can. Essentially, I use the SparkToro blog, people subscribing to that, email, email newsletters, people trying the product for free, signing up with their email, and then getting on our product update list. All of my social networking activity is essentially to build up what I call engagement streaks. Essentially have people engage multiple times with me on Twitter, Facebook, LinkedIn, or Instagram. Then see my content in there, and every fourth or fifth post, there’s a link that hopefully gets seen by a bunch of people before the algorithm drags down its visibility.

That’s a lot of how I’m playing the growth game these days—centering everything on the website and email.

Rob: I’ve heard it called the hub-and-spoke model, or I started at some prank calling at the hub-and-spoke model. I don’t know if I came up with it, but I remember thinking at one point—this is in the late 2000s even before 2010 where Twitter, Facebook, digg.com, the other some kind of social news, and all that was coming around Reddit. I remember wondering, should I stop blogging? I was doing a bunch of blogging at the time.

I finally realized, oh, no, the blog articles are the meat, the hub, and all these other things are implications. This just sounds obvious in retrospect. This is 12, 13 years ago as my little developer mind was still turning to grok marketing and really understand what’s going on. But it sounds like that’s a lot of what you’re saying.

You’re still on Twitter with a huge following. You’re on LinkedIn with a big following, Instagram, and the other things, but you are using the SparkToro blog and an email list. There are mixed emotions about it, I know. Some developers don’t like email because they say, oh, it feels like a spammy thing. But you’ll see that any successful, especially B2B SaaS businesses, are utilizing email pretty elegantly and pretty well in a way that’s not obnoxious.

That’s really the one medium. I guess that and SMS if you had a list of phone numbers that people opted into. These are the only two social media-agnostic ways to interact with your audience to where you can’t just accidentally, oops, I got banned on YouTube for something accidentally.

Rand: That happens all the time.

Rob: It does and then it’s just a black box. You’re trying to get reinstated and you don’t realize that your son in the background—I heard this on a tech podcast—started playing a song and it was copyrighted. He eventually gets reinstated, but in the meantime, you can’t communicate with your people because you don’t own the channel. Email is the channel that we can own.

Rand: I am always surprised when I see these folks who dedicate so many hours of their life to becoming influencers, but then they’re exclusively bound to the channel where they’ve built up their influence whether that’s TikTok, Instagram, YouTube, or what have you, and they don’t have a presence elsewhere. If the algorithm decides that their stuff isn’t that interesting anymore so they don’t get shown to people, or if they get blocked, banned, temporarily can’t access, or whatever it is, their audience is gone. Their revenue stream is gone.

That is madness to me. Look, if you’re a TikTok influencer, turn those videos into a library that lives on a website. Promote that. You might complain like, oh, but that lowers my reach by 80% or 90%, I’d still take it. I’d still take it because I can own that channel long-term.

Unfortunately, a lot of these folks are going to find that the same thing that happened with Facebook seven years ago or six years ago where that engagement rate falls from 11% to 0.09% will happen. That will happen to you.

Rob: Yeah. It seems to be the inevitable pattern with social media.

Rand: Yeah, it’s the model. As more and more creators come on to the scene and as TikTok attempts to better monetize its audience and better engage them, there will be less and less of that organic visibility possible no matter who we’re talking about.

Instagram is the highest of the organic engagement channels today, or organic social networks. I think it’s hovering on average around 1.9%. I wouldn’t expect that to last five years.

Rob: Rand Fishkin, thank you so much for joining me today.

Rand: Rob, it was my pleasure. Thank you for having me.

Rob: You are @randfish on Twitter and sparktoro.com if folks want to check out your blog and see what you’re building. Thanks again.

Rand: Yeah, that’s right. Thanks for having me, man. Really appreciate it.

Rob: Thanks again to Rand for coming on Startups For The Rest of Us, and thank you for listening. It’s always great to be in your earbuds. If we’re not connected on Twitter, let’s do it. I’m @robwalling. I would love to connect with you there. I’ll be back with another episode in your earbuds next Tuesday morning

Rob: Welcome to this week’s episode of Startups for the Rest of Us. I’m your host, Rob Walling, in this Episode 536, I believe. I guess I should’ve checked that before I hit record. Thanks for joining me this week. I’m doing a Rob solo adventure. I want to talk through some things that 2020 taught me and hopefully, as you’re listening, it brings up some things that 2020 maybe taught you. Maybe we learned the same things or maybe you had different experiences.

As I was driving across the country, I just drove from Minneapolis all the way to the central coast of California with a car filled with instruments and bikes attached on the back and several pieces of luggage and an aerial rig, if you know what that is, and a dog. It was just me and the dog and all that stuff. I had a lot of time to think. It was four 8-hour days of driving.

Along the way, I was reflecting back. It was almost a mini-retreat for me. I was reflecting back on the year and thinking what are some lessons that I can take away both personally, professionally, and even higher level, just philosophically from what we all experienced in what I think will be, perhaps, one of the worst years on record for a lot of us for quite some time. That’s what I’m going to talk through today.

In true entrepreneurial form, these lessons are positive. I’m not going to belabor the terrible things that happened and then at the end, I have a little section that I’ve just titled Opportunities in 2021. I’m thinking about software entrepreneurs starting new SaaS apps and just trends that I think are going to continue to play out that will need more and better software over the next year or two or three as things panned out.

I have four things to cover today in addition to that Opportunities in 2021. The first thing I learned in 2020 is perspective that startup problems are one thing. That losing an employee, stagnating MRR, high churn, customer flaming you on Twitter really brings you down. It gives you anxiety. It can cause you lack of sleep chew through your mental cycles, but I learned that perspective in all of those things compared to massive wildfires in Australia and California, murder hornets, a global pandemic, massive racial injustice, and even storming the capitol which technically was 2021, put things into perspective for me.

In all honesty, I’ve had a personal reset now with my internal anxieties and concerns about my company, or other companies, or work, life, and professional progress, and just all these things that I think over time creep up on me personally. They start to make me question, and worry, and have concerns about, are we moving fast enough and what happens here, just all the things in your business that you think about. I’ve learned to hold those things just a little bit distant from me in the way that I’m concerned, I’m going to focus on them but I’m not going to let them be on my mind causing me stress 24 hours a day because compared to these other things that were happening in our world, they’re just not that important.

For me, 2020 was a reset of perspective and showed me that having a job where I could work from home and continue to provide for my family and none of us getting sick and on and on. The inconvenience was a rounding error compared to what so many people around our country and around our world have been dealing with. I’m thankful for that reset of perspective that I received over the past year.

The second thing I learned in 2020 is that we can make it through really scary and dangerous things and even when things felt almost hopeless and each of our individual experiences of the year was different. I have memories of gunshots and helicopters flying over our house because we live in Minneapolis, and there were protests, and fires, and all types of stuff that was happening around the time that George Floyd was killed.

Frankly, there’s trauma around that for me and my family. There’s trauma around having to worry about my parents whether they’re going to get COVID or whether we’re going to get COVID. Our friends, who got COVID, are they going to be okay. Our kids are feeling stressed about us. On and on, each of our experiences, I’m sure we have some share, but a lot of us have these individual memories or experiences. I’ll admit that even in those dark times, I remember thinking we’re going to make it through this. This is scary but we will press forward.

I’ve actually reflected back on something I said on this podcast back in either late March or early April of 2020. It was Episode 490 and I’m going to play that clip here right now. I was on the episode with Einar Vollsett and we were talking about things you should be thinking as a founder and as a business owner in this global pandemic as the early days of it unfold. I remember when I said this, I wondered if people would believe me if you as a listener would hear me and believe that I believed it because I did. There was a sense of calm and that was that sense of, we can make it through scary, hard, dangerous things. Let’s cut to that tape here.

Last point, point seven is just reminding you that we are going to make it through this. It feels terrible right now and it is terrible. The health crisis is not something that any of us could even imagine, but things will get better. We will figure this out. While it’s serious and tragic, we need to keep a level head. We need to kind of keep pushing things forward to take care of ourselves, our families, our communities. Again, it comes back to staying mentally healthy and not stressing so much about it, not thinking about it all the time. With little new information or no real new information, it doesn’t help to just think about something all the time. Worrying doesn’t solve anything. That’s something that Sherry and other psychologists have kind of drilled into me over the years. Worry with no new information, there’s no value to it.

While my advice to not worry without new information was easier said than done, I do hope that there was some value in me essentially trying to reassure us that we can make it through these hard things. In fact, we are and we continue to do so.

The third thing I learned in 2020 is that there is always opportunity. This is something I didn’t realize back in, let’s say, the 2001 dot-com bust and the recession that followed. I remember because I worked in tech. I was a web developer at the time and doing consulting and then also working for some startups. I felt like the world was ending. Unemployment shot through the roof, at least in the tech community and it was chaos. I was too early in the workforce to realize that A, this is cyclical, B, usually the best people are employed through the whole cycle, through the ups and the downs, and C, that there is always opportunity. In fact, there can be even added opportunity in big economic bust times. How many great companies came out of 2001 that were almost bootstrapped or just had tiny amounts of funding and then once the economic cycle comes back, these things take off like a rocket.

Similarly, in 2008, how many companies came out of that? In 2020, as the recession hit, what did we see just accelerating? We saw anything dealing with remote work. We saw anything dealing with podcasting, video conferencing. There’s a whole list of online event platforms. There’s a whole list of things that I’m sure you noticed increasing in demand and increasing in MRR. I certainly saw it across both the TinySeed companies and my own portfolio of angel companies. A couple of companies get hit real hard and a handful of companies, just up into the right, doubling month over month, a few months of just crazy growth.

In addition, we started raising TinySeed Fund 2. We were going to start raising it in March of 2020 and we had all the assets and everything ready to start pitching it and this happened. Everything just locked up. We ended up waiting one month or maybe two to start it. But things calmed down and in that ensuing, what has been not quite a year, I guess it’s eight or nine months, we have raised a substantial Fund 2 and are in the process of closing that now.

I’ve watched a handful of startups or even early-stage close angel rounds and start talking to venture capitalists about closing venture capital rounds. Funding was still flowing. There was an initial 1-2 months of uncertainty but after that, there was still opportunity. Even across, again, the TinySeed portfolio, as I look at the numbers, there was one month, six weeks of a pullback and then things kept moving forward. In addition to exits, we just heard from Josh from Baremetrics a couple of weeks ago, he’s still just a handful of months ago, amid arguably tumultuous times.

That ties into my fourth point that doing things in public creates opportunity. You couldn’t look at the pandemic happening and everyone starting to shelter in place and then suddenly build and launch Zoom, or build and launch Tuple, build and launch Squadcast or Castos. You had to be in the game doing something in order to hit it right at the right time and have a product out there that people could just adopt.

Is there luck involved in that? Of course, there was. These founders and others had obviously delivered products that people loved and had growth. They weren’t going up into the right but with the exponential growth that came in a lot of these tools, there was some luck that they were at the right place at the right time. They happened to choose an idea that in this case had such an outlier event as Nicholas Taleb calls it, a black swan event, that is just completely unpredictable. For them, they were in the right place at the right time. This is where that hard work, luck, and skill comes into play.

Did all these founders put in hard work? Absolutely. Did they have some skill and experience to get that product out and to be growing it? Absolutely. Was there luck involved perhaps in the fact that some of these were essentially doubling month over month? There was. But that’s the game. If you aren’t doing things in public, and if you aren’t working hard, and you are putting your skill to work, you’ll never get lucky. If you’re not in the game, no amount of luck will get you to that point of dramatic success. There’s an old quote from Thomas Jefferson that I like to paraphrase, the harder I work, the luckier I get. While I don’t think hard work directly correlates to it, I think there’s a lot of things that are involved. As I’ve been saying, hard work, luck, and skill I think all play a role, in this case, doing things in public continues to create opportunities for founders.

Those are a few things I learned in 2020. Obviously, there are more than that but I wanted to share this with you today. Maybe some of them resonated and I’d be interested to hear if you learned something. You can tweet me @robwalling or post in the comments for this episode which is 536.

Now, I wanted to throw out a few areas that I think opportunities exist in 2021. Frankly, I mean if you look at the TinySeed companies we’ve funded in the first two batches or I look at any of the companies that I see having success in the MicroConf community, or online, or in Indie Hackers, they’re in all types of niches. When you see a list of niches that are growing or industries that are taking off, there is an opportunity there. But there is an opportunity in a lot of places. There’s an opportunity in construction CRM software, like Builder Prime in our 2020 batch of TinySeed and in data for bio-pharma mergers and acquisitions like DealForma which is a batch two company, in online scheduling software, like there are […] SavvyCal which is a batch one company.

Some of these are horizontal. Some are vertical. There’s room to grow in a lot of places but some areas that I see growing over the next 3-5 years are these. Number one, I think there are going to be more freelance and more gig workers than there ever have been. I think part of that is due to the economy. I think part of that is due to people wanting remote work. Part of that is due to people seeing that perhaps working retail or working in a restaurant has been really impacted by COVID.

If there is another thing like this, another pandemic, or another thing that causes work to shut down, people want backup plans. Freelancing sites like Upwork and freelancing management software and ways to pay your freelancers like TransferWise are all things that I’m sure to have gotten just massive booms from this. Thinking about what do freelancers need, marketing, and having freelancers have remained customer-based is tough because they’re price sensitive and they churn and they go out of business because then they get a job. Take it for what it’s worth, but if you can build a business for freelancers, this is a really big market.

That’s why I like what when Dan and Ian are doing with dynamitejobs.com. If you haven’t been to that site in a while, I would check it out because they’re starting that two sets of marketplace but they have the advantage of already having basically both sides of the marketplace filled with their Dynamite Circle online community. I think they’re doing things in public and it’s going to create some opportunity here. I think they’re on their way to finding that innovation. It’s not reinventing something from scratch. It’s not making something completely novel that came out of their head. Let’s take this concept of an Upwork or a Fiverr and put a spin on it that we think is lacking in the market. Much like we did with Drip, where there are other ESPs out there but they don’t do this, and let’s do that better—Derrick Reimer SavvyCal, Ruben Gamez with Docsketch.

There are other e-signature apps out there but how can I put my unique spin on it? How can I get some proprietary traffic channels, and all that? Freelancers are one, obviously remote work. You’ve heard a ton about that. What software do people need for managing and dealing with remote work? They’re going to be more creative, full time and part-time, I’ve been asked in the past two months four times by two relatives and then some old friends from the city I used to live in, I think I want to learn to code, or learn to be a designer, or learn some skill that allows me to work from home on my laptop.

That’s not a surprise because if you were formally working in an accounting office or a legal office or you were going to school to get a degree in something that you were doubting if you’re going to get a job, and then suddenly the pandemic hits, and you realize, I can’t just push paper. I need to be in an office to do my job, or I can’t work at the restaurant like my backup plan. Learning these skills, I think there’s going to be more and more people doing it. What do they need? What opportunities are going to be there? Podcasting’s a big thing. You probably already knew this. You’ve seen the acquisition and the frothiness but it is mind-boggling to me that there continue to be new podcasting apps that are launched that do different things from podcast hosting like Castos to podcast editing productized service like Castos Productions to Squadcast which is the recording a podcast to Alitu. I interviewed the founder, Colin Gray, on this podcast maybe six weeks ago and that is in essence a podcast education but the software is easy podcast editing effectively in your web browser.

What other opportunities are there? I, frankly, could use help marketing our podcast. There are productized services that are doing all types of stuff to help podcasters get recognized, or have better visuals, or have better show notes, or have better editing. They’re out there and I think there continues to be an expansion of new podcasts, but there’s an opportunity to start your own. I know that podcast listening hours have probably gone down now. I think that is going to make a big comeback once everybody’s commuting again. I know not everyone will commute. Some people will stay remote. I still listen to a lot of podcasts. I force it into my day. That’s not going away especially as these cars get the direct podcast integrations, virtual events, online video streaming, maybe online audio streaming events once people are commuting again.

Look at Clubhouse, and isn’t that really what that is? It’s an online audio streaming event. It’s fascinating to think about. I never would have thought that that is the format that people would want. But think about what you’re doing when you’re listening to podcasts. I don’t actually watch a lot of online videos because I can’t background it very easily.

I do listen to a lot of audio—a lot of audiobooks, a lot of podcasts. I think online video and online audio events, that sky’s the limit there, and of course, then mixing that with in-person events as they come back is going to be a big deal. There’s software, there are services, there are all kinds of stuff that needs to be done there. Those are a few, perhaps, obvious areas that I think will be expanding right now and for the next several years. I always struggled with those kinds of niches, or verticals, or spaces because then I would go in and I would often try to create a solution in search of a problem for that audience.

That’s not necessarily the way that I think you should go about it but looking in those spaces and then trying to find problems in them is where I would go. That’s a big thing. I’ve announced a couple of times on MicroConf on Air, I don’t know if I’ve said it on this podcast, but I am working on my next book and it is in essence—it’s not a sequel to Start Small, Stay Small—but it is like the next steps. Start Small, Stay Small focused on these tiny little niche businesses, often with little competition, often having one or two marketing channels. They are really like step one and step two businesses if you remember my stairs step approach. The true lifestyle businesses, true businesses that, hey,  I want to make $10,000, $50,000 a month, just small businesses that will maybe never outgrow that niche.

This book I’m working on now is maybe that next step. If you look at my trajectory of building those small niche businesses and then levelling up to HitTail and then levelling up to a Drip which became a 7-figure app that we sold and obviously, where my life-changing money came from, that’s what this is about. It’s building that million-dollar, multi multi-million dollar SaaS app with our venture capital.

In the book right now, I’m in the section of looking for ideas and how to think about generating ideas for a startup and it doesn’t start with niches. It starts with several different approaches that I’ve seen and I’ve either done it or I’ve seen it in companies that again TinySeed, MicroConf, Startups for the Rest of Us, all these sources than one approach to finding your ideas, to find a problem and then try to build a software that solves that. I have five different ways to find problems.

If you start with what problems do freelancers, or remote work, or creatives, or podcasts, or online videos, what problems are in those spaces and then you can go through these five things of I’m going to scratch my own itch. That’s only if I am a freelancer or I am a remote worker and I have a problem. You can look for a problem at your day job. You can look for the problem of a spouse relative or colleague. You can have a poor customer experience yourself and want to fix that with code and with your app. You can find a problem online by looking at Facebook groups, core threads, private Slack groups, product support forums, and on and on.

Finding a problem is one way. It’s a great way to start. There are other ways. I’m going to run through a few of them here real quick because I have my book up so why not just talk through it a little bit. Translate an existing idea to a new niche. Think about how Ruben Gamez launched Bidsketch in 2009. There was a proposal software out there but he made a proposal software for designers. He niched it down, later he expanded and Bidsketch is still doing very well.

A company in TinySeed batch two called BuilderPrime did this with great success by building a CRM for the home improvement industry. CRM existed, but they really didn’t have it for home improvement contractors. Another way is to go into a large space with hated competitors. That’s what we did with Drip going against InfusionSoft. Xero did this against QuickBooks. Stripe did this against every payment gateway ever. I would say that’s probably more of a step three thing that I wouldn’t do as my first effort but it’s really a fascinating way to dive into it.

There are a few other ways. You can build on your audience or your reputation if you have one. Build on your network. Build a less expensive version of an expensive enterprise competitor. Enter a fast-growing ecosystem that’s like Josh Pigford did with Stripe Analytics, […] did this with WooThemes back in 2008. Of course, you can build on an existing product. This is what Craig Hewitt did with his seriously simple podcasting WordPress plugin. He then built Castos SaaS app on top of that. I realized that’s a lot of information coming at you once. That’s all from a chapter of my book. Once I figure out when that’s coming out, I’ll be sure to let you know.

If you want to be sure, by the way, to be notified or to hear about it, certainly listen to this podcast because I’ll talk about it as we get closer but robwalling.com—sign up for my email list and I will definitely be mentioning it there as we get closer to it. I knew that writing the book would be an absolutely not fun, painful process and it has been that plus some. In fact, with the holidays, and then January, and then TinySeed applications, state of independence SaaS report, I have not touched it in almost two months and I actually feel bad about that. But there’s definitely perhaps a gap in the market for that type of book that I’m writing. I do find that it is easy to get.

There’s a lot of topics to cover. It’s easy to have a lot of content because I’ve been blogging about it for 15 years, talking about it on the show for more than a decade at this point. There’s plenty of words to be written and I will try to keep it succinct as I always do try to make the best use of your time.

Speaking of succinct, I think I should wrap up this episode. I like to do these solo adventures every couple of months, two or three months, and this one’s probably overdue at this point. I actually have an entire other solo episode outlined that I may record here in the next month or so.

If you liked this episode, let me know. I’m @robwalling on Twitter. You can always hit me up directly questions@startupsfortherestofus.com or post a comment on this episode. It’s great to have you here. Thanks again for joining me this week and I’ll be back in your earbuds again next Tuesday morning.

Rob: You are experiencing the next episode of Startups for the Rest of Us. Today, I talked with co-host emeritus Mike Taber. He co-hosted this show with me for the first 448 episodes, and now he comes on periodically to update us on his progress with his own startup, Bluetick.io.

Mike hasn’t been on the show for almost seven months, because he’s had some things cooking in the background that he wasn’t able to talk about. The good news is, Mike’s back on the show today, and he and I have a conversation about what he’s been up to over the past seven months, and things he’s thinking about with his startup, Bluetick, as well as a reveal of what has been going on.

He isn’t able to reveal every detail, but it’s enough that gives you an idea of why he probably wasn’t able to talk about it six, seven, eight months ago. It’s exciting stuff and I’m hopeful for Mike as he moves forward.

If you’re newer to the show and you haven’t heard of Mike before, again, he co-hosted the show with me for the first big chunk of episodes, and now he’s doubling down on bluetick.io, which is his SaaS startup. It’s Cold & Warm Email Followup Software: Personal outreach at scale for your follow-up emails.

With that, let’s dive into our conversation. Mike Taber, thanks for coming back on the show.

Mike: Thanks for having me. How are you doing today?

Rob: I’m doing okay. I’m out here in California. I don’t think I’ve mentioned it on the show, actually, but we decided to take advantage of distance learning for the kids, and since our kids have been in school, this is the first time during a school year we could essentially travel, or live somewhere else temporarily.

As most folks know, I’m located in Minneapolis, which is just a lovely city. We’ve been here for years, and decided to stay. We could have moved away a couple of years ago, but decided to stay long-term. The winters are a bit of a barrier, and we normally do a bit of traveling to warmer climates just for three or four days each month during the winter, now three or four months in a row.

This year, kids are remote, and are on Chromebooks and iPads. We were like, why don’t we just go to the Central Coast of California? We used to have an apartment out here. It was a big could-we-do-that? Pretty soon it was like, yeah, find a more short-term rental and we’re going to spend a couple of months out here in the warmer weather. Although I got up this morning and it was, I don’t know, 39 degrees when I woke up, but the highs are 55–60. It’s like California winter versus the East Coast.

Mike: I will say I would love to get in on this distance learning, so shoot me your address or email, and I will send my kids so we can get this taken care of.

Rob: Exactly, it’s how it’s going on. So your kids are at home too, huh?

Mike: Yeah.

Rob: How’s that been like?

Mike: I’ve become the resident math tutor because apparently, either the kids don’t listen, they don’t take notes, they don’t pay attention, or the teacher isn’t explaining it well. I don’t know what the exact problem is, but needless to say they have a lot of problems with math. I’m not saying that they don’t have a lot of problems with just getting the rest of their homework done, but it’s just brutal. Some of the stuff that they’re doing, my wife’s like, nope that’s all you.

Rob: So you’re the math tutor. I think for us the challenge has not been with specific subjects because they have plenty of face-to-face Zoom calls, Google Meets, whatever. It’s that our kids would wander off onto YouTube and are suddenly backgrounding the teacher, which is exactly what I would be doing if I was in the class. I would want the class recorded so I could watch it back at one point at 8X speed, and that’s at least two of my kids wants stuff faster. Their brain can process it so fast. So for them, it’s wandering.

At home, I have a router where per device just can’t go to gaming websites, block YouTube or whatever. I can just do it all on my phone because I have the eero router. But we are now at a new location and I can’t do that here because I don’t have access to the router, so it’s been a struggle.

Mike: In theory I could do that, too, but a lot of their teachers post stuff on YouTube. They’ll be like, go watch this YouTube video, and the kids are like, I can’t do my homework because you blocked YouTube. I’m like, Dear God you’ve got to be kidding me.

Rob: Here’s how I worked around that: I blocked it on all their devices, and then I have one iPad that is my old one—it’s an iPad Mini—and I have YouTube open on it. When they need YouTube, they come to me and I hand it to them, and then I set a timer or have them sit in the office, watch the video, and then leave. I’ve had them locked down. I’m not saying it’s foolproof or whatever. It’s a pain to get interrupted when they need to, but these are the struggles.

Mike: I’m just going to send my kids to you. We’ve agreed on that, right?

Rob: Yeah, do that. Exactly. Put them on a plane out to California.

Mike: I’m just going to put them in an envelope and just FedEx them.

Rob: Mail them out? Jeez. It’s been 30-something episodes. It was episode 501, the last episode that you were on, updating folks, and that was back in June of last year, so it’s been about seven months. A lot’s going on for you. I mentioned a couple of times in some of the intros for other episodes in the meantime that since you had things going on behind the scenes that basically you couldn’t or didn’t want to talk about on the podcast, and it was potentially exciting things for you and Bluetick.

This is one of the struggles with podcasts. You have to weigh how transparent and open you’re going to be about it, but at this point you’re in a place where we can at least talk a little more about it. Everything’s not finalized so we’re not going to disclose all the details, but there’s been a potential partnership brewing over the past—what has it been—eight months? Do you want to talk people through what that looks like and where it’s at?

Mike: Yeah. It was probably about eight or nine months ago when I was talking to a fellow entrepreneur that I know. He has a couple of different businesses, and the one he wanted to collaborate with me on was basically a CRM that he has for field sales reps. Essentially, what it does is they use either an Android or an IOS app that they put on a phone, and then there’s also a web-based SaaS component to it, and it’s used by them to track their activities. It integrates directly into the CRM system, so that their managers can get the reports.

Things just like talking to their phone with their notes, so they go to a customer, talk into it, and then it just transcribes stuff for them. It tracks the phone calls that they make and receive, and also does email tracking. That’s where Bluetick comes in a little bit because of my background, knowledge, and experience with synchronizing emails. I was able to help out quite a bit with that because they were having some issues. I won’t say very early on because the business has been around for a while, but early on when I started helping them out.

I got a lot of that stuff straightened out. The intent initially was we’ll have you come in and work for a couple of months to see how things work together. Meanwhile, he’s got a couple of other businesses that he owns, and trying to offload those and sell them. Unfortunately, COVID hit, and it really threw a wrench into the entire thing.

Things have stretched on substantially longer than either one of us thought that they ever would. The whole plan was we’ll do this for 3–5 months or something like that, and now it’s double that. We’re looking at 9 or 10 months at this point.

For me, I’ve been helping out with the technical side of things. They’ve got a sales rep, a support person, and a development team that I’ve been working with. I’m basically managing that development team, the support person, and pretty much all of their infrastructure as well, and then also trying to look at ways that Bluetick can plug directly into that.

We’re at the point now where he’s sold the other businesses and is working essentially on this one, more or less full-time. At this point it’s like, let’s actually work together for the 3–4 months that we were going to before, see how things go, and then try and figure out a way to make this work long-term, or is it something that after that 3–4 months, one or the other of us or both decide, this just isn’t going to work and we don’t want to do it, let’s part ways.

Rob: Got it. So it’s a piece of software that is, in essence, complementary to Bluetick. Is that right?

Mike: Yes.

Rob: You can say as much or as little as you know or are comfortable with, but are you talking about a potential merging of the two into a single entity, or is it more like this is going to be a really tight partnership?

Mike: That’s an open question. Neither one of us really knows the answer. It could be one, it could be the other, it could be both. I don’t know, and neither does he. We have to work through things for the next couple of months and see how things play out, and see if there’s a really good fit internally, like directly inside of the app.

Is it going to be a merger, or is it going to be both applications merged together, or is it going to be to keep them separate and we just do a really tight integration? There are implications around all of that based on who owns what, and how the profits are distributed between those two applications, the technical costs and all the other stuff that goes with it. There’s a lot of stuff that’s kind of up in the air right now.

The plan is to just work through things for the next couple of months, see how they work out. Probably the most interesting thing that we started talking about was a way to sell Bluetick to their existing customer base as essentially a done-for-you service.

We’ve already mentally tagged somebody that we know of that is familiar with both products, and would be a good fit to essentially manage those email campaigns on behalf of the sales reps, because the sales reps who are using that CRM are probably not the greatest at putting together email campaigns, or managing them, or anything like that. It would be easier for us to offer that as a service. One, it gets more people using Bluetick, and two, it gets more revenue in the door for Bluetick, but it also gets more revenue in the door for the CRM as well. It gets tighter integration with their existing customer base, and really is more of an upsell to the existing customer base.

I think there are a lot of opportunities and potential there, but we really have to just buckle down and work through those things. This stuff has really started to come together as of a couple of weeks ago, but again, it’s going to be several months before we really know how things are all going to shake out.

Rob: It sounds like everything’s on the table and you’re both on the same page with that, which is probably good. And it sounds like there’s a lot of potential options, which is probably both good and bad.

When I think about selling an entire company—if I was just going to sell it for cash to a buyer—there are enough things to work out there. The moment is like we have two companies and maybe we can partner, maybe we merge them. If we merge, what type of equity does each person get? There’s a lot to be figured out there, so I think that it’s super interesting and exciting.

Obviously, I know more details than you’re talking about on the show and I’ve said it a couple of times, but I’m excited for this as a potential. If it winds up that in essence you do have a co-founder/business partner or whatever term you want to say, I think that could serve you well in this space. I think you have the tech stuff dialed in, I think you’re building a solid product, but there’s always been a lot to do, and getting the marketing engine going has just been challenging with everything else that’s going on.

That’s where having two people working on something allows for just so much more bandwidth, especially if their skillsets are not the same. In this case, that’s true. He’s not a developer, the person you’re talking to. He has a completely different skill set than you, in a complementary way, much like Einar Vollset and myself with TinySeed. He’s got more of the sales, the finances, and working on spreadsheet type stuff, and I’m on the other end.

I’m curious. You’ve been working on stuff for a while now, like you said 8–10 months or somewhere in there, and then you’re talking about now working for another 3 months. What if you get to a point where either one of you or both is like, this just isn’t going to work? Do you feel like you’ve wasted that time, like it’s kind of a wasted, lost year? How are you thinking about that?

Mike: There’s definitely a part of me that wishes that everything had gone substantially faster. I think we’re all like that where we want things to move faster than they do, but I think the whole pandemic really threw a wrench into a lot of things and it just caused delays that neither one of us really had anticipated, expected, or could have accounted for in any way, shape, or form.

If it came to that point where one or both of us wanted to say, this just isn’t going to work out. Would it be disappointing? Yeah, absolutely. Is it still a possibility? Sure, it absolutely is. Would I probably feel like I wasted a lot of time? Yeah, I would. I’m sure that I would feel that way. At the same time, I know that I’ve done a lot of good things so far for that business, and he’s a friend so it’s not like it’s the end of the world. I left him in a good position with a lot of things, and honestly, I overhauled pretty much everything on their entire technical environment.

One of the team of developers that I managed, I think right now is about a dozen people. There’s a lot there. There’s been a lot going on, and it’s been a struggle to keep on top of everything just because there are so many moving parts, not just in that particular product with the two mobile apps, the web-app, all these back-end jobs, AWS Infrastructure, and then I’ve got all the stuff that I’m managing on my side with Bluetick, Azure Infrastructure, Google Audit, and all this other stuff.

It’s been tough and interesting, but let me answer your questions directly. It is a concern or fear that I have, but honestly, what else can I do about it? It’s not a lot I can do.

Rob: Right, it’s an opportunity that when it started to happen, you knew that it has a real potential upside. It has an asymmetric upside because if it works, it could be game-changing for you/Bluetick to partner up in this way. The downside, of course, is that you waste some time. Oftentimes, as entrepreneurs, that’s the calculus that we have to do; figure out is investing this time worth the potential upside? But again, if it works out, could this potentially turn into a business partnership that lasts 5 or 10 years? In that scale or frame of mind it’s like, if that happens, you’ll look back and say, that was a tough time but certainly worth the risk.

Mike: Right, and I can kind of see that now. If it were to move forward and everything were to work out as, I won’t say best case scenario but a reasonably good case scenario, I could definitely see that happening, working out really well. But you’re right. If it doesn’t work out, that sucks. I wouldn’t have called it a complete waste of time either, because I do feel like I’ve learned a lot along the way.

Rob: Yeah, you’ve learned a lot. And like you said, you did help him and his team out, and there’s something to be said for feeling okay about that, just feeling like you made the best decisions you could along the way.

Mike: I can’t think of anything where there’s some additional piece of information that I wish I’d known three months or six months ago. Even last year early on, had I known that the pandemic was going to hit and it was going to cause it to take a lot longer for him to sell his business and come over into this one, would it have changed things? I can’t say that I think it really would have too much. I don’t know. It’s hard to say right now, but I don’t know if it would have made that much of a difference.

Rob: This other software product, is it further along than Bluetick? Is it more revenue? I guess there’s a team working on it, so how could you describe where it’s at?

Mike: That’s hard to answer. It definitely has more customers, more revenue, and a lot more technical challenges because it’s never really been managed by anybody who had an understanding of technology.

The development team that has been working on it for years—we actually switched from one development team to another, and they were in that process when I first started working with them—are the type of people who would do exactly what they’re told but don’t necessarily think ahead.

They don’t have advanced architecture experience and modular programming—all that stuff that goes with it, you would expect from senior developers—it was just handed over the wall like, here you go, we need this done. There wasn’t a lot of consideration given to architectural concerns.

I cut around $25,000 a year off from their AWS bill so far, so I’ve saved them a huge amount of money over there. But if you think about it from that perspective, that number alone is just the savings. I still think there are ways to go with this just by rearchitecting things and changing how things are done, and I could definitely cut the AWS bill by even more.

You can use that as kind of a, I don’t want to say benchmark but a datapoint to say, there are probably ways to plug Bluetick in, and help grow that business as well. Like I said, the lot of the technology sprawls across the mobile apps, the website, integrated into other services, things like that. There’s a lot of upside to it, there’s a lot of potential, and it’s a matter of us dividing and conquering.

Rob: It sounds like it’s further along if you look at business metrics, but it has more technical debt than Bluetick, right?

Mike: Yeah. The technical debt piece, I plugged a tool into it called SonarCloud that just basically analyzes the source code, and that told me that there was about a year’s worth of technical debt associated with just various pieces.

Just by looking at the source code itself, there’s logic that is different between the mobile apps and the web app. It’s been a challenge to wrangle all the technological pieces of it and start fixing them. That’s been my world for the past six months or so, just trying to manage that stuff and get things on track.

I would say by and large, it’s been extremely successful because during that time frame, there was a point where I was told that the number of incoming support requests per day were bordering on 50–60. I’m not sure how much sock I put in that actual number because I just didn’t see a lot of them, but at this point it’s down to a couple a day. It’s really not that hard to keep up with them, but early on you breathe on some things wrong and it fell over. It was just really that bad.

Things are so much better now. I won’t say it’s hands-off because we basically went through a redesign process where we’re completely rebuilding the mobile apps from the ground up, just because structurally, everything was just a total disaster. We’ve done that. we’re just wrapping that up now. We’ll be at a point where maybe within the next couple of days, we could start putting it in front of customers, and having them take a look at it directly. It’s really just a rip and replace of the old version. It does exactly the same things. It just looks better and it functions a lot better.

Rob: That sounds like a challenge. I was going to say, like a fun challenge, but actually that doesn’t sound fun. That just sounds like a technical challenge, to be all factual about it. During this time, were you working full-time, or you had some time to continue working on Bluetick on the side?

Mike: I would probably put it more along the lines of, if you have a full-time job and that was it, and you were trying to build a product on the side, Bluetick was my side business throughout most of this.

Rob: I think we’re all familiar with that. We don’t have to go all the way back to seven months because I actually remember early on, you were pretty engulfed by everything that was going on. You came into the technical situation and were trying to get a lot of stuff fixed. I know that Bluetick was humming along, but you weren’t investing a ton of time. But more recently, or in the past few months, you mentioned to me that you’re considering doing an AppSumo deal.

Mike: Yeah, I’ve been talking to them for a couple of months now. I’m still torn on that, to be perfectly honest. I haven’t pulled the trigger, I haven’t decided to move forward with it. I’ve had conversations with several people who have done AppSumo deals in the past, and one person I talked to said, think of it as a freemium offering. You are using it as a channel to get people in and talk to them, learn about your products, be able to scale things up. You will get a cash injection from it, but don’t necessarily expect or think that you are going to get a lot of them to convert into monthly-paying customers.

AppSumo’s prime offering to most of their customers is they want a lifetime deal. You pay X dollars and you never have to pay for it again, which really puts something like Bluetick in a tough spot because if there are hard costs associated with storage, processing, or anything like that, then it really makes it difficult to offer that kind of thing and come out ahead.

I’ve really struggled with how to not just position that but also to even put it into the AppSumo ecosystem for those reasons. Let’s say that I have 3–5 GB worth of disk space storage on a per-customer basis. If I get a couple of thousand people in really quickly, that could be a hefty chunk of change depending on how much data each of them has. I have no way of knowing what that’s going to be in advance.

Rob: That’s tough. I guess one thing to think about is, I think the majority of AppSumo users will either not redeem the coupon, or will redeem it and then not actually use it. There’s a good chunk that won’t actually consume that much disk space or that much cost. But yeah, you do have to think about this. It is a bit of a gamble.

To give folks an idea, if you’re listening to this, I did have an AppSumo deal way back in the day. I think it was in 2012 with HitTail, and I netted somewhere around $11,000–$12,000. I did another one later that netted about the same.

Ruben Gamez came on this podcast to talk about Docsketch and a bunch of stuff he was doing, and he mentioned on the air that he made about $30,000–$35,000 from his AppSumo deal. I think that’s so much more than mine because: (a) the AppSumo list is so much larger now nine years later, and (b) I think they’ve gotten better at doing the deals.

They pretty much do lifetime-only now. They really encourage lifetime-only because that’s what their AppSumo people like. And I think they know how to price them better and all that. And perhaps Docsketch is just a better fit for the AppSumo audience as well. The things that I pulled out of Ruben and my own experiences.

AppSumo deals are good for your app if it’s relatively low-support, there’s not a ton of onboarding, it’s not complicated—I imagine doing an AppSumo deal with Drip and that would be a nightmare because it’s just a complicated app; there’s a lot to it. Low per-user cost, as you were saying. For Drip, we had cost to send emails, so for the next infinity years, you can have a list of up to 1000 people sending emails. That would have been a cost against us.

And then, usually some type of virality. If your app just has even the modicum of virality, which Drip did have, where you had that ‘powered by’ widget. You had Powered by Drip on the widget, and with Docsketch as an example, Ruben has the Powered by Docsketch. Every document that gets sent out is some type of virality.

Those are three factors that I keep in mind, and have heard from others who were thinking about this. So I hear you. The hard costing is a gamble. If you took $20,000 or $30,000 away from the deal, and then 60%–70% of people didn’t really use it, do the numbers work out for doing this?

Mike: I’ve run them in a couple of different ways, and initially the answer was no. I’ve looked at what things I could change to try and make it work, and there are things that I could do that I believe would address some of those problems, but those are technical things that I would need to change in the product in order to make that happen, to make it work in a way that would be cost-effective for me.

I haven’t done them yet, but I have evaluated them a little bit and said, if I make these changes over here and I produce this cost over there, what does that ultimately mean? I do think there is a way to make it work, I just haven’t mapped out every single little detail. I do have it on my list of things to do to go through that, and I’m probably a quarter of the way through all the list of things that I need to look at and evaluate.

I don’t know how long it would take to do those things—that’s part of what I’m working through—but it is something that I would expect to know within the next couple of weeks. Like what does that actually look like? What would it take if I were to pull the trigger tomorrow? When could those things be done? Would they be done in time? Obviously, they would have to be done in time because otherwise, I would be going bankrupt from it.

Rob: Yeah, and they book way out right now. I think they’re 3–4 months out when you book a deal, so it gives you time to do it. Does Bluetick have virality? Does it have a Powered by Bluetick email footer or something?

Mike: That’s the thing, it really doesn’t. There is stuff that I could put in there, and that would be one of those technical considerations. I could put in the footer of the emails that are being sent out, Powered by Bluetick. I know that they probably would not be terribly happy about that, but if it said that and the AppSumo customers were not paying on a monthly basis, I could justify doing an AppSumo deal where I’m not going to get any additional revenue from them going forward if that were in there and there was that viral component. But there just isn’t right now.

That’s something I struggle with. I agree with you. It needs to be a marketing channel of some kind. If you can’t leverage it into the future with those users, does it really help you? I struggle to say yes.

Rob: I think it will help with short-term cash infusion, and it can help with customer development for sure. You might discover that if you get 1000–2000 new users, you will start seeing usage patterns and perhaps even there’s an industry vertical that uses it and gets a ton of value out of it—mortgage brokers, or realtors, or just something where you’re like wow, this really is the use case for it. So there could be learnings there.

I think the virality thing, maybe talk to AppSumo to find out what they think. I wouldn’t be opposed to adding that Powered by Bluetick link. If that’s a dealbreaker—which no no no, it feels like it would be for me—then if I can do this and put it in what’s essentially a free plan or a lifetime plan, but upgrading to paid removes it.

We had that with Drip with the $49 plan, had a Powered by Drip link, and on the $99 plan there was a toggle to turn that off. That was just part of it. If people wanted it turned off, that’s fine. You just need to upgrade.

Again, I wouldn’t be opposed to doing that or think that it would upset people. AppSumo, the folks that you’re talking to there will know whether that’s a good idea to do or not.

Mike: I haven’t talked to them about that specific piece of it. It’s just something that I came up with as an idea, so it’s something that I still need to talk to them about.

The other thing that I’ve actually considered is when somebody told me, think of them as freemium users. It did occur to me, if I’m already evaluating the things that I would need to do in order to essentially create a freemium version of Bluetick, what would it look like on a grand scale? Could I actually put something like that together and then offer it directly, not necessarily as part of AppSumo, but just directly from the website? Could there be a freemium plan for Bluetick that does have those viral components that would essentially help with marketing?

It crossed my mind. I haven’t really dug into that a little bit, but it is something I’m keeping in mind as I go through and try to make my list of things that I think need to change in order to make an AppSumo deal viable.

Rob: I’m iffy on a free plan with Bluetick. We’d probably need more discussion if we were to actually get into it, but I feel like one of the advantages of doing it with AppSumo is you instantly get exposure to their whatever it is million person list, or 750,000 person list. It’s worth it at that point. But if you’re going to just set up a free plan and let people trickle in, I’m not sure personally that it’s worth the effort there.

Mike: No. I mean doing it in addition to, like here’s an AppSumo deal and then there’s also this freemium version of it. So that’s entry level, then there’s the AppSumo deal, and then there are the regular paid plans. Kind of in-between, that’s more what I mean.

Rob: Yeah, I don’t know. Scaling I think is an issue I would be concerned about, but I guess we already have to be concerned about that with the AppSumo deal, right?

Mike: Yup.

Rob: Anyway, that’s an interesting thought. That’s cool. Next time we chat then, I’d love to hear your thought process about whether you decided to do it or not. I think it’s one of those things that obviously, there’s potential risk. The risk really is that longer-term it costs you some money, or that scaling is just too hard, that it essentially crashes your servers or really brings your service down, which would be a bummer.

I don’t feel like the risk is that you’re chewing through all of your customer base or anything like that. I think AppSumo really does have reach that could be helpful to you and not only in getting people in there, but I remember when I did the HitTail AppSumo deal that a bunch of people signed up through the deal, and then a bunch of people signed up not through the deal.

They just signed up as normal users, and I don’t know why that happened, but people just heard about it. It’s like when AppSumo stomps its feet, their ripples just go far and wide because there’s a million people on that list, and then it just gets talked about. Suddenly, your name is just being bandied about in Facebook groups, in Slack, or whatever. I would expect it to actually drive non-AppSumo signups to Bluetick. That’s the other advantage.

If I were in your shoes personally, I would lean towards doing it because, again, it comes back to asymmetric risk. If it doesn’t work, well that sucks, but if it works, there’s a potential to really expand your MRR in a pretty quick fashion, as well as derive some quick cash that you can use to grow the business.

Mike: The other thing I still have to look at in terms of the numbers is let’s say that I’ve got a bunch of users in from AppSumo and they were lifetime deal users. I’m going to have to eat whatever the cost is for those users. The question is what actually would that cost be moving forward? How many additional customers would I need to bring in as a result of the AppSumo stomp and that ripple effect? How many additional customers could potentially come in that would just completely nullify whatever those costs happen to be? Is the net effect of that positive or negative? My suspicion is that it would be positive and I would lean towards doing it myself, but I still need to sit down and run some of those numbers a little bit more.

Rob: Yeah, given that your price plans are $50 a month, $150 a month, and $500 a month. As an entrepreneur, I am a little bit of a gambler, and I like those kinds of risks. I say that if I were in your shoes, I would do it. I would need to be comfortable with scaling, both technical and support.

That’s the other thing. Recently, folks who do these deals, if they don’t already have at least one full-time support rep in addition to themselves, they often staff up just a little bit because there’s a two or three week period where there are hundreds and hundreds of requests coming in, and you have to be everywhere at once. That would be the other thing. You have to justify that expense as well.

Mike: A couple of different people suggested to me that I hire a support rep, even if it’s only for a couple of weeks or in the initial launch of the AppSumo deal to answer questions and emails, help people through it as needed, and help serve as a filter so that I’m not doing absolutely everything myself.

Rob: On another topic, are we resuming the Startups for the Rest of Us drinking game where whenever we mention the Google Security Audit, everyone takes a shot? Why are you doing this again, Mike? Why would you do another audit?

Mike: I have to, it’s basically an annual audit.

Rob: It’s been a year already. It’s crazy. You have another audit coming up. What do you want to catch people up on what that is or where it’s at?

Mike: I’ve said this before, and I wholeheartedly agree that it’s just completely applicable to this. I either want less corruption or more opportunity to participate. This whole thing is just an absolute, utter scam. It really is. I got an appraised quote yesterday. It was last night, like seven or eight o’clock at night. I just looked at it and like, that’s not going to happen.

Rob: So they did an audit for you last year. This gets people up. Since you tie into Google’s Gmail APIs, that you need the security audit. It was a long-running thing for a year, or a year-and-a-half on Startups for the Rest of Us, where you would come on and update, yeah this audit is a pain in the butt, it’s expensive, and blah-blah-blah.

Eventually, you decide to bite the bullet and do it. You had to negotiate it way down and you got it done. I remember the episode where we celebrated that it was done and all that, and now a year later, you essentially need to do it again and have it updated. They give you a quote and it’s more than the initial audit last year, but you already have everything in place, right? You already have (I’m assuming) a bunch of documents and a bunch of other stuff you need, and that’s all done. How can they possibly justify raising it? Shouldn’t it be maintenance? You know, half the cost? That’s what I would think.

Mike: That’s the thing. That’s what they told me when I first had it done. They were like, if you have this done, in a year if you come back and you use us, then it should essentially be reduced. You won’t have to pay as much the next time because you’ll have already gone through this process once. Of course, fast-forward one year and I ask them for a price quote and they do everything and send me the price quote, and it’s almost double what I paid initially.

I’m like, wait a second. No, hold on. I sent them an email this morning saying basically, this is what I was told, this is what you guys said to me. Essentially, what you’re saying now is that literally everything that we did, we’re just going to throw it all out because it’s all completely worthless, and it can’t be used at all. In addition to that, the cost is double because the work that needs to be done at this point is double what the initial work was, including all that we initially did was worthless. Something’s not adding up here, you need to explain this.

I feel there’s a lot of room for them to come back down to reality, so we’ll see what they say. I’m getting quotes from three different companies, so I’m not too worried about it, but it is something that kept me up at night and made me get up early this morning.

I know that for a fact because when I woke up at four o’clock this morning, it was the first thing on my mind. I’m like, man this sucks, this has already impacted my sleep. I know that I can do something about it, I know that we’re going to be able to figure something else out, but it’s just a pain.

Rob: It’s been a long-running pain. It’s a bummer it comes “so soon.” It just feels like we were just talking about it, but I suppose a year has passed since that. No other updates at this point on, right? You’ll negotiate, you’ll find another vendor, and then you’ll just do it again. You know what to expect this time because you’ve already been through it. There shouldn’t be too many surprises.

Mike: I do talk to other people who have to go through it, so it’s not like I have zero visibility or information about the things that are upcoming, that need to be taken care of. I already have an expectation in my head of like, I need to go do this before we actually get started with the audit.

Right now, I’m just getting the price quotes, but on the side, I’m also looking at those things and saying I need to get this done, I need to get that done. Otherwise, they’ll just come up and say, that’s a fine and you’ll need to fix that before we’ll approve it, so I’m going to have to do it anyway.

Rob: To be continued in our next conversation. Sir, it’s always great to have you on the show.

Mike: Thanks for having me, it’s good to be back.

Rob: It’s fun catching up with you. You and I have only caught up maybe one time. No, that’s not true because we’ve emailed and done some texts. But in terms of voice, we’ve only had one voice call since the last show. It’s good to get you on here and get dual purpose: for me to hear about the ins and outs of what’s going on, and also create an update for the long-running Startups for the Rest of Us fans. Thanks again for coming on. Are you active on Twitter these days?

Mike: A little bit here and there. I check in maybe once a week, or maybe once every other week or something like that. It depends on the week, but I don’t really have a whole lot of time for it. Honestly, I’m starting to come back out of my shell a little bit.

There was that one year period where I just did not touch Twitter at all, and then I started posting a little bit a couple of months ago. I’ve slowly been easing back into something social media but not a huge amount. I’m still not in consumption mode by any stretch of the imagination. I’m starting to slowly unfurl that.

Rob: And if folks want to keep up with us there, they can go to @singlefounder for you, and @robwalling for me. It’s great to have you back.

Mike: Thanks.

Rob: Thanks again to Mike for coming on the show. It’s always a pleasure having him on, and just easy conversation. He and I have had a lot of on and off conversations over the years, so I do enjoy the episodes when he’s able to make it on.

A couple of folks have asked me recently how they can maybe give something back to me or this podcast that’s been running for free for more than 10 years. Realistically, leaving a review or a five-star rating always helps. Also, just a tweet or something on LinkedIn about perhaps how this podcast has impacted you, or just a testimonial of, hey this is a great show and if you’re a founder, you should check it out. We are @startupspod on Twitter.

Thank you so much for joining me again this week, and I’ll be back in your earbuds again next Tuesday morning.

Rob: Thank you so much for joining me for another episode of Startups For The Rest Of Us. I’m really excited about this week. It’s episode 534. It’s a breaking-news episode where I talked with Josh Pigford, the founder of Baremetrics, about his recent sale of Baremetrics for $4,000,000 to Xenon Ventures. Even though the sale was about two months ago, Josh has not been doing podcasts or blogging. This is the first time that I know of that he has come out in public and made comments about the exit. I’m really happy and excited for Josh to see that his seven-year journey of building Baremetrics wound up with that kind of success for him.
I hope you really enjoy our conversation as we dive into the specifics of the purchase price—how much he walked away with, how he is basically getting away with paying almost zero taxes on the proceeds. We talk about what he bought after the exit, how it’s changed his life. Then we look back at the last few years because Josh was on the show back in 2015 and several both exciting and stressful things had happened to him in Baremetrics in the ensuing five years or so. We dig into each one of those.
Before we do that, I wanted to encourage you, if you haven’t gone to startupsfortherestofus.com and have gotten on our email list, there are a couple of reasons to do so. One, every week we send an email with expanded show notes. It’s almost like a detailed outline that is taken from the episodes by our assistant producer. If you go to the website, you’ll see a quick summary with links. But if you are on our email list, you get an email every week with a full-blown outline that includes time codes and just a really fleshed-out version of the episode in writing. That means you don’t have to go through the transcript. If you want to refer back to things, you can get it there.
In addition, if you do sign up to be on our email list, there are two episodes that have never been released on this feed. There’s Rob’s solo episode where I talked about the eight things you must know when launching your SaaS app. The other one is 10 things you should know as you grow or as you scale your SaaS app. I’ve got really positive reviews about both of those episodes. They also come with written guides. They’re like five-, six-pagepage PDF versions of the episodes in case you want to refer back to them or see it in writing. I’d encourage you to check it out, startupsfortherestofus.com, and enter your email.
With that, let’s dive into my conversation with Josh which, in all honesty, turned into a really good, steady-flowing, funny, entertaining conversation. I really think you’re going to enjoy this episode. Let’s dive-in.
Rob: Josh Pigford, thank you so much for coming back on the show.
Josh: Thank you for having me, Rob.
Rob: Your last appearance on Startups For The Rest Of Us was in 2015. It was episode 244. Where we talked about competition, transparency, and funding. We talked about how you had raised, I believe at that point, the full $800,000. Maybe it was only half-a-million at that point. But eventually, you raised a full $800,000 in funding. I asked on the show whether you regretted that at any point, and you said you really didn’t. That you didn’t regret the raise. That at some point, you regretted burning through it a little too fast. Does that ring a bell?
Josh: That’s accurate.
Rob: That’s usually what happens if you burn through it.
Josh: I wish I had not done that.
Rob: That’s the one thing. I am trying to imagine who’s listening to the show who hasn’t heard of Baremetrics. But Baremetrics, you started in 2013 and it was the first, essentially one-click subscription metrics for SaaS apps that worked on Stripe. You just one click, enter your Stripe account, and it gives this gorgeous dashboard of your MRR, LTV, your Churn, all this stuff.
There are certainly other apps that are out there doing it today, but it’s quite a success story in the early days. You and I actually talked about your pretty meteoric growth over the first couple of years. Again, you started in 2013, and we talked in 2015. Since then a ton has gone on.
I’m realizing, I should have had you back a couple of years ago. So many interesting things have happened to you and you’ve done so many interesting things with Baremetrics that there’s a lot of stories to tell here. But realistically 2 ½, 3 months ago, you wrote a blog post called I Sold Baremetrics and that was in November of 2020. In true Josh Pigford transparency, you walked through that there was no earn-out, that the sale price was $4 million, that you personally walked away with $3.7 million in cash. I believe you didn’t pay capital gains tax on that due to the qualified small business stock, is that right?
Josh: That’s correct.
Rob: Which is incredible. For people who don’t know, it’s called QSBS. That is mind blowing because normally you would pay 20% federal, I believe, or at least 18% federal. Then if you have any state tax, you would pay on that. You’re saving yourself between 20% and 30% of that number. What is QSBS for someone who hasn’t heard of it?
Josh: This is basically only really applicable in the US. But what the US government was trying to do was encourage people to hold on to stock in a business for longer periods of time They set up QSBS to say, after five years of holding on to the stock, you can cash out, and not pay any taxes on it—federal, state, et cetera. That requires the states to recognize it which is a classic Alabama fashion. Alabama does not recognize it. I actually end up paying 5% tax on mine which is still better than capital gains.
Rob: Thanks, Alabama.
Josh: That’s right. But otherwise, you pay no taxes on it. That’s cash in your bank.
Rob: Which is incredible.
Josh: It is. That’s one of these scenarios where when I formed Baremetrics as a C-corp that was not anything I had even remotely thought about. I didn’t even know it existed. I set it up as a C-corp because we were raising money at the time. I was like, okay, to do the whole shares-thing, C-corp is the natural entity for that. Otherwise, that would not exist for us.
Rob: If you’ve done an LLC, there’s no QSBS.
Josh: Right. It’s a different story. Honestly, I stumbled upon that by purely just luck.
Rob: You have to hold it longer than five years. The fact that some startups sell before five years and you did hold it for, in essence, about seven years, also opened you up to that. That made it possible. At a certain point, some of these tax benefits make it such that a sale is maybe feasible or not. The question I have is, would you have sold it if you had to pay 30% tax on that number because that’s a much smaller number?
Josh: Totally no, I would not. I remember in 2019, it’s probably April 2019, I had an offer for around $5 million. But it was an asset sale instead of a stock sale. After all that was said and done, nearly 50% of the purchase price would have gone away. I would not have done it then. It’s not worth it. It definitely is a make-or-break deal.
Rob: The thing is, I’ve heard people say, how do you calculate your number? Probably the number that you need to potentially live forever on, so to speak, to retire on. Knowing that people like you and I are never going to not do interesting things, not make things, we’re probably going to make money doing them as we get into later with your woodworking, your Laser Tweets, but just to have that safety of being like, I don’t have to work again.
There’s this rule called the 4% rule that economists studied. I think it was in the 80s and it’s been updated since then. They say, if you have enough cash in the bank, that you can live on 4% of that, then you can live for a 30-year retirement. They ran a bunch of scenarios and most of them worked and some of them don’t. If you sell right now, you put most of it in stocks, and then there’s a huge dip right away, it actually doesn’t work. There’s a timing of events.
Me, I want to be a little more concerned than that because these days, especially right now with stocks at historic highs, I don’t know if the 4% rule is as safe as it used to be. I don’t think it is, personally. But certainly, if you start notching down to a 3.5% rule, a 3% rule, you’d think about, oh, if I had $4,000,000 in the bank, 3% of that is $120,000 a year that you can draw. In essence, that’s your money. You don’t pay income tax on that. It’s already in your bank account, in essence. It’s not a $120,000 salary. It’s more like a $170,000 salary to pull a $20,000 out.
The idea there is a 3% rule. If you had $4,000,000 in the bank, you could potentially live for 30 plus years. In many of the scenarios, people actually had more money left at the end of the 30 years because of just the way the stock market has performed historically. All that said, a lot of people think, Oh, I need $10,000,000 to retire or $20,000,000 to retire. You probably don’t, assuming you’re decent with money, you invest well, you’re not crazy with going out, and buying a Lambo once you get the check. That leads me to my next question which is, did you buy anything in the past two or three months that maybe you’d been waiting most of your life to do? Did you make any crazy purchases?
Josh: The first thing we did was pit off our house. To your point about the 4% rule, that was a big part of our mortgage. It looks like a couple of thousand dollars a month. It’s like, okay, that instantly goes away. All of a sudden, your needs from a cash perspective drop pretty drastically. It’s like at that point, we have no debt. It’s like, okay well, we certainly can live off of the interest of $3.7 million.
Past that, I paid off the house and then bought a Tesla. That was it though. I went back and forth on the whole Tesla thing. We ended up getting a model X which was the most expensive Tesla which I was super happy with. But also, I’m not a big spender. I don’t care to buy really expensive things. I went back and forth on that one for quite a while. But I bit the bullet and I’m happy with it. Everybody loves it, too. That’s what it’s been.
Rob: Yeah, that’s what I found with some larger purchases. We both came from humble beginnings, I’ll say. My dad was an electrician. Mom didn’t work. We always had food, but definitely did not have money for any types of fancy stuff. I’ve always been pretty tight with money. As I started having some entrepreneurial success, we bought a bigger house. As you said, we had a house payment. It was $2,500. I remember being like, oh my gosh, that feels a lot.
Now, of course, it’s like, well, that’s not terrible. Not that big of a deal. After selling Drip, eventually upgrading, my cars were always used beaters that I drove for 10, 15 years. I had a salvage title Buick Rendezvous that I bought for $8,000 in cash from a gas station in Fresno, California. I drove that for 10 years while we were building Drip. It had the side-mirror taped on with duct tape. It just never bothered me. It was just a car.
Then after we moved to Minneapolis, I wanted an all-wheel-drive car with a remote start and heated seat. I’ve never had any of this stuff. I bought a Volvo which is when you hear it, it’s like, oh isn’t that like your grandpa’s car. But no, they’re actually crazy luxury, and they’re really nice cars. It was a big step. Frankly, Sherry pushed me to do it and encouraged me to do it. It was a good move so I hear you on that. Of course, I bought it used because I just couldn’t stand it.
Josh: We were the same way. It was like, I kept looking at like, should I get a used model X or something like that. Then it’s just like, no, we have nothing else. We’re just like, let’s spend tons of money on it. I was just like, let’s just buy it and be done with it.
Rob: Is there any other way you can think of selling Baremetrics and having these last few months to do really, truly what you want with it? Is it a dramatic shift? Do you feel your life has changed pretty dramatically?
Josh: I feel it has changed dramatically from a mental perspective. From a day-in and day-out, what am I doing? I still come up to my home office and do stuff. It’s not Baremetrics. I’m still doing things that probably most people would classify as work. What I don’t find myself doing is going home or leaving my office, and I’m still mentally chewing on whatever it is I’m working on. Whereas with Baremetrics, it goes to say, I would go to sleep worrying about something, maybe an employee had said, or maybe there’s an employee that seems like they’re unhappy so maybe I’ve had this gut feeling that they’re going to leave soon. These things that just occupy your brain space, that stuff pretty much went away overnight. I feel probably mentally freer than I had in the previous seven years.
Rob: I definitely know that feeling. It chews up a lot of mental cycles running a business.
Josh: After you do it for years, you don’t even realize how it’s become the baseline for you. That’s probably the biggest shift for me. It’s not chewing on stuff for days and days.
Rob: You have taken some time off social media, right? Or you had planned to?
Josh: Yeah. I take a little bit of time off. But I think pandemic stuff has made it. Social media can become, for me, some sort of like a social lifeline when it’s harder to see people in person as much.
Rob: It makes it tough. I’m curious, I’m going to ask you as someone who has gone through similar experiences of selling a company, leaving, and having the new owner perhaps make some decisions that I wouldn’t have made. With me, it was a Drip price increase with no grandfathering. That happened very quickly. I was not involved anymore. I sat and watched that debacle unfold. Over the past couple of months, I think that the new owner of Baremetrics has made decisions that you probably wouldn’t have made. I believe there are cancellations you have to call in. There’s stuff. They’re changing flows. How has that impacted you emotionally or in another way?
Josh: I don’t know that it has impacted me emotionally at all. It’s one of these things where, okay, if I have to have an opinion on this, my opinion is I would not have done that. We did not do that while I was running the company. I still would not do it. But I also know that there are different ways of doing things. It doesn’t bother me. Almost what bothers me more is in that particular case where the whole call-to-cancel thing while I’m not involved with Baremetrics. They still were keeping me informed like, well, here’s actually what went down. Everybody was piling on, and the reality was, there’s a lot more to that story than what probably seemed like on social media where everybody’s just piling on, which is always the case.
When somebody posts some angry thing on Twitter, the reality is, they’re not including everything. That was one of those cases where everybody’s piling on Baremetrics. I disagree with the call-to-cancel thing. But at the same time, there’s more to the story here. Baremetrics people just had to bite their tongue and let it pass.
Rob: I didn’t see you getting involved. You were just like, yeah, I’m not going to.
Josh: I didn’t at all because the only way that I said anything about it was I tweeted something about how I was going to write up some rant and then I just decided that I don’t care because that’s the reality. I have an opinion here, but it doesn’t matter.
Rob: That’s it. I hear founders say, I’m starting a new company, and I’m going to hire a CEO to run my old company. I’m going to run two companies at once. Why would I sell? It’s growing. It’s doing well. That’s one of those instances where I’m not saying you should sell or whatever, but there are moments where you are happy that you really are separate from the business, that you’re not, still an owner that a CEO is running. There really is a clean-cut between you and the company.
Josh: I had explored that, too. Let me hire a CEO and I’ll just sit back. But then the whole brain space thing, the whole mental breakdown—we talked about a few minutes ago—you don’t get the break from that. It’s still there because whoever’s running, runs it into the ground, that affects you.
Rob: Yeah. You’re under-diversified. You have literally millions of dollars in cash in this private company that you can’t get out and that’s tough. There’s a lot of risks there. A little bit joke-y but truly but did you buy any crypto with your mad-stacks of cash?
Josh: What we did with the money is we got a financial planner. Planner is probably the wrong word. I meant this financial planning.
Rob: Advisor?
Josh: Yeah. They’re managing our money for us. We basically just put it all with them. They’re handling buying the appropriate stocks and bonds, moving things over at the correct times, and all that stuff. In the same way that I pay a CPA to handle my taxes because I hate taxes and don’t want to try to become an expert on it. It’s the same with the life financial stuff where I can’t simply really wrap my head around it so that I don’t screw it up. I’m going to let somebody else do it.
Rob: Personal finance and investing have been a hobby of mine, a sick twisted hobby, much like entrepreneurship for years. I still manage my own money but I do think there’s a case to be made for getting outside help, getting experts as long as you find someone you can trust. As long as they’re being fairly compensated but there are no hidden fees because that’s something that happens in that space.
Josh: That’s crucial. I remember the first financial advisors that we talked to, I really got a sleazy feeling about him. I would not feel comfortable here and we found someone with whom I didn’t get that vibe with. I think that’s crucial, finding somebody that you feel okay with.
Rob: I want to roll the story back until late 2016. At a point where you almost ran out of money. Baremetrics almost ran out of money. You blogged about this later in March of 2017. How we went from weeks of cash left in the bank to profitable in eight months. The beauty, Josh, you were telling me offline before we started this. It’s so easy to interview you because all you have to do is go back and look at your blog posts and you just tell this extremely open story of what’s going on. You can almost just step from the crisis.
You write a blog about things that are really hard or really amazing wins. Those are the things that are interesting to talk about on the podcast. Almost running out of money and then trying to sell the company, and then selling it—these are all basically bronzed for us in these blog posts that will live on.
Talk to me about this decision in late 2016. By that time you had raised your funding, and I believe you were through it. You burned it. You’re running out of money. What was your thought process there? What was the story? That had been quite stressful. The first is how painful it was for you to sit here and think, I’ve built this amazing company for three years. We’re the envy of a lot of SaaS founders because you’ve been telling your story publicly and then, wow, I might miss payroll next week.
Josh: In 2015, we were on this traditional VC trajectory of okay, we need to get to a million MRR. That’s the next goal. We had raised $500,000. I was coming to the end of that. I was like, okay, we got to raise some more money. We raised $300,000. That was the end of 2015.
As 2016 progressed, we did not have the growth. It’s just a classic startup story of like, you keep raising money, and then you’re not hitting the growth that you thought you would. You’d just start burning through all your cash. Mid to late 2016, we had, in fact, started running out of cash. The financial details of things tend to bore me. I’m in the big picture. Let’s just build a product and see what happens. That’s fun to me, the building things. Managing things and spreadsheets is not fun for me.
That had gotten out of hand for me. I had not paid attention to burn rates stuff as I should have. All of a sudden, I realized, okay, we’ve just got a few weeks of cash left. We got to make some big changes here. I had already gone through the second round where we raised $300,000 more. I was like, man, I can’t do another. Let me go ask for more money from people.
It was either ask for money from people or let’s see if there’s a scenario where we can get profitable and not lay people off. The way that we did that was, everybody on the team took a 15% pay cut. I took a 30% pay cut. From a Silicon Valley perspective, our salaries were not astronomical or anything to begin with. By the end of 2016, we were able to change the graph so that we did not run out of money.
Rob: That’s tough. Did you lose anybody?
Josh: No. We had two people left. I was disconnected from that whole situation. It wasn’t like we had to lay people off or people were like okay, I’m not making enough, I need to leave. There are people who, from 2015 with those pay cuts, they’re still at the company today. All through, I’m pretty proud of how we handled that. But I guess, more grateful for the people who were willing to stick around.
Rob: Yeah, I bet. How was that? Obviously, it wasn’t fun. Did it take a noticeable toll on you? Is that one of the weeks where you maybe didn’t sleep well? Drink a few too many bourbons? How do you cope with that stuff?
Josh: It certainly affected sleep a lot. For me, the stressors with Baremetrics were almost always around the people. A wonderful team, but I always wanted to not do anything that would put the team in some hard position. The fact that we were putting people in our position by asking them to take a pay cut made me sick to my stomach. It was one of those things where, with entrepreneurship, I signed up for the roller coaster ride. I’m aware of the ups and downs. Baremetrics is not the first thing that I’ve ever started. Me, my family—we’re used to some instability when it comes to the financial side of things and comfortable with it, ultimately. But no one I hired signed up for that. It’s tough to ask people to do that. Certainly, some sleepless nights were on them.
Rob: Yeah. I could imagine that. Another interesting point, probably another down point is Baremetrics had a few plateaus over the years. A lot of folks listening to this building SaaS apps have experienced that. Where you’re growing, everything is going great, and suddenly, it’s like, why are we stuck at $30,000 MRR for six months?
People can go to demo.baremetrics.com and they can see your MRR since inception. That’s all I did in preparing for this. It looks like from late 2017 until early 2019, you’re growing a lot faster before then and then you were between $90,000 and $100,000 for 17 months, or 16 months, or something. What happened there? You broke through it. Because I believe right now, Baremetrics is at $150,000 MRR. Obviously, that’s the remedy itself. The first question is, what caused that, and then the second is, how did you figure out how to break through it?
Josh: There’s a number of things. One, there was some technical stuff. We were having to spend a lot of time rewriting things because when you build something, to begin with, there are all these things where you could build this thing to scale up to hundreds of thousands of customers or millions. But then you would never launch the thing because you spend all this time pre-optimizing things.
As is the case with most software, you get to a point where you’ve reached the technical limits of what you originally build. We delayed that rewrite as long as possible. But the 2017-ish timeframe was when we’re hitting the limits here. We ended up spending a ton of time rebuilding the internals. Externally, the customer seed—nothing from an improvement perspective. That was a lot of the plateaus. It was like okay, there are things that people are asking for or wanting but we don’t have the bandwidth to do those things right now because we’re in the middle of this rewrite.
That was a lot of it. Then at the same time, this is about when Stripe starts rolling out their own analytics thing. ChartMogul is probably the most—from a competition perspective—they’re pretty strong and they’ve handled the infrastructure stuff a lot better than we were able to at that time. There’s just all these things that converged and made it really difficult for us to grow ultimately. We only had six, seven people, and all of them focused on engineering stuff. No marketing team or anything like that. It was just a lot of different things that all piled up.
Rob: That had been tough for 15 or 17 months to be plateaued like that. How did you break through it eventually?
Josh: We made the infrastructure changes that ultimately allowed us to do more real-time stuff where previously, your metrics would be delayed by 24 hours. Those infrastructure changes set the groundwork for us to have a more powerful tool. You can do more real-time metrics, you can create all these different segments based on all these different attributes. From an analytical tooling perspective, Baremetrics became a lot more powerful. That was a huge one. As a tool, it lets people do a lot more than they could previously.
Then we started doing these add-ons. We’ve got recover, cancellation insights. There are these different add-ons that make Baremetrics as a tool more powerful. I do believe that product is ultimately what got us through the whole plateau thing. We hired a growth person for a while. That didn’t really work out and didn’t really have any progress there. At least, the entire time I was there, the product, and to some extent, the content stuff drove growth for us.
Rob: Yeah. That’s what I was going to ask was the product got you out of it? Do you think marketing could’ve gotten you out of it sooner? You and I are product people. The expression of like, hey, when you’re a product person, building features is a way to get out of plateaus. But I often think that more marketing could be helpful in those situations. But I’m curious about your take on that.
Josh: I wanted marketing to be this magic pill for us. Especially in the early days, it was product and it was me writing blog posts every single week. That works really well in the early days. But eventually, me writing a blog post every week, I just couldn’t keep up with it. Hiring a marketing person, my hope had been, okay, we can have somebody who can really focus on just marketing this thing and doing the things that I don’t have a skill set for.
For whatever reason, that ended up not really being the case for us on the marketing-hire side of things. I don’t know exactly what Xenon, the acquirer of Baremetrics, is doing on the marketing front now. But the entire time I was there, we never found this marketing channel or set of channels that worked really well for us. A lot of that was just my lack of skill, or maybe it was budget, or willingness to spend money. I never really found it.
Rob: Interest, too, probably.
Josh: Interest, for sure.
Rob: You’re not that interested.
Josh: Yeah. We hired a content marketing person. He was fantastic. If anything, I hired him in January of 2020. He had about eight or nine months where we worked together before I sold the company. In that time, he got that machine going again where it had died off in the previous couple of years with me trying to manage it. I still think content was and maybe still is the strongest acquisition channel for Baremetrics. It was hard to do anything outside of that.
Rob: Yeah. It’s interesting to hear you say, we never really found the channel outside of content and yet you grew a business to almost $2 million in annual recurring revenue. There are many ways to do this. One could argue well with, if we had found the channel over the seven years, it would be a larger business. But it’s also still possible.
Josh: Our friend, Nathan Barry with ConvertKit, was just doing nothing for years almost. He would say the same thing where he’s just at a few thousand dollars a month. Then does almost nothing on the product side, but repositions himself in the product. It just starts growing like gangbusters. I kept thinking with Baremetrics, are we just focused on the wrong people? Is our target market wrong? We just never could find whatever switch to make that happen.
Rob: In December of 2019, you wrote a blog post called I almost sold Baremetrics for $5 million. Leading up to that, I’m guessing, and correct me if I’m wrong but you’re basically, almost six years into this business, it’s growing but maybe not as fast as one would like. Do you feel like you were experiencing burnout? Were you tired of the grind? I guess the real question is what motivated you to start thinking about selling it?
Josh: A lot of that was life timing. I had not been thinking about selling. I certainly had not been pursuing anything and then got an email with a decent offer, relatively straightforward. No complicated stuff attached to it or anything. I was like, maybe this would make sense. At the time, family stuff was rough. There’s just a lot going on that it’s like man, I would love to not have this mental burden of running a company. That started the train down the tracks. Ultimately, it worked out.
Rob: The interested time folks can read that blog post if they want to hear more about how it didn’t work out. That was a bummer. I had to imagine. Obviously, later you sold it and basically got more money because you don’t have to pay taxes due to QSBS because it was a stock sale versus asset. But after that sale fell through, what was your headspace? How devastated did that feel? How did you pick yourself up after that?
Josh: From the time that I got that original offer—that was April and I might have a few months off here—it was August, September when I was like, okay, this is not going to work. At that point, I was so burned out on the process that I had accepted this isn’t going to work out, or at least this time around. I can’t pour more into this. I just need to get back to work.
After I made that decision, I really did not spend much time wallowing. I was just like, okay, well, this is what we got. Let me get back to work. A couple of months later, I hired three people. It was just, let’s go all-in make this happen. I was not as bummed as one would think. But I was probably more so because my nerves were just shot from the whole process and all that falling through.
Rob: I have a lot of respect for that because I don’t know if I could’ve recovered that quickly. My personality is I would hang on to things for months and probably wallowed in the sadness. But it sounds like that really wasn’t the case for you.
Josh: Other than like being bitterly angry at the people who ultimately ghosted us, screw those guys, but other than that, I was ready to get back to it.
Rob: And then in 2020, you launched a new feature. You said you hired people. You launched a new feature, this feature called Intros where I believe you had conversations with investors. It was going to match up potential investors or acquirers with Baremetrics customers who had opted into this thing of, hey, I am looking for funding or I am open to acquisition offers. Here are all our metrics. It’s a natural fit. You had conversations where people said, hey this is a great thing. You built it and it didn’t work. What happened there?
Josh: Of all the things that we had built with Baremetrics, I felt so confident in our research phase of this idea. I had dozens and dozens of calls with ultimate investors because they would be the customer here. We did interactive mock-ups before we wrote any code. We just tried all sorts of things to try to prove the idea before we spent the time to build it.
I felt so great about it. I also had this classic entrepreneur, pie in the sky. This is the thing that’s going to blow it up for us because we’re talking about million-dollar deals here. We’ll be able to make tens of thousands into MRR on day one. That’s the kind of feeling that it had.
We had so many investors who had signed up to be notified when it launched, even outside of all the people I had talked to. Then we launched it and I didn’t get a single paying customer for it. It was such a downer for me and the team as a whole like, where did we go wrong here?
That was probably one of the biggest morale destroyers in the history of Baremetrics. We spent months building this thing. It felt like we were onto something and we got it wrong.
Rob: Yeah. It’s tough. To me, when I think about Intros, obviously, you were going to charge the investor’s side for deal flow, in essence. When I think about it not working, I think well, that makes sense because most investors don’t actually need that much deal flow because they’re giving away money, giving it away in exchange for equity. Still, you’re going to have money and you’re going to invest. Deal flow isn’t as hard as I think people would make out.
If you were just to pitch me the idea, I’d be like, yeah, I’m not sure this is going to work. But the fact that you then did the mock-ups, have the conversations, did the validation, and that all pointed towards it working, that’s the surprising part to me. I just would’ve thought that there would be signals earlier in the process.
Josh: In all my conversations, probably where we didn’t spend enough time harping on this with the investors was the cost of it, or how much they would be willing to pay. Occasionally, someone would recommend, well, how about you take a percentage of the deal that goes through or whatever. We were trying to not complicate it or have a contract signed. We’re now some partial owner in whatever the deal is. There are a lot of different ways you could charge for something like that. We’re just trying to just say, okay look, if we can get you one new deal a month that you, otherwise, would not have gotten, this has got to be worth at least $500,000 a month or something like that. We couldn’t make it happen.
Again, part of that also went down to my aversion to sales-y marketing stuff. It’s like if we had had someone, a proper salesperson handling all that stuff, maybe we could’ve closed some of those deals. After we launched it and could not get people to convert, it was just okay, I don’t know what else to do here because this is so far out of my wheelhouse.
Rob: Right, and at $500,000 a month, it’s more of an enterprise sales process and you didn’t really want to do enterprise sales.
Josh: I did not. It just kills me. It’s not that I don’t think the product could’ve worked. I have seen a bunch of stuff, other things crap up in the past, a year or two since then, from people building similar things like trying to have deal flow and hooking up to your Stripe account and all this stuff. People are still trying it. I was the wrong guy for it.
Rob: That’s the thing I think folks should realize. Validation can work. I will say it does work not all the time. Oftentimes, we validate incorrectly or we make mistakes with it. Sometimes it does give us false signals. Validation is not 100%. But also, when you launch something, a lot of times, knowing yourself and knowing—like you said—what you are interested in, what you’re willing to do, sometimes a product needs something different than that.
As you said, I can feasibly be successful if it has different folks running it. I think of TinySeed and if I were pitching investors and raising money, TinySeed would not be nearly as successful as it is with my co-founder Einar Vollset, who is designed and made for that. It’s more of an enterprise sales process, its relationship, and all that stuff. Much like you, it’s not my sweet spot. In fact, I don’t ever want to do it, ever.
In that case, TinySeed wouldn’t work for me if I had started it on my own. It sounds like interest is a similar thing where it wasn’t in the right place for you. You did wind up selling it for $400,000. It was a year and a half later or something when you wound up getting some cash out of it.
Josh: Yes. I talked about from a moral perspective, how that thing’s failing was such a bummer for everybody. But selling it $400,000, it sort of flipped that over and everybody was really stoked on it. One of our goals for that year when we sold it was to get more cash in the bank. We got profitable after we almost ran out of money. But we were still operating pretty much right at breakeven on purpose. Having just some more cash to the bank to get a little bit more of a buffer wasn’t one of our goals going into the year. Being able to get that buffer in by selling this thing, the leftovers, felt like a win for everybody. I was happy with that outcome.
Rob: To take us forward, two, three months ago, you wind up selling Baremetrics in a true life-changing exit. I asked you before we hit record, Are you going to do the smart thing and take six months off, or knowing you, are you already working on your next thing?
You told me about Laser Tweets which I had seen you tweet about now and again. But I thought it was a hobby thing that you were doing. Folks can go to lasertweets.co and you have a full-on online store here, sir, with their coasters that are laser engraved with people’s tweets. You have a Lil Nas X Coaster set. The first one says, “old town road is literally about horses.” You have this one from Kanye West, well you have a whole set of them. But he says, “I have no interest in working with anyone who is too important, or too good, or too traditional to take a call at 3:00 AM.” Tell me about your maker. This makes sense. Tell me about how this came about and what it’s doing?
Josh: Yeah. It’s super dumb, Rob. In 2018, I got a laser cutter just because, why not. It sounded fun. Then I was like, maybe I should figure out some way to make something with it. Let’s laser etch tweets into woods and see what happens. It was still very much a little hobby thing. In 2019, I made $10,000 from that year. Then this past year, 2020, it’s certainly picking up in the summer. When I sold Baremetrics, I closed the deal by the end of October, early November, which also coincided with the shopping season for holidays.
The second I sold Baremetrics, I instantly jumped into running the laser cutter for 12 hours a day and packing orders all day. This just blew up, man. That’s what I’ve been doing. I haven’t taken a break because I’ve been laser etching Kanye tweets.
Rob: This is the most bizarre ending to a startup exit story that I’ve ever heard. Did you make some money?
Josh: I was looking at it now and I have $20,000 in 2020. I have doubled my growth. This is rocketship growth stuff here, Rob.
Rob: You need to raise funding. I think that you’re onto something here. Oh my gosh, I love it, man. Are you going to continue doing this? It sounds like it has legs of its own.
Josh: I guess. It was certainly not my plan to jump right into it. Right now, I want to see things through. With Baremetrics, for instance, I felt like my role or like my usefulness at the company, my ability to grow it ran its course. I was the wrong guy to keep trying to run the company. With Laser Tweets, it’s like, I’m still the right guy for it. Let me just see what happens. When we doubled sales for the past year, what happens if I double it again this year, in 2021? The first part of it is next year, sell it and be done with it then or something like that.
You’d asked about taking some time off, I don’t feel any desire to start anything new. This is more like, let me just see this through to the end of this thing that I’ve already got going. It doesn’t stress me out. That’s nice.
Rob: It’s nice that it’s so different. So different than running a SaaS app.
Josh: Exactly. I’m avoiding software, building any kind of software like the plague. I just don’t want to touch any software. This is very much not that. It’s handling wood and just like making physical things. That’s almost therapeutic for me, especially because with Baremetrics, it had to work because there were people, families relying on me not running that thing into the ground. Whereas like with Laser Tweets, if it stopped tomorrow, if people no longer wanted Kanye Tweets, fine. Who cares? I don’t. It doesn’t matter. There’s no stress associated with it.
Rob: That’s why I’ve loved watching you over these past seven, eight years since we got to know each other at MicroConf, and on Twitter you’re always doing interesting things. You’re framing them in a way that is both admirable and inspirational to a lot of folks. You make people around you want to build things. You make people want to be entrepreneurial or to do cookie things. I have a lot of respect for what you built with Baremetrics. Honestly, I’m just super happy that this was your outcome. I don’t like to use deserve because it just said a loaded word. I feel like you worked your ass off and you earned some success. Props to you.
Josh: Thanks, man. I appreciate that.
Rob: If folks want to keep up with you, you are @Shpigford on Twitter, obviously lasertweets.co if they want to see the amazing. Dude, you have picked out. Your taste in curating these is amazing. There’s the Elon Musk set. There’s Donald Trump coupled on, Trump sets. I notice Kanye West has the most sets.
Josh: He’s easily the most popular. Followed by Elon. People love some Kanye.
Rob: I can’t stop laughing as I read through these. I love it, man. Thanks again for joining me, man. If you do get the startup bug, I’m curious to see it over the next few months. You’re a maker. You’re a creator. You’ve built multiple SaaS apps. A lot of people don’t know that you had several apps before Baremetrics. But I am genuinely curious to see if it comes back to you. You’re always going to build and launch things. I wonder if you’re going to ever want to do software again.
I have not had the itch to launch production software since we sold Drip. I still build things. I still have packy-hacky ass PHP scripts that I connect to this and that API. I do things and I love codes. I’ve been writing codes since I was eight. But to launch something into production for other people to use, I have not had that desire. I’m, of course, scratching that itch with this podcast, MicroConf, and TinySeed. I’m building interesting things, things that are interesting to me through that. I’m curious to see how, aside from Laser Tweets, you figure out how to scratch that itch for yourself.
Josh: I’m curious as well. I think that the reality is I’ve been building software, trying to make money off of software for the better part of almost 15 years. It’s not like, oh, I’m stuck with Baremetrics for seven years. I’m moving on to something else. I’ve had a career, essentially, in the SaaS world for 15 years. Okay, I feel like I’ve done that. Now, I’m ready to move on to try other things. I get bored. I’m curious what the next few years look like.
Rob: Yeah. Congrats again to you, sir. Thanks for joining me today.
Josh: Thanks, Rob.
Rob: Thanks again to Josh for coming on the show. Thanks so much for joining me again this week and I’ll be in your earbuds again next Tuesday morning.

Rob: Welcome back to Startups for the Rest of Us. It’s me, your host, Rob Walling. Thanks for joining me this week. This is episode 533 of the podcast. Today, we’re talking about life profitability after two exits with Adii Pienaar. I’ll give his full bio in a minute.

He is a multi-time founder with multiple exits under his belt. He has written a book called Life Profitability: The New Measure of Entrepreneurial Success. He talked the talk and walked the walk. He’s been a MicroConf speaker, he’s a TinySeed mentor, and he has lots of experience and success under his belt.

Today we dig into more of the personal side, the life side of building a startup. A lot of what my wife, Sherry Walling, talks about on her podcast, ZenFounder, is the startup family, life, and the balance of those three things. In this book, Adii looks a lot at how to make it all work.

Before we dive into that, I wanted to remind you, in case you haven’t checked it out, the MicroConf Podcast. Every week, we either release an episode of MicroConf On Air, which is our video live stream show—we release that in audio format, or we do MicroConf Refresh Episodes where we go back to a previous MicroConf. We take the talk, pull the audio from it, and then I add an intro to it for context. We put that out on the feed, and we’ve had a lot of interest in this show.

If you haven’t checked it out, just go to any podcatcher, search for MicroConf. It should be your number one result. It’s nice, I subscribed to it myself. It’s a fun reminder, even the talks that I saw in person, which I guess technically is all of them because I’ve attended all the MicroConfs. Even those talks that I saw in person, it’s nice to be reminded and be refreshed on the topics and the ideas that are put forth.

It’s a low investment because it’s audio. Of course, you can always click through the show notes and watch the video if you do want to see the visuals. MicroConf Podcast, if you haven’t checked it out already. With that, let’s dive into my conversation with Adii Pienaar.

Joining me today is Adii Pienaar, the founder of WooThemes—later became WooCommerce and sold to Automattic, the parent company of WordPress—founder of Conversio, an ecommerce ESP that’s sold to Campaign Monitor in 2019. He’s a multi-time MicroConf speaker, TinySeed mentor, TinySeed investor, and he’s appeared on this show once before, episode 467, “A Life-Changing Exit” with Adii Pienaar of Conversio. Sir, thanks so much for joining me today.

Adii: Yeah, Rob. Thanks for having me again.

Rob: It’s an absolute pleasure to have you. You’ve written a book called Life Profitability: The New Measure of Entrepreneurial Success. If folks want to go check it out right now, it actually just dropped today, the day this episode goes live. It’s at adii.me/book. We will include that in the show notes. It should appear in any podcatcher that you’re using today. Coming out in Kindle and physical today, and then the audiobook is out in about six weeks. I have my preview PDF copyright here. Thank you for sending that over.

I’m really fascinated with this concept of life profitability, and I want to dive in today to help flush it out for Startups for the Rest of Us listeners. You’ve been to MicroConfs, you’ve listened to these podcasts, you hear the people that are in this community, and you know that there’s quite a bit of overlap with this idea of lifestyle or of work-life balance, which you addressed in the book. You say, hey, work-life balance is not the answer. We’ll get into that in a little bit. You’re a founder with multiple exits under your belt, so why sit down and write a book about this topic?

Adii: That’s a really good question, Rob. For me, there are multiple answers to it as well. If I were to give you the marketing pitch, part of it is I probably think that in 2021 going forward, we need an augmented version of capitalism. I’m not suggesting socialism or any other kind of model that we had. I’m not suggesting that capitalism itself is wrong, but I think that it’s not always perfect. With the notion of life profitability, I am trying to offer entrepreneurs an opportunity to augment that version of capitalism.

I think that’s part of that be the change you want to see in the world spiel to this. That’s what I hoped for to happen after the book. For me personally, I had much closer ties to the concept. You mentioned that I’ve been a successful entrepreneur in the past. What I know about that journey and what probably resonates with many of the Startups for the Rest of Us listeners here is the notion that it’s really, really hard. Building a business is really, really hard. It doesn’t matter how much you learn, it doesn’t matter how much capital you have, experience, all of those things were really hard.

I’ve mentioned this a few times before. In large parts, building my second business was harder than the first. I know that with more, it doesn’t necessarily become easier. In that personal journey, I almost lost all the things that really matter to me in the world. That notion played a big part in me. Essentially sitting down and realizing that, hey, if I don’t change something in my life, in my business, then nothing that matters is going to be left after all this business or entrepreneurial success.

Rob: It’s interesting you say that. I heard you spoke at MicroConf Europe. I think it was 2017 or 2018, and you were talking about your Conversio journey. This was your, basically, second win. You hadn’t sold it yet, but it was a company that was growing. Most of the talk was focused on how bad you felt, that you were burned out, and that you weren’t having fun.

I remember being surprised by that because I was thinking it’s your second time. We’re usually better equipped with money, with resources, with the mental capacity to know what’s gone on, we’re more resilient, and all this stuff. I’m curious, why do you think Conversio was harder for you than the WooCommerce, WooThemes day?

Adii: That’s one of the questions that anyone can ask me about the book and about Conversio that I have great clarity about. The context there is I can’t just add that. To a large extent, Conversio was much easier due to the success I had with WooThemes. Many of the tactical things were easier. The harder parts were what about me? It was the challenges and the issues I ultimately introduced into the greater equation of building this business and the life I was leading.

The way I now understand that—which is very much a hindsight thing—is in the following way, which is I left WooThemes with this notion that I was a one-hit-wonder. I really wanted to challenge myself again because challenges are what fires me. Money itself has never been a big motivator, challenges are. I wanted to challenge myself again and prove that I’m not a one-hit-wonder, and I can actually build another successful business.

Interestingly enough, at least what I now know is I was only trying to prove myself to myself, which is ironic on its own. It’s part of bringing that awareness and what I’ve had to learn. Hopefully, through Conversio, what effectively happened was two things overlaid. These things happened very soon after each other.

The first thing that happened was Conversio got to a point where we were successful. I think we were probably at about $1.5 million ARR, for example, and I thought to myself, hey, you’ve built another significant business at least. It wasn’t the size or scale of WooThemes or WooCommerce, but it was successful in its own right—just about break-even, growing nicely.

At that moment, the goal of being in this business of proving that I wasn’t a one-hit-wonder evaporated. Shortly after that, just a short couple of months after, we hit a rocky patch where we had to go through layoffs and business was not growing as well as we thought it was, loads of context there. In that hard moment, what I realized was I suddenly didn’t have that North Star, that meaning, that purpose in this business anymore because I’ve done that. That’s where that became a grind.

You’re referring to MicroConf (I believe it was) late 2018—if my memory serves me correct—when I gave that talk. That was me going through that almost rejigging process of reframing the context that I was in. Again, 2018 as a whole year—tactically within the business—was all about taking a screwdriver to every single screw and trying to eke out that 0.1-degree turn to make it a better business. It was a hard year, and that was the context for that talk. That’s why the overall […] that I was, this was so much harder than it was before.

Rob: For context, if folks haven’t followed you in the past or didn’t hear episode 467, when I listen to successful entrepreneurs talk about the world, a lot of them have a pretty unique viewpoint. I often think of Jason Fried as a founder/advocate. He’s always advocating for a cause, whether it’s privacy, bootstrappers, or whatever. I’ve heard someone call me a founder/teacher where I’m going to start companies, and I’m always going to be teaching what I’ve learned. I think of you as a founder/philosopher. Frankly, you’re a poet as well. You have a book of poetry folks can buy. What’s that called?

Adii: It’s called Motion.

Rob: We have a copy. Sherry bought it and so I’ve read through it. You are very much into mindfulness, thinking about the self, being aware, and seeking happiness. You’re like a founder’s body with a philosopher’s mind, or maybe it’s a philosopher’s body with a founder’s mind. There’s some merging of these two in a way that, frankly, I don’t have.

A lot of founders, especially maybe more left-brained founders I would say like I am more of an engineer. I can dip my toe into philosophy, I can listen to it, but I can’t write it. I don’t come up with the concepts. That’s how I feel as I read through Life Profitability. There’s a merging of entrepreneurship and philosophy almost.

With that as an intro, can you just explain? The title of the book again is Life Profitability: The New Measure of Entrepreneurial Success. Can you just give folks an idea or an intro of what Life Profitability is because it’s a term that you coined?

Adii: Yeah. By the way, I totally own and I know you have a cooldown period on domains. Totally proud that I actually own lifeprofitability.com as well, which confirms that I’ve coined the term. Jokes aside, the idea of life profitability essentially comes from firstly, this notion of I don’t think we work to live, and neither do we live to work. You mentioned work-life balance earlier, I also don’t believe that can exist when work is always just part of life.

When viewed from that lens, the idea of life profitability is all around. If you’re an entrepreneur, you should build your business in a way that is profitable to your life. That’s where life profitability comes from. That profitability needs to be more than just literally the financial distributions—whether it’s salary or otherwise—that you get from your business. It truly needs to be ingrained in your whole life.

The book goes through what those various parts of life are. I essentially came down—for me at least and what we proposed in the book—is these concentric circles that start with you first, then your immediate family, your team, your community, and only thereafter that the business itself actually becomes almost the container for all these things.

Really looking at all of those kinds of things in detail and saying, how are the things that I’m doing on a daily basis, whether it’s for my business or just a provisional career, how are those things profitable for the things that I truly value in this world? The converse of that, which I think people often don’t recognize, is the cost of doing those things.

Henry Thoreau, the actual philosopher here, has a great quote. I’m totally going to butcher up. He essentially says the cost of anything we do is life. That is the thing that we ultimately give away. Whenever we make a decision to do something, the cost of that decision is life.

Through that lens, augmenting how you would calculate profitability in a business as well but really saying what are the costs of me doing business here, trying to reframe that, and figuring out, not necessarily change that altogether, but make those incremental changes to shift to greater life profitability.

Rob: I’d like to get into a specific example of a decision or decisions you made to move towards life profitability in your own journey. But first, I want to talk about work-life balance and why in your book, you point out that’s not the solution. What you’re talking about life profitability is different than work-life balance. Can you give folks an idea of how that works?

Adii: The simple version there, Rob, is if we propose this idea of work-life balance, we’re essentially saying that work and life are two opposite things that can balance each other out. They’re two nodes on the same spectrum, and for you to have balance, they have these two […] that interplay between those two things.

The reason I don’t think that works is you’re essentially taking two things and you’re saying that they’re completely independent of each other. I think what all people listening to this podcast know is that if you have a crappy day at work, that spills over into your home life, and vice versa, which means that these things are never totally separate.

If they were totally separate, totally independent, then yes, work-life balance is achievable. But because those things always overlap, there’s always some spilling over of things, I don’t think that’s the key there. Which is why with the book, I’m trying to change that perspective, which I said is all around work just being part of life. Life is the ultimate thing that we’re doing here on this planet and work is always just a component thereof versus this totally separate thing from the lives we’re living.

Rob: Got it. Can you give us an example of a choice you made that was basically moving towards this idea of life profitability in your own experience with Conversio?

Adii: I mentioned earlier that 2018, that tough tactical year we had in Conversio where we essentially had to move too fast to profitability pretty quickly and do so in a shoestring budget effectively after the layoffs.

I remember that towards the latter stages of that year, I was ultimately to do two things. One was to repay parts of the initial founder loan that I put into the business, and the other was to essentially declare a small profit-sharing bonus for the team.

Those two things matter for two separate reasons. The team is more obvious and easier to explain, which is all around building a business in a way that doesn’t just support or empower my life profitability as the founder/entrepreneur but also doing that at least in part for my team members. But that repayment of the loan, which seems very converse to this idea of building and reinvesting or investing in a business was crucially important to me because what it did was diversified some of my risk in the business. It reduced a lot of stress that I had.

I think what subsequently happens is an entrepreneur and a founder that’s not stressed, that’s not anxious in their life is ultimately a better entrepreneur and leader within a team as well. That’s just one of those things that comes to mind, Rob. The reason why that example came to mind was all around how it served two separate groups of people—myself, the team. Almost did that in an almost inception-like, meta-like exponential manner as well by helping me be a better, calmer, more peaceful, or more grounded entrepreneur and leader to the team afterward.

Rob: What you’ve described is a decision that a lot of lifestyle entrepreneurs make. I use that term as a positive. I know Silicon Valley venture capitalists say you just have a lifestyle business, it’s unfundable by us. I—of course, being involved with MicroConf, Startups For the Rest of Us for a decade or more—think lifestyle businesses are amazing.

One of the great pieces of that type of business is you’re in control, you make the decisions, and you can pull up profits when you want. You can really drive the business in a way that fits you, but that helps benefit the team and your customers. You can make the “right decision in your opinion” because if you truly haven’t raised investment or have really just raised a small round from people who are willing to go with you on a journey, you have immense control. You can make the decisions that you feel right about and you feel good about.

Is there a difference between the traditional bootstrapped lifestyle business path and what you’re talking about with life profitability?

Adii: No, there is very much alignment there, Rob. The context here is that I am mostly a bootstrapped founder as well. WooThemes is completely bootstrapped, Conversio raised a single round before moving to profitability. To a large extent, this whole idea of being an entrepreneur stems from one’s desire for freedom. Freedom in whatever way you articulate that freedom. Whether it’s the freedom to work in a way you want, work with whom you want, or work in what you want. It stems from that freedom.

There is that self-expression in that, which essentially says you can build the life you want which is where the term lifestyle business comes into play. I’ll build a business to have the lifestyle that I want instead of being in a corporate gig where I can’t control those things.

The only thing that I’m almost trying to emphasize with life profitability is to truly understand what the things are you really want, what the things are you really value, and to not define those things by traditional measures of success.

It’s actually expanding what that success looks like for you and replacing it with this idea of life profitability. The key part for me here is really doubling down on that original starting point, which was all around I’m starting this business because I have a vision of my future that I want to achieve. Which means that my version of what success looks like for me will always be very, very unique.

Compared to other entrepreneurs, there will be many similarities especially if all of us are bootstrapped, for example. But I for example don’t think that the source of capital is the biggest differentiating factor there. I really think that our unique personalities probably change that equation significantly more than the source of capital does.

Rob: Yes. I have had this conversation so many times where we can say bootstrapped and mainly bootstrapped versus venture-funded. You’re right, you can be a bootstrap founder, run yourself into the ground, and work 90-hour weeks. I’ve seen folks raise $20 million, $30 million of venture capital, and work 8-hour days—it happens—and be happy with their business.

Eventually, they have to perform and everything has to go well. But you’re right, the source of capital is really not how we should be defining these things. Unfortunately, we have fallen into a kind of dichotomy there. What I like about what you said about life profits versus lifestyle business is really figuring out what you as an individual value most.

I’ll tell you a short story. As we’re building Drip early days, I wanted it to make $40,000, $50,000, $60,000 a month. I wanted it to be this amazing lifestyle business that threw off a bunch of cash. Pretty soon, we found we were in the midst of a huge shift in email marketing where there were the MailChimps and AWebers. They were less expensive, no automation, no tagging, and then there were these really expensive solutions.

We could fit right there in the middle and be a nice, usable version that had all the automation. We dove headlong into that. It threw us into a really competitive space, and it was harder than I thought it would be. It was a lot harder than I thought it would be, actually. I hadn’t grown a business that grew that fast before, needing to hire, and just the rat race you can get into.

Segments of your book I actually want to read an excerpt from it right here that really captures what I was feeling as we were growing Drip and as I started feeling a little bit out of control. You say, “Life Profits. In a nutshell, realizing life profits means more lived abundance for every person the business touches. This is the vision, the mission, the strategy, and its outcome. A richer, more colorful life that is so much wider and deeper than a business will look different to every entrepreneur since it’s based on what you value. Making more space for your life when you are used to feeling obligated,” it’s a big word there—obligated—because I felt that every day.

“Making more space for your life when you are used to feeling obligated to give your business your all might feel scary and daunting, but you’re not going to make a drastic change to the way things are right now. It’s important not to do a 180-degree turn here, but instead, begin growing life profits by shifting the way you do things in incremental bits. Within business, there are rules and ethics that must be upheld, but you can play the game in a changed way by differently orienting yourself to it.”

That’s a big gamble and it could be risky. But if you know what you value and you know the road you don’t want to go down, it’s almost a road to unhappiness if you let yourself get pulled. This comes back to what you said earlier, which is don’t value your success by the standard metrics, by what everyone else thinks is a success.

Adii: Exactly right. What the irony of all of that as well, many of us—I definitely have my days where I still feel like an impostor. That impostor syndrome, where it stems from is entrepreneurs archetype lends itself to that because we’re always comparing ourselves to other entrepreneurs and saying, okay, so my business is actually doing okay. Okay, I’m not an impostor.

In saying that, you’re an impostor in your own life because you’re probably neglecting those other life costs that are coming at the price of being this impostor but at least matching up to these other entrepreneurs. That’s the hardest part to figure out for every entrepreneur here is who you really are and what that means for your business. Hence, why I do not propose that anyone makes a 180-degree turn here.

If you’ve got an existing business, dream, or goal, don’t read the book and shift completely here, but really start incrementally thinking about how you can shift that. For anyone reading the book, I purposely went into writing the book. I didn’t want to write here’s 10 steps to life profitability because I don’t believe that those 10 steps actually exist. All of us are so unique, and part of this journey is for us to figure this out ourselves.

The book includes many ideas from my own experience, suggestions, et cetera, for you to help illuminate what those things could be, but I honestly don’t believe that there’s a single blueprint. I also don’t believe, by the way, that there’s a single blueprint for being successful in business, but every year, 100 million copies or whatever of business books sell, proposing that they’ve got the answer for you. Life profitability I don’t think is that because it’s super personalized and unique to every single individual that wants to grow down their path.

Rob: Something that I’ve mentally struggled with over the past few years—obviously, I sold the Drip and moved on—is the Drip years, some of them are great, and then there were times that were just really tough, much like you and pretty much all the founders we know who have done these larger companies and had exits. There are some times that are very, very difficult and the journey is challenging. But for me, it was absolutely worth it. I don’t regret making the decisions that we made to enter the really competitive space, to go after a faster-growing market, to grow the business and to hire. All that, I have no regrets. It turned out great.

What I regret was that my mindset was not right. My mental game—like I often say, more than half of being an entrepreneur is managing your own psychology. I did a poor job of that at times, that’s what I regret. That’s where your book comes in. It’s a level set, it’s a looking internally, it’s saying what is truly important to you, how to pull that out. You actually have worksheets and exercises in the back almost like an appendix that’s basically here are the steps to try to pull these things out of you so that you do know what’s important and that you’re grounded as you do this journey.

The journey is going to be hard no matter what unless you get really, really lucky. There’s just going to be trying times, there’s going to be things like lawsuits, all your servers get hacked, or Russian spammers get in your systems and send things out. Things are going to happen, it’s going to be stressful. At a certain point, you’re going to say, well, I guess we had a good run. This whole thing’s about to collapse, and it’s going to be very, very stressful.

Maybe you almost ran out of cash. I’ve almost done that, you’ve almost done that. All this stuff is going to happen. The difference I see in founders who keep their wits about them, it’s not that bad things don’t happen. It’s that they have that inner groundedness of really knowing what they’re about, knowing where they’re headed with their business and the confidence that this is just the way it goes.

That’s where I feel like your book comes in. It’s a way to find that groundedness for yourself. As you go about this journey, you almost have that armor to these events that are going to happen to you.

Adii: That’s definitely my hope here, Rob. I’m definitely a pro-entrepreneur. I do not want to discourage anyone from being an entrepreneur. I really just want to help them figure out what entrepreneurship means for them.

Two things that stood out in what you said there. The first is yes, we’re grounded when we understand our meaning and when we can pursue our meaning. In those hard times, when we know what our meaning is, our purpose here, it’s a lot easier to never get those hard times. The best way I ever understood that was Dr. Dina Glouberman, she wrote a book. The book is called The Joy of Burnout. She defines burnout as the thing that happens when meaning drains out of the structures that you’ve invested a lot in.

That’s what sometimes happens in business is this thing that we invest so much in and then suddenly we lose meaning. When we lose that meaning, that’s when it becomes harder than it probably needs to be. That speaks your point of that mindset—managing your psychology as an entrepreneur. That’s the first part of it.

The second part that I will just leave with listeners here is that when I have a bad day as an entrepreneur or a bad week where I struggle with my mindset, with the mental or emotional part of being an entrepreneur, what happens after that? Where am I taking that energy elsewhere in my life and probably affecting other things? Whether it’s the people I love most around me. Maybe more irritated or impatient than I normally am with them, or short. Or am I neglecting my sleep, my health in other ways, exercise, or connection with friends? Whatever the case is.

We’re not aware of those things. Even a few words would navigate your personal experience. There are probably others around us or other things, those life costs that accumulate as well if we don’t manage to essentially build a business, run a business, be an entrepreneur in a way that is life profitable.

Rob: You’ve been through two challenging journeys, WooThemes-WooCommerce and Conversio. Something that I told my wife, Sherry, as Drip was—I don’t even remember if it was winding up. It was when we’d hit really hard times. I told her, I’m never doing this again. I’m not starting another SaaS app. This is less fun than I want it to be now. In retrospect, it wasn’t that it was less fun. It was that I didn’t have my mindset together to really play it out the way I should have.

All that said, I moved on from Drip, took six months off, and then started TinySeed. There was a lot of thinking that goes into that. Interested in sharing that with the listeners here, but what I want to hear from you is you did go and start another SaaS app. It’s called Cogsy. The H1 is “Never run out of stock for your best-selling products ever again,” and it’s aimed at ecommerce merchants. You’ve obviously had experience and success in the ecommerce space, both with WooCommerce and with Conversio.

I’d love to hear your thought process post-Conversio as you’re thinking, okay, here I am. I’ve had exits. You can work on whatever you want to work on. You could not start anything. You told me offline you could become a coach, you could become an author/speaker, you could be a full-time investor. You can do what you want. What was that process like for you to say who am I, what do I really value, and I really want to get back in the trenches?

Adii: Firstly, my wife Jeanne has always known that I will probably be doing this again and again. She and I were sitting earlier having a glass of wine and she told me she knows that Cogsy is not the last one. That knowledge is part of our everyday life, which I am an entrepreneur and I will do these things.

I told Mark and Magnus, my co-founders in Woo the other day as well. They chuckled at the fact that I’m doing this again and they pretty much said the same thing which is I’m crazy. When they said that, my answer was very simple—I love the work. It doesn’t matter how hard it is sometimes. I went to great detail earlier in our conversation explaining how tough Conversio was at stages, and how a big part of that hardship essentially created this book as well.

For me, it really came down to knowing bare parts of myself. The most prominent part of why I decided to work on Cogsy was around I like the starting phases of things, and I like holding a team. I really miss a team. I miss post-acquisition after leaving Campaign Monitor. The thing I missed most is my team. Those things are important parts of why I want to do this.

Again, the other part of this is I hope that there is a part of this future with Cogsy that challenges my own life profitability but also allows me to continuously evolve. Because I haven’t totally figured it out. Even as the author of the book, the guy that came up with this term, I haven’t figured it out.

For me, Cogsy is that playground or blank canvass where I can take everything I’ve learned, everything that I understand about myself, just reapply that in a new way, and ultimately continue my evolution and my journey.

Rob: From my end, leaving Drip in 2018, and I took six months off. I was looking around for something to keep me busy. I was hacking PHP on the weekends and tying into crypto APIs just to fool around with stuff. I had a great time doing it, but I almost went down this path of basically walking away from everything—from the podcast, MicroConf, and whatever else. All the brands, all the assets, the world of startups and entrepreneurship.

I thought just a brief moment, what if? Mental exercise, thought experiment, what would it look like for me to just exist in a completely different space? I looked around and I realized, I don’t want to build stuff from scratch because it just takes too long. I have the means, I’m going to acquire something.

I actually got in a conversation with the owner of the second-largest website for tabletop games. I was saying, hey, I think I want to buy this site, talk to me about revenue. We started talking about his numbers and what it looks like to run the thing.

Getting into the tip of a gaming space would be fun because it’s a hobby. I do it with my kids and I really enjoy it, but what I realized within even weeks of thinking about this avenue is that I would be leaving behind a huge piece of myself. Almost something that I’d taken for granted because I’ve done it for so long.

I’ve been thinking about it for 20 or 30 years. I’ve always been enamored with entrepreneurship. I’ve been writing about it for 15. I’ve been podcasting about it for 10. This is the thread of my life, this is the through-line. I realized I value freedom, purpose, and relationships. You hear me talk about that a lot. I would have left behind a huge part of my purpose and a part of my legacy if I were to do that—and a part of freedom, purpose, and relationships. I love having relationships with founders. They’re just super interesting people. I find them fascinating.

It was a thought that for a moment like, oh, but I could just start over, and wouldn’t it be easy? But I had to dive into myself. I had to be mindful, I had to know myself, know who I really was to say this—Startups for the Rest of Us, MicroConf, this community, this ecosystem, it was the moment that I doubled down on it and said, I’m going to be doing this for the rest of my life.

It’s one of those things in my life that I don’t think will ever go away now that I’ve had the moment to reassess and think. For me, what is life profitability right now? It’s not abandoning everything I put into the world so far, not that it wouldn’t live on or whatever. I think there are such a big point and such a big part to asking yourself, what is it that I really want? You wanted to do another SaaS app, and that’s the path for a lot of founders.

You see Ruben Gomez is on his second, you see David Cancel has done five of them. That’s a path for some, and others go more of the teaching route or the author route. As you said, you can be a keynote speaker, some people become investors, some people gather folks and build communities. Figuring that out about yourself is the point of everything we’re talking about here.

Adii: Exactly, Rob. In anyone’s next steps here—in my next steps, there’s only going to be a single common denominator, and that’s going to be me. I mean, businesses can change, ideas can change, people get divorced, families change, people move countries. All these things can change, but there’s going to be a single person on that journey that’s going to be the only present and that’s going to be yourself. That’s why it’s important to really know who you are because that’s how you can constantly adjust to the next steps you’re taking.

For me, maybe Cogsy is my last SaaS app or last software business that I build myself. Maybe, there’s going to be a new chapter in the future. The idea of life probability acknowledges that whereas life naturally evolves. That’s the way the universe has always worked, and the key is just to stay in that mindfulness. Stay aware of when those energies change, when the things you want change, when the definition of your life profit changes, and then readjusting the next steps that you take from there.

Rob: If you folks want to check out the book, they can head to adii.me/book. It is $0.99 this week on Kindle and you have physical copies as well. As I said earlier, it will be out in audio in about six weeks.

If folks want to keep up with what you’re up to, you’re Adii on Twitter. It’s a great four-letter Twitter handle there. As we were chatting, when you said lifeprofitability.com, I just typed it into the browser just for kicks. You have a podcast. I didn’t know you had a podcast. We can plug it here, Life Profitability podcast. Is this the first podcast that you’ve hosted?

Adii: Yes, it is.

Rob: How are you enjoying it?

Adii: I have my good days and I have bad days, Rob.

Rob: Very cool. Folks, that’s where to find Adii. Thanks so much for coming to the show, sir.

Adii: Thanks for having me, Rob.

Rob: Thanks again to Adii for coming back on the show. It’s always a pleasure talking with Adii. I’ve known him for many years and I have a lot of respect for what he’s built. Thank you for joining me once again this week. I look forward to coming at you in your earbuds again next Tuesday morning.

Rob: You guessed it, it’s another episode of Startups for the Rest of Us. This is episode 532 where I had the pleasure of sitting down with someone I’ve admired for a long time. His name is John Warrillow and he has written a couple of books—now three books—on selling companies. It’s not SaaS or startup specific, but I really respect John’s experience building and selling his own companies. His first book, Built to Sell, had a pretty big impact on me as we were going through the experience of selling Drip.

I was honored to get him on the podcast today. He is a big name in the M&A space, and his book was just released last week. It’s called The Art of Selling Your Business. We effectively just talked through a few pieces of advice John has, and I asked him questions about all types of stuff. He has such a myriad of experiences. It’s a really good conversation even if you’re not selling today. The thing I like too is he’s not selling services. He’s not saying you should sell your business or here’s how to do it and now pay me to broker you. He’s not a broker. I just really appreciate that aspect of what John does.

Before we dive into that, we have a new podcast review from Tax Podcast Fan in the US, and they say five stars, “The OG SaaS podcast. I’ve been listening to this podcast off and on for at least five years. So much actionable wisdom.” Thank you so much. We have 875 worldwide ratings, not all have reviews but I would love to get to 1000 ratings. If you haven’t clicked five stars on the Apple Podcast or whatever podcast you use, I would really appreciate it.

If you haven’t heard, TinySeed batch three applications are open. They’re open for about another week from today from when this episode goes live. If you run a SaaS company, bootstrap SasS, that’s at least doing $500 a month in MRR and up, you should apply. If you’re interested in getting mentorship, advice, and being in a batch experience where you’re in the trenches with other founders, as well as the funding we offer and unfettered access to myself, Einar Vollset, and other knowledgeable SaaS folks, I would encourage you to apply. Head to tinyseed.com/apply.

Also, if you feel like maybe you’re not ready yet, we are going to be running another application process later this year. We raised TinySeed’s second fund, and it allows us to start funding more companies because that’s been the issue to date. We get more quality applications for good businesses that we’ve been able to fund based on the first round of funding we raised. Tinyseed.com if you’re interested. With that, let’s talk about The Art of Selling Your Business.

John Warrillow, thank you so much for joining me on the show.

John: Good to be here.

Rob: It is a pleasure to have you, sir. I think I mentioned this to you. I came on your show Built to Sell Radio a few months back. I think I mentioned it on there that your first book about selling companies called Built to Sell: Creating a Business That Can Thrive Without You was something that I read multiple times as I was going through the exit process with Drip.

Then I stumbled upon Built to Sell Radio and I thought is this going to be the typical kind of fluff around selling a company where they don’t dig into real stories? I was blown away by how much information that you’re able to convey and how helpful your examples are on Built to Sell Radio because they’re real companies. You interviewed, in my memory, services company and there are some tech companies, but there’s an awful lot of physical products.

It just feels like it’s not these Silicon Valley—I sold Instagram for a billion dollars in a week—stories. What I see is the more true look at what it’s like to sell a company. Do you hear that a lot?

John: No, but it means a ton for me to hear that from you. You’re absolutely right. We try to interview the real entrepreneur. Our sweet spot is a deal that’s $1 million to $20 million of value, they’re life-changing events for the entrepreneurs who experience them, and they will never show up in the headline. That’s the sweet spot for us.

We try to unpack those. We try to understand the pitfalls to avoid, the mistakes to avoid, and some of those successes. You are an incredible example of that when we had you on. It was one of the best-rated episodes of all time. I’m grateful for you to be on our show too.

Rob: Absolutely. As we are recording this, you’re launching your book this week. This will go live next Tuesday. Last week, in essence, your third book in your trilogy about selling your company is available now. Honestly, I have a preview copy. I’m going to buy the audible. I got an audible alert today. I’m going to go buy that version, but folks, seriously, you can have a Kindle version for $10. You can go to Amazon, any local bookseller, and Audible for an audiobook if you want to check it out.

The book is titled The Art of Selling Your Business, subtitled Winning Strategies and Secret Hacks for Exiting on Top. The way you framed it to me—I hadn’t realized there was a trilogy. I had read Built to Sell, as I said, and I had noticed you wrote a book called The Automatic Customer, which is about getting subscription revenue.

I never read that because we run SaaS companies and that’s built-in for us. I didn’t realize that you were then going to make a capstone, The Art of Selling your Business. Could you talk through a little bit? I’m guessing a good chunk of the audience has heard of or has read Built to Sell because it’s popular in our circles. How is The Art of Selling your Business different from maybe the other Built to Sell or the other two?

John: Yeah, sure. Built to Sell is how do you build a valuable company structuring so that is not dependent on you personally. The Automatic Customer is all about recurring revenue. You’re right, for a SaaS company, that’s old news, but for a lot of businesses, that’s a new way to think. There’s nothing faster that will take you from a multiple […] to a multiple of revenue when you go to sell your capital and then have recurring revenue, which is the subject around The Automatic of Customers.

The thing that is really interesting is I often—not these days given the pandemic—get asked to speak to entrepreneurs. When I talk about either The Automatic Customer or Built to Sell, oftentimes, the questions the audience has at the end of my speech have nothing to do with my content. They’ll be like, yeah that was great. I really appreciate recurring revenue itself, but what I really want to know is how do I avoid an earnout or that was great but what’s an escrow?

I realized that there’s a real appetite among entrepreneurs to know some of the knots and bolts, the best practices, the hacks for selling a company—the actual transaction itself. That was the idea. It’s really build, accelerate, and then this last book, The Art of Selling Your Business but harvesting the value you created. That’s the back story.

Rob: Very cool. I think one of the reasons I was drawn to Built to Sell, originally—and your writing in general—is not only was it referred to me by multiple people, but there are so many books written by people who have never done it. That’s okay, but it’s more of a journalistic approach.

Prior to writing your books, you started and exited four companies including selling one to a public company. Then you went and wrote your book, you started your podcast, now you’ve interviewed hundreds of founders in-depth about real exits, as we’ll continue to say—the $1 million to $20 million, which is a vast majority of what companies will sell for, I’m guessing on this earth. It’s like the $1 billion exits are just the outliers.

Listeners, if you’re listening to this and you’ve never heard of John or his books, he is both a practitioner and now someone who has a broad range of knowledge around this—obviously having written three books and done these interviews.

I think I want to start with a question of, if a founder is listening to this and they’re thinking, should I sell my business or when is a good time versus a bad time to sell? How can a business owner know or think about when is the right time to sell their company?

John: Right now, a lot of people are asking that question because the pandemic has caused a lot of founders to suffer. In the SaaS world, it’s a bit different. Technology, in many cases, is swamped through the pandemic relatively unscathed. But the old school economy has been crashing, in particular, a lot of service businesses. That’s caused a lot of business owners to want to sell, they want to get out. Of course, the business itself is not always in great shape.

The counterbalancing force, I think, right now is that interest rates are so low. The biggest majority of deals that get done in this space we are talking about today are funded by private equity groups. They run on basically good debt. They run on good debt terms. When a private equity group can get debt cheap, it accelerates their appetite to buy businesses.

Right now is a funny time because, on one hand, you think it’s a terrible time to sell your business. On the other hand, given low-interest rates, it’s actually a very good time. You’re seeing M&A markets reflect that. I think it’s a unique time in history too to be thinking about this topic.

Rob: In the conversations I have both with founders I’m invested in and listeners of this podcast, MicroConf attendees, and such, I have heard that there are definitely a lot of transactions happening. Maybe, to your point earlier, SaaS was lucky because SaaS is still growing across the board, and in some cases has been accelerated by the pandemic.

John: Not to state the obvious, SaaS company, you can still use it at home. It’s a big deal. As good as it is right now for a SaaS company, I think we run the risk of writing it over the top. Have you ever had Rand Fishkin on your show?

Rob: I haven’t yet but Rand is a friend of mine. He’s an investor and mentor in TinySeed. He was going to speak at MicroConf last year, but obviously, we postponed it. I’m invested in his company, so yes, I know Rand very well. Love his book.

John: Yeah, you would have read Lost and Founder. It’s a great book for any SaaS founder. It is required reading. I had Rand on the show, and I had him tell the story of when Brian Halligan from HubSpot came and tried to acquire SEOmoz. Have you ever heard of this story?

Rob: I have. You want to tell it here because it’s really fascinating.

John: Yeah, because it speaks to this idea of writing it over the top and when’s the right time to sell. Halligan comes to Rand. Rand has built SEOmoz software, SaaS business—something around $5.4 million in ARR, annual recurring revenue. Halligan says we want to buy your business. We’re going to give you an offer of $25 million of cash and HubSpot stock. Rand, in his mind, he’s heard this number four times top-line revenue, and he’s on the way from five to what he thinks that year is going to be $10 million in annual recurring revenue.

He’s like four times ten is 40, and here’s Halligan’s offering me 25. Long story short, Rand turns him down and instead takes a venture capital round and the VCs get him to launch a bunch of products in unrelated categories. Long story short, those products failed. Rand actually goes through a period of depression where he’s actually removed by the board by the venture capitalist. The […] venture capitalists often invest is they used preferred shares so they’re guaranteed preferred return.

I interviewed him after this all went down and I said, what’s your stake in Moz worth these days? He’s like, I don’t think it’s actually worth anything because once the VCs get their preferred return, there’s nothing really left for us. I said, wow. He’s like, what’s worse is I’ve got to spend the bulk of the rest of my assets—the cash that I have—on elder care for my grandparents. I said, out of interest, what would that offer from Halligan now be worth given the increase in HubSpot stock? He said it would be worth close to $200 million.

Rob: Oh my goodness.

John: Anyway, I don’t mean to be the bearer of bad news, but it’s an indication or an illustration of writing it over the top when a glib answer to the question when’s the best time to sell? It’s when somebody makes you an offer because, at that point, you’ve got negotiating leverage. You’re not courting them, they’re courting you. You can use that to your advantage, but there is the risk of writing it over the top meaning not selling when someone offers you a reasonable good sum for your company.

Rob: That was definitely something I was concerned about back when we were running Drip and building it. It was growing quickly but there were a lot of competitors. The stock market valuations of public SaaS companies were climbing, climbing, climbing and it was about seven times revenue. Then it got cut in half in January of 2016, which is right around the time there were a lot of people sniffing around at that point.

It was down to 3.2 or something of revenue, and suddenly that became a multiple that potential acquirers were going to base their offers on. Not to say you wouldn’t negotiate against that, but that was an instant justification of SaaS isn’t worth this much anymore. I remember thinking uh-oh, did we ride this over the top? We’ve had this sustained growth of the stock market and of the economy. At that point, it was from basically 2009-2016, seven years. It starts to feel a little long. We’re even further into that now.

I know that I’ve predicted five of the last two recessions, but I do as a startup founder. If you get that offer, it’s tough to walk away. If there’s an offer for enough money, you never have to work again, you really have to ask yourself do I want to walk away from that? And at the possibility of doubling that in the next year or doubling them in the next two or three years because there’s just always a risk.

I don’t think you and I want to be the sky’s falling about it. Anytime an offer comes by, you should sell blah, blah, blah. But what we see in the movies or what we read on TechCrunch of it sounds like every company gets an offer every few months, and that’s not the reality that I’ve experienced. Would you agree with that?

John: I agree 100%. You’ll get those fishing letters from brokers who say, I’ve got a buyer that wants to buy your business. Those are usually not true or disingenuous. You’ll also get a lot of fishing letters from private equity groups and those are sourcing agents. They’re just trying to get a proprietary deal. A prop deal is where the acquirer has proprietary, unique, or exclusive access to buying your business. It’s a recipe for making sure you sell your business for much less than it’s worth. They are bad actors out there who are trying to, essentially, prey on your naiveté or your ignorance about the process. You will get those letters. Those are different from a genuine, large, recognizable company that comes to you and says look, we’ve seen what you are doing and we want to buy your business.

In your case, Leadpages came to you. That’s a very different conversation than a chop shop that’s just basically cranking out letters that basically swipe out the first name of the person. You can quickly discern those by asking and responding thanks for your interest. Tell me, what specifically about our business did you find most compelling. Most of the time they’ll stutter because they have no clue what your business does.

Rob: It’s a mass cold email. I think that’s a good point to raise, and piggybacking on that, let’s say I’m a startup founder. I’m a SaaS founder. I’m doing $1 million, $2 million, $5 million and I do get an email from a company that—whether it’s private equity or whether it’s a strategic, potential acquirer—are probably much bigger than me. They probably have done this a lot more times than me, and they, in my mind, have more leverage. What’s the best way that you would advise a startup founder to try to gain leverage when negotiating with a player that is so much larger or more experienced than they are?

John: Piggybacking on the last comment, I would definitely say getting multiple offers gives you that leverage. I’m reminded of James Murphy, I interviewed him for the show. He developed something called Viviscal, which is a hair loss treatment for women. It turns out, women lose their hair for different reasons than guys do. He developed this hair loss treatment. He became this huge success. Got Reese Witherspoon to endorse it. Got it to $50 million in revenue, not totally ARR but annual revenue, and he went through the process.

He got 12 bidders for the company, and the best offer at that time was I think €103 million, they’re based in Ireland. The 12 offers were perfect because that gave him great leverage. He played one off the other, threw a whole process, and got down to two offers both of which were then increased their offer to €130 million. And then of course he went through a second round of playing one off of the other and ultimately got €150 million from C&D, the ones who own Trojan condoms along with a bunch of consumer packaged goods.

The moral of the story is he never would have been able to gin up the offers that much had he not started with 12 really good ones. He’s a tiny company relative to C&D, but it was the recipe he needed to punch above his weight.

Rob: How does one do that? I’m imagining you get this email and it’s like I guess I should start a conversation. Are you willing to sell? And typically, what I did—and the advice I’ve heard—is you play hard to get. Of course, you can always reply with everybody has a price type thing but you don’t want to act too eager like I’m really looking forward to it. What is your first response to an email like this as a founder?

John: To an email from a potential acquirer? Like legitimate you vetted that you think are real?

Rob: Like you recognize the name like Facebook. Facebook Corp Dev emails me and says, hey we’re looking for a strategic acquisition in your space. I know they would never do that upfront, and there’s a bunch of code words that they use about partnerships. But when you get to that point, how do you interact with that from the start to try to balance hard to get but also wanting the process to continue with the conversation.

John: I think there’s no harm in having that conversation with a strategic acquirer, and I think going into that, what you’re going to want to do is arm yourself with an entire bucket full of what questions. What questions, of course, are open-ended questions that elicit the creativity of the person you’re asking the question of.

If I was going to a meeting with Facebook Cooperative Development, I would have 10 or 20 questions that start with things like what was it that you found in my company that you were interested in? What do you think the strategic fit is? What do you think some of the barriers would be?

Basically, what you’re trying to do is dominate the conversation. You’re trying to get them talking 99% of the time. The reason you use what questions is they are open-ended and force an answer, and you keep control. Just like a good salesperson in a consultative selling context would never let the prospect take control of the conversation, equally, you never let the cooperative development person take control.

You want to be on the offensive. When I say offensive, I’m not talking about you talking. I’m saying you pushing them to keep talking. That’s the way you’re going to take much more information out of them that you’re going to give to them. The idea of getting suckered into (if you will) a proprietary deal or a prop deal—which is what these strategics call it when you start negotiating with them independently—means you’re going to give up a lot of negotiating leverage.

I think it’s okay to have that conversation. You just don’t want to give up too much information. Information in an M&A process is valuable. I’ve got a crude analogy in the book, it’s like a striptease. I know it’s terribly crude and not very politically correct, but in essence, the selling of your business is somewhat like a striptease. Where the information about your company—your ARR, your net churn rate, your whatever—that’s all your clothing. You want to leave it on but undress in a very strategic tantalizing cadence, which is designed to maximize your attractiveness in the eyes of an acquirer.

It’s all done very deliberately. I had someone ask me recently. Someone’s looking at acquiring our business, should I share my QuickBooks login information with them? And my answer was, no, that’s a little premature. Again, information about your business is very precious. It’s to be doled out or dripped out (to use your word) very slowly and deliberately.

Rob: Yup. And get an NDA before you give MRR. That’s always my typical advice to founders. Why would I give my revenue to someone without having some type of NDA signed?

John: An NDA is going to be a good proxy for interest because acquirers don’t like signing NDAs because it exposes them to liability. If you’ve got a tire kicker, someone who’s just sniffing around your company to get competitive information, they’re unlikely to want to sign an NDA. Whereas if you got someone genuinely interested, they’ll sign an NDA.

Rob: You mentioned earlier a proprietary process where basically you don’t have other bidders. You don’t have a competitive bidding war in essence that you set up. I know that there are folks who run these processes. My co-founder with TinySeed founded a company called Discretion Capital, and it does sell-side processes for SaaS companies. They’ll contact a bunch of private equity, they’ll contact a slew of strategics, and they run that process to create a bidding war.

When you said that the guy (I forgot his name) who’s selling earlier had a dozen offers, that is crazy. That’s amazing to have a dozen offers. Is that what he did? Did he run a process himself? Did he get help to run a process? How does that usually look like? Because it sounds, for me, I’m not big into spreadsheets, the MBA stuff. I’m a startup founder who’s building a business. It sounds complicated and, frankly, a little scary to me. How does that work out?

John: Dan Sullivan, the guy who […], talks about these things being who problems not how problems. What I mean by that and what Dan means by that is that these things—finding multiple bidders for your company—is something that we as a founder think is our job and actually, it’s not our job. It’s an M&A professional’s job to find and acquire for your company. That’s what they do.

Instead of trying to figure out how to do it yourself, I would—in all cases—hire an M&A professional. That’s not what I do for a living, so I say that without trying to sound you can’t hire me to do that. I’m not trying to make a commercial for me. But I think they are worth their weight. They’re going to create competitive tension for your deal.

I think the only exception to that, I interviewed a guy—Peter Kelley—and he built the SaaS company for online auctions of used cars. It’s not a sexy business, but it’s basically an auto trader for used cars. Where if you’re a car dealer, you can buy your inventory on this website. The competitors in that space, there are three giant, old school auctioneers that own that space. They are old school. The big car goes on the conveyor belt and the used car dealers sit there with a pencil and paper and write down the specs and make an offer. It couldn’t be more old school.

All three of these giant auctioneers had approached Peter about buying his company. Peter, for a variety of reasons, decided it was time to sell. In that case, he just went all three and said, okay, you’ve expressed interest. Make your best offer. He knew who they were. He did not want to run an auction because he was afraid that if he told BMW and Ford about his business model, they would create competitive auctions. He wanted to keep it very, very close to these three companies. He was very sure they already wanted to make an offer.

That’s a fairly unusual circumstance. In that case, you might run your own process. But again, in almost all other cases, I think an M&A professional is going to really pay for themselves by creating this competitive tension.

Rob: I would agree. I think that’s a mistake that a lot of founders make, myself included, of we start our company and you’re doing everything. You can learn things quickly and you feel like you’re doing really good at learning and picking up new skills. This is a skill that is not something you can learn easily.

In fact—I’ve said this many times—when we sold Drip, one of the first things I did as it got serious was to hire representation, essentially. A broker who acted as an investment banker, an adviser on our side because he had done dozens and dozens of deals—tens of millions, hundreds of millions—and just knew what was standard and knew when to talk me off the ledge. It’s a very emotional process, as a lot of people talk about. That is one thing.

Same thing with me. I’m not selling anything either. I’m not a broker. It doesn’t matter to me if folks hire a broker or an adviser to do this. But I think it’s as you said, worthy of gold, not only for the advice that you get but for the mental side of things. The reassurance that I’m at least going about this. It’s like would you sign the contract without a lawyer reviewing it? You’re going to hire a lawyer to do stuff. Why would you construct a deal without someone on your side who really knows how to construct deals well?

John: Yeah. I think you’re hitting on it right with there’s a very practical reason. This is what they do, this is their job. There’s also that emotional reason where they act as that foil. Think about you pounding your fist on the table asking for an extra half-turn multiple extra whatever. The next day, you’re reporting to that individual. You burnt all that relationship capital being just a jackass in the negotiation and now you’ve got to sum up, put your tail between your legs, and say, please, can I have some more budget to do X, Y, or Z?

I think you want to insulate yourself. The good broker can play both good and bad cop, by the way. They can play bad cop. They can insulate you and they can pound their fist. They can also do the opposite. They could be the good cop. When you’re pounding your fist and frustrated with something, they can communicate that frustration but in a much softer way to the other side.

When we’re recording this, I think today Rob—by the time it airs, it’ll be a couple of days ago—is the 12-year anniversary of Sully, if I’ve got it right, landing the plane on the Hudson River. Do you remember that?

Rob: Yeah, I do.

John: I think it’s the anniversary, and I think it’s the perfect analogy for a SaaS founder selling their company. Sully had done literally everything there was to do in an airplane, Sully had done in his 40-year career. He’d flown the first seat, left seat, right seat. He’d gone through terrible turbulence. He’d done everything. He was, in fact, the trainer who trained other younger pilots. He had never in his 40-year career had the opportunity to land a plane on the Hudson River. One-shot, huge stakes.

The same is true for a lot of entrepreneurs, right? We’ve been running our company for, in many cases, decades. We could talk all day long about marketing funnels, hiring employees, and NDAs. But when it comes to the mechanics of selling, it’s just not something you practice every day.

Rob: Yeah, indeed. You may do it once or twice in your life, but there are people who’ve done it 20, 30, 40 times. If I have a marketing campaign, I buy some google AdWords, and I accidentally leave it on or I get low clickthrough rates, I might burn tens of thousands of dollars, depending on the scale. If you sell your company poorly and you don’t negotiate for things that maybe you should, you can leave literally millions of dollars on the table. That’s why this is important.

John: I interviewed a guy, Kris Jones, have you ever heard Kris in the show? He ran an affiliate marketing program called Pepperjam. Do you know Kris?

Rob: I haven’t heard of him.

John: Good guy, and I interviewed him on my show about this idea of leaving money on the table. He gets a call from my Michael Rubin who was the Founder of GSI, sold to PayPal—a huge, multi, multi-million dollar deal. Michael Rubin calls up Kris and says, come down and see me. I’m intrigued by this company, Pepperjam. What are you guys doing?

Kris goes down and he’s expecting a one-on-one meeting with Michael. Instead, he walks in on Michael’s office and there are his chief financial officer and his chief counsel flanking him. Without even exchanging, hi, how are you? Michael says to Kris, what do you want for Pepperjam? Kris is like, I was expecting a conversation here. Michael repeated. He’s like, what do you want for your company?

Kris blurted out a number, feeling on the spot. Rubin turned to his chief counsel and his CFO and said okay, I think we can get a deal done. What he was communicating to his lieutenants was, don’t pay a penny more than the number Kris just said. Kris, upon reflecting after being put on the spot, he says, I probably should’ve answered that differently because I put a ceiling on which I’m never going to sell beyond. It’s just one of the mistakes we make when acquirers approach us and say what do you want for it? We’re under no requirement to answer that question. In fact, I think answering it is usually a mistake.

Rob: Right. That’s good advice. There’s something else in your book that I’m really intrigued by. I like mental farmworks, I like rules of thumb, and I feel like this 5-20 rule is an interesting rule of thumb and I never heard it anywhere else. Do you want to tell people what that is?

John: Simply put, the 5-20 rule means that a company that is going to acquire your business is likely going to be between 5 and 20 times the size of your company. Now, that’s not always going to be the case. Clearly, Google makes acquihires all the time, and they’re thousands of times more. But it’s a rule of thumb, and it means that the most likely acquire for the companies, I think in our community—and I say that your audience if you will—they’re likely not going to be Google, Tesla, and Facebook. It just doesn’t move the needle for them.

But most likely to get an offer from a private equity group. Someone rolling up SaaS companies together because they’re generally in that space, and you’re going to be a material acquisition for them. But it’s also not so big an acquisition that it’s going to put their company out of business. As you look out on the landscape and say, who’s most likely to buy my business? You might throw Google, Tesla, and Apple on your list. But realistically, it’s probably someone slightly smaller, again, between 5 and 20 times the size of your company.

Rob: Nice. I like that. I think it makes sense. What you said, use the phrase acquihire and most folks have heard that. But that’s different than what we’re talking about. We’re talking about selling your company and getting a really great multiple on revenue. That’s to strategic or private equity, and there’s a whole process that goes on there.

Acquihire is when there’s a really small team—oftentimes just the founders—like you said, Google or Facebook comes and says, we like the tech you build. We’re probably going to kill the tech, we just want you to come work for us. They give, typically, it’s a lot of stock. You might get a half-million or a couple of million dollars in public company stock. Is that how you describe an acquihire as well?

John: That’s exactly right. Really, they’re BATNA, Best Alternative To a Negotiated Agreement—in other words, their plan B—is they’re going to hire a recruiter from […] or some fancy recruiting house and they’re going to go hire for your people. They’re just doing the math and say, okay, to get a CEO, I got to hire a recruiter, a head hunter, and it’s going to cost me $100,000. And then I got some VPs, that’s going to cost me $80,000 each. It’s $600,000. Give them some stocks and yeah, you’re right. Kill the tech, we just want people. That’s an acquihire.

Rob: I want to ask you if there are any—evil tricks is maybe a strong word—worst practices like a Fortune 500 or private equity group might use to prey on a more inexperienced founder?

John: There are tons of them, that’s why I dedicated a whole section of the book to the things that acquirers do that you need to look out for. I think probably the most damaging is something called re-trading where you agree to a price for your company at a letter of intent stage. When you sign a letter of intent, you’ve got to sign a no-shop clause, meaning you’re not going to continue to negotiate with anybody else—like getting engaged, you agree not to see other people.

At that point, the leverage in the deal goes from you as the seller having most of the negotiating leverage to now with all in the hands of the buyer and they know that. Re-trading happens when they use that leverage to manufacture reasons to lower the price they offered you at the LOI. That’s an evil trick they use because, first of all, they know they’re probably dealing with someone who’s going through this the first time. That you’ve probably told your employees, you’ve told your spouse, you bought the ski house in your mind, and you’re now very emotionally committed to selling.

They just say, well, we’re going to drop our price by 10%. You say, why? And they say, well, that’s just our decision. You have very little recourse. In a letter of intent, it’s usually non-binding, meaning they can walk away, you can walk away. But if you do walk away and go back to the other people you had at the table before, they’re all going to wonder what they found in due diligence. What’s lurking in your closet? What skeletons do you have that they found? They’re going to take a very skeptical view of your company if you say, yeah, we were going to do a deal but it fell apart. They’re going to just really highly scrutinize you.

Re-trading is a fact of life. It’s one where you can defend yourself against it, first of all, by hitting your numbers. If you have numbers that you put in a plan that you’ve shared with an acquirer, during due diligence, you got to hit those numbers. Equally, there’s illegitimate re-trading, which is the one I’m talking about where it’s done for no other reason other than because they can.

Rob: That’s crappy. You talk about that a little bit in Built to Sell, and I had heard of folks doing that. Luckily, I’ve had cursory involvement in dozens of exits where either a founder just gives me a phone call and says, hey, I’m thinking about selling and we talk about it. And I haven’t heard that happening, but obviously, that’s rough. I would have a tough time working for that company. I would feel like I got screwed.

John: Again, you’re emotionally so far deep into the process. I just did an interview on the show, I don’t think it’s gone live yet when we talk. But it describes a two-year selling process where the acquirer made an offer, they both mutually signed a letter of intent, and then the acquirer couldn’t come up with the money. They drag them out, drag them out, drag them out for nine months, and then they bailed and it went on.

That happens and it’s a dirty underbelly of the world of acquisitions. The other one that comes to mind around tricks that big companies use is tying your earnout to something that is completely out of your control or so outlandish that you’re never going to hit it. An earnout, of course, is where you get some cash upfront and then there’s a future payment. It’s less common in a SaaS business. Many of your listeners, hopefully, will be able to avoid an earnout. Some of them, especially those in the service business would certainly have to deal with an earnout.

One of the classic tricks is to tie an earnout with thresholds that you have to hit along the way in order to unlock the budget to hit the next gate. I’m reminded of a guy named Rod Drury. Rod started Xero, the cloud-based accounting platform that you’ve heard—a big competitor of QuickBooks. Before he started Xero, he actually created a company called Aftermail, which was a way to archive email and it was a very successful company. Built it up, sold it for $45 million. That was the headline number.

But it was actually—after we unpacked it on the show—$15 million of cash, the rest in an earnout. Rod, as you can imagine, he’s a young guy, he sells his business for $15 million. This is life-changing money. It blew his mind. He had trouble getting back in the driver’s seat. He had trouble hitting his first gate, which would’ve unlocked the budget to help him hit the earnout. Anyway, six months later, he bailed and walked away from whatever it is, $30 million, that he stood to gain if he stuck it out for three years.

But what he realized was, he’d signed up for this thing that he had no chance of hitting because he needed six months just to sober up and unwind from the sale, which he just didn’t give himself. He missed the first gate, and then it’s impossible to reach the next.

Rob: That is something that I tell founders. I was actually talking to a founder literally right before this call with you and me. He has an offer, and it’s a life-changing—never have to work again—number. We were talking about what that means. The advice I often give is when you sell the company—if you do have an earnout and you still have to work—it gets a little easier because you can breathe easy like wow, I’ve taken a lot of risks off the table. But it’s tough to keep your head in the game. I think that’s pretty common.

John: Did you have an earnout with Leadpages? I can’t remember.

Rob: Yeah, we did.

John: How was it?

Rob: It was relatively short. They were very reasonable and we also negotiated pretty hard to keep it short. For us, it actually wasn’t bad at all. I don’t know if we got lucky or it was the judgment that we did. We chose to sell to Leadpages rather than some other interested acquirers because I did trust that they were going to treat us well and they did. It wasn’t based on any of the got […] numbers. There were no milestones that I felt uncomfortable with, if that makes sense. In the end, it was definitely a good decision for us. No regrets there.

John: That’s fantastic. If you could get your earnout tied to something other than earnings, it’s ironic even the name earnout. But if you could get it tied to a goal like a topline revenue, even then you’ve got probably a little more control. The problem with tying an earnout to your earnings is, of course, once you’re at the vision of another company, you lose control over your financials. That gets done by head office. They can oftentimes graft other expenses under your P&L because head office expenses. It just gets messy trying to control the expression of profit when you don’t control it anymore.

If you have to deal with an earnout, getting it tied to something more like revenue or in your case, launching of a feature. That’s way, way more in your control.

Rob: Yup. As we wrap up, three years ago, if a founder were to email me and say, hey, I’m thinking through this exit. Maybe they have no offers, maybe they have an LOI, whatever it is. If I have time, I always jump on a 30-minute call just to chat with them, just to give them some moral support and talk through the mental process. But I also recommend that they listen to at least a few episodes of Built to Sell Radio just to get their head around how it might be, and I recommend a few books. It used to be Built to Sell and Finish Big by Bo Burlingham. I really like that book. I read it multiple times as well as we were exiting.

Now, I’ve added two more to that list. There’s one called Before the Exit by Dan Andrews. And you actually interviewed his co-founder, Ian Schoen, on the show many years ago. They had a cat furniture and valet podium business. Before The Exit: Thought Experiments For Entrepreneurs is a good one. And, as of today, I’m adding The Art of Selling Your Business. Again, if you’re thinking about selling your business or even if you’re not, this is a no brainer. Just spend $10 or $20 and get educated.

Obviously, John, you’re a wealth of knowledge, and I really appreciate you taking the time on the show with me today.

John: Thanks, Rob. It’s great to be with you.

Rob: Thanks again to John for coming on the show. It’s interesting, I know that I talked a few times during the interview about how you should just go out and buy the book even if you’re not thinking of selling a business. I really mean that because this is the type of thing where I’ve gotten to the point where for a $10 book, $20 audiobook, or one Audible credit, however, you think about it, it’s not the cost of it.

The real cost is the time that you have to invest because we have these big lists and we have so many priorities. I’ve read through The Art of Selling Your Company and I know that anything that John Warrillow puts out is going to be of that high-quality bar that it’s going to be worth your time at some point.

His way of thinking around negotiation. I love the 5-20 rule. There’s just a lot of nuggets in his brain that he has put in his three books, frankly, that it’s one of those that I think is a good thing to just have. It’s good knowledge to have in your back pocket as you’re running a company, even if you never plan to sell. Thank you for joining me again this week. I look forward to talking to you again next Tuesday morning.