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In this episode of Startups For The Rest Of Us , Rob and Mike answer a number of listener questions on topics including SaaS pricing, subdomains, and building affordable MVP’s.
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Rob: In this episode of Startups For The Rest Of Us, Mike and I discuss SaaS pricing conundrum, subdomains, building an affordable MVP and more listener questions. This is Startups For The Rest Of Us episode 407.
Welcome to Startups For The Rest Of Us. The podcast that helps developers, designers, and entrepreneurs to be awesome at building, launching, and growing software products, whether you’ve built your first product or you’re just thinking about it. I’m Rob.
Mike: And I’m Mike.
Rob: And we’re here to share out experiences to help you avoid the same mistakes we’ve made. Where this week, sir?
Mike: You remember a few weeks ago when I said I had gone unto meetup.com, and had started a Dungeons & Dragons group, and gotten a couple of people together, and started playing a campaign?
Rob: Indeed.
Mike: Because I’m signed up for and have a paid account now, they started emailing me about various groups, like, “Hey, you might be interested in this,” and I was told that I should join the Massachusetts cannabis marketing and sales group.
Rob: You totally should. That’s a growth market, man.
Mike: Yeah.
Rob: Is it legal in Massachusetts?
Mike: It is. Although I don’t think anybody’s licensed to actually sell it yet, that happened two years ago, they said, “Yes, this is now legal in Massachusetts for recreational use.” but they still had to go through all these regulatory hurdles, and people had to get certified, and all these other stuff. They’re like, “Yes, you can use it recreationally, but nobody can sell it to you.” that was the situation for a couple of years, I think that they’re supposedly sometime this summer, starting to do that but I don’t know. Maybe the deadline has already passed. I don’t know.
Rob: Because I was back in California, I think it was when I was at SaaStr, so it was probably, February or March of this year, and it’s legal there. It’s been medically legal for years, so they already have the dispensaries, and they legalized it. I think it was maybe, less than a year later, they were allowed to sell it for recreational use.
I was walking around at night with some friends from the conference, co-workers, there was a lot of pot smoke that you could smell, and it was like, “Oh, yeah.” Of course, I was looking around like, “Oh man, they can’t be doing that, right?” it’s just this sense you get when you smell that. But it’s like, “No, no. It’s just legal, and you can do it on the corner.” It’s such a trip, such a trip. It’s going to be weird to get used to. The way it’s going, it’s going to be legal in all 50 States, eventually. It’ll be an interesting thing to adjust to.
Mike: Yeah. Definitely can be interesting. I just found it funny that they’re like, “Oh, you should join this group.”
Rob: Totally. They know who you are, Mike, deep down.
Mike: I guess, maybe. I don’t know. How about you?
Rob: I’ve been doing some smart home stuff which is something I’ve been interested in for years. But since we had a rental for the past couple of years, obviously, I wasn’t going to put a bunch of stuff in a rental. I now have several Alexas—oops, I just activated.
Mike: We should leave this in. This is good radio.
Rob: Yeah, I have several Echos in the house. I need to, not say A-L-E-X-A. I’m enjoying them. I’m enjoying that you can use them as intercoms because our house has a lot of stairs. There’s three or four stories—depending on how you count.
Mike: I found out about that the other day that you could use it as an intercom. I didn’t know that you could do that. You can just drop into some other room in the house. Although I was told there’s a—not a security loophole or something like that—but something associated with it where you have to disable it by default. Otherwise, if somebody in your contact list, they know you have one, they can drop into your living room and just talk to you through the intercom, I think over the internet, and I didn’t know that.
Rob: Oh, interesting.
Mike: Yeah. It doesn’t sound good.
Rob: Yeah. I enjoyed doing it most from the Echo app on my phone. You can just click a couple of times, and then boom, you’re just speaking out of one of the Amazon Echos. Our kids’ playroom is way downstairs, and it’s easier than running down and telling them dinner is ready. It’s pretty nice.
I’ve definitely bought into the Echo ecosystem, and I like their direction that’s going. I got a Nest for the first time. I tried installing Nest at our old house, but it wasn’t compatible. I have a Nest here, and I can now control that of course with the app, and it’s smart thermostat, and that’s fun. You can even tell the Echo to adjust the temperature, I believe. I haven’t activated that yet.
We moved into this house, it’s in the Midwest, it was built right around 2000, and they wired the whole thing for in-home speakers. There’s speakers in almost every room. There’s this big central places where he had a receiver, a tuner, CD player, and all this stuff. I’m thinking, in the 90s, that’s what I would have done. When in college, I would love big speakers from dorm room to dorm room, as I moved around or apartment to apartment, and you had your receiver, you had your amp and all that stuff.
Now I went online, and I was like, “There’s got to be an easier way here. I want to be able to stream everything.” I researched it, and of course, Sonos is the leader in that space. While I don’t love how proprietary Sonos is, even down to the fact that I can’t just stream from Spotify through my Sonos but I believe that you have to use the Sonos app, and you […] it into your Spotify account like, “I don’t want to use the Sonos app.”
Mike: Oh, geez.
Rob: I know. I know. I need to double-check that because they may have opened it up, but last time I looked, you weren’t able to kind of just airplay it–the equivalent of that through the Sonos thing. But anyway, they have this thing called, Sonos Connect: Amp. The Amp part means it has an amp in it that you can connect to speakers. I just got one, just as an experiment. I put in on the first floor, and sure enough, it takes the place of all of this equipment he had, the speaker wires go in the back, and there’s volume knobs on every wall in the house.
I was going to bail on it altogether and just not do it. But Sherri’s like, “No, no, no. If we have people over, there’d be multiple…” because you can do multiple floors, and there’s all this stuff. All that to say, I reluctantly implemented Sonos in this smart home thing, but man, it’s cool. You can tell your Echo to start this on Spotify on the Sonos, and it will do it, and you go to the wall and turn it up. It’s magical, man. It’s pretty interesting. It feels like we’re living in the future.
Mike: That’s pretty cool. I bought a new amplifier maybe two or three years ago because my old one was 12, 15 years old. Actually, it was more than that. It’s probably close to 20. It still works great. It’s just that it didn’t have any of the connections. It didn’t have an HDMI connection. It still had all the component outputs or inputs and everything else. I couldn’t hook it up to any new equipment that I had, like a Blu-ray player and stuff like that. I was like, “Alright, fine.” I brought it down, and I bought a new amp.
I was looking at all the different options, and it seemed to me like a lot of that type of equipment, is very much like car technology where they’ll build something into it like Spotify or something like that, and it’s obsolete almost the second you buy it. They’re terribly useful. It sucks that it feels like that type of technology is still on that trend, where everything is proprietary, and it’s so hard to connect stuff, and it’s expensive too, but at the same time, it doesn’t really wear out. I still got speakers that were almost 20 years old, and they’re still in great working condition. I don’t really have any need to buy new ones, except for the fact that if something breaks. That’s it.
Rob: Yeah, that makes sense. I agree. I was concerned when I bought this Sonos. I had to research it because I was, “Do they even support speaker outputs anymore? There’s exterior speakers in the patios, is it going to drive those? Is it going to connect to all the stuff?” Sure enough on the back, it looked like it had the right ports and it wound up doing it. They’re called banana clips.
I agree. Trying to interface this newfangled technology with stuff that has existed for 30, 40 years, maybe even longer. I remember twisting speaker wires together. I had four speakers in my dorm room. Certainly, it was quadraphonic, it was a stereo, but I would twist them together, ran them into the amp, and do all the stuff, and that technology is now having to interface with, like you said, this Spotify stuff.
I did evaluate not doing Sonos. There are, obviously, other brands that have streaming music devices that have amps built-in, but they just all seem, like you said, bolted on, and antiquated. I don’t know. It’s interesting to see how this is going to shake out. I’m interested to see how it’s going to shake out over the next few years.
Obviously, I’m investing in ecosystems now. I’ve been on the Alexa ecosystem now. I’m in obviously now, on the Sonos a little bit. I think I’m probably going to have to get at least one more […] perhaps too because there’s different zones and stuff. But I’m trying to pick market leaders because I don’t want to buy the Betamax, and suddenly have to bail on it because they just killed the line or whatever.
Mike: Well, that just means you’ll have to find the one that is selling porn with it, that will be the winner.
Rob: I do think, I might need to stand corrected because I opened Spotify while we were talking, and it does look like I can just connect to the Sonos downstairs, and just stream it through there instead of using their app. I’ll test that later to prove it out. I know for a while they didn’t do that. But if it does it now, they must have added it in the past whatever, six months or something.
Mike: It seems to me, for that type of technology, anything that comes to streaming, you just want something where you can connect to it with Bluetooth or something like that, or with even just a cable, and then from there, it just acts as a dummy piece of equipment that just does its thing, and that’s its sole purpose is, and then you plug other stuff into it. It seems most people would really just want to do that.
My wife used to work at an electronic house, and they had all these high-end stereo systems going up to $100,000-$150,000. Don’t get wrong, they were beautiful, but the reality is you’re going to spend that much money on a stereo system for some downstairs place. Their target market was people who had nothing better to do with their money. Sure, that makes sense, but I think for the average user, it doesn’t matter that much.
Rob: Yeah, that’s the thing. Like you sad, I wouldn’t want to use a cable because the Sonos is in a cabinet set away but Bluetooth or I believe it’s just via wifi because it connects to wifi obviously, and it had its own identity. Once I […] it connects over that. I’m not Bluetooth-connected to Sonos at all. The phone just know where it is.
Mike: Yeah.
Rob: With that, should we do a whole episode?
Mike: We could talk about all the different problems of those too. There was some kid’s device that was out there that connected into the WiFi, but it also would record pretty much anything, and it would send it back to the servers to the company that made it, it wasn’t encrypted, and it was using it to do voice recognition. They were basically collecting voice data from kids. It was like, “Oh boy. That’s not good,” and it’s all not encrypted either. That’s a big problem.
Rob: Yeah. That’s the thing too. The IoT is the term for this—Internet of Things. Everything is going to be on the internet at some point, is what they’re saying. The IoT devices are much like the Nest and the Sonos and even smart toasters, smart microwaves, smart fridges, and all the stuff that’s supposed to be coming.
That stuff is said to be a hacker’s dream. Most of it, it’s super insecure. Some of it, if it doesn’t get patched, then it’s easy to hack. Even a lot of it that is patched is easy to hack into. They’re saying that’s the coming wave of hacks. That’s going to be the zombie nets of the future. Because that’s how folks do DDoSes—they go out, and they take control of a bunch of old PCs that are unpatched, and then they do attacks, distributed denial-of-service, from all those things. They’re saying that the Internet of Things is going to be tenfold or a hundredfold the number of devices. It’s going to have that much power.
Mike: Yeah. I shudder for people who have to deal with those types of problems.
Rob: Seriously, yup. Cool. Let’s dive in. We have some listener questions. We have some comments on some prior episodes. Our first comment is on episode 403 which was titled, Should You Love What You’re Working On? and it’s from Martin. He just came to startupsfortherestofus.com and entered a comment at the bottom of episode 403’s blog post.
He said, “Hi, Rob and Mike. Thanks for another great episode. When you guys talked about love versus opportunity, I was reminded of the idea that it can take hard work to cultivate a passion. If I remember correctly, Cal Newport talks about this idea in one of his books. I don’t know about you guys, but I’ve noticed that there are a lot of things where you need to put in the work first before you start to enjoy them. I’m currently working as a software consultant, and I remembered that the reason I picked up programming in the first place was because as a kid, I was into video games. Now many years later, I really enjoyed developing software, often more than playing games. I think that’s true of many things. For example, when you’re just starting with any kind of sport, and you suck at it, it’s often not that great, but once you put some effort into it and you start to improve, you suddenly get why people enjoyed doing it.”
I think Martin has a good point. Thanks for posting, Martin. This is how I felt about playing music–playing the guitar. When I first started it, it was really hard, and then definitely the better I got, the more I wanted to play my guitar. What do you think about this?
Mike: I remember reading about this. I think that Josh Kaufman wrote a book about learning different things. I’m pretty sure he had a graph in there that showed that. There’s a skill level versus enjoyment. When you first start doing something new, you suck at it which is to be expected, but you don’t enjoy it at all. Then once you get a little skilled at it, then you really start to enjoy it because you feel you know what you’re doing, so you’re on the cusp of always learning this new stuff, but you’re also enjoying the journey. Once you get much more advanced, then it’s about putting the time and effort to practice, and get the muscle memory or the mental connections made so you don’t have to really think about it when you’re doing it. Pretty sure it was Josh’s book that—I can’t remember the name of the book off the top of my head—but I think that that was in there.
Rob: It’s called The First 20 Hours: How to Learn Anything Fast.
Mike: Yes, that was it. Yup. It’s a fascinating read, too. If you are interested in learning new things and the process of learning new things, I’d definitely recommend picking up that book and checking it out. He goes through several different things that he learned, like the ukulele, sailboarding, and a couple of other things. It’s just fascinating how he learned about how to learn stuff.
I always had a problem with that when I was in college. When I got to college, I just authorized, “Go ahead,” relied on my natural ability to just remember things, pay attention in class, and then do well on tests. When I get to college, you have to do the homework. That was always a problem for me in college, but it worked itself out eventually, but it took years for that to happen.
Rob: Yup. For sure, I felt the same thing. The First 20 Hours by Josh Kaufman. It’s also on audible which is I believe how I read that book. Thanks for the comment, Martin. Our first question of the day is from Michael Needle. He’s from alltheguides.com. He says, “Mike and Rob, first, thanks for all you do. I previously called in about building a marketplace, alltheguides.com, to connect adventure travelers and guides. I’m close to finishing the platform, and I took your advice on building one segment first. I went with guides to have providers ready when clients come,” which is the way I believe we should have recommended that you do. It’s a two-sided marketplace, and we said when you start with two-side marketplace you have to get that one side done first.
Now back to his email. “Now ahead of the platform launch, I want to make sure I can bring the clients to the site, the customers, the consumers. I thought I’d follow your advice by starting an informative blog in order to get emails.” Adventure Travel Ideas, I think is the idea of the blog. Here’s the question. “I already have a landing page up from my platform. I assume it would be better to have the lead gen on a different domain as opposed to a subdomain. I just assume that subdomains will be less likely to draw initial visitors. Am I wrong on this? Or if I’m right, and I should go with a different domain, what is the best way to nudge my list towards the platform once it’s launched? Thanks again, guys. You provide invaluable advice and inspiration.” What do you think, Mike?
Mike: I think there’s a natural inclination to believe that you should put your landing page and stuff like that on some sort of a subdomain and that’s how you’re driving traffic to them. But the reality is, I think is that if you’re doing tour guides in a marketplace like this, I don’t think people necessarily really care about the subdomain. I think what really comes into it with the subdomain is that you’re trying to establish new website according to Google, and do all the SEO, and the site ranking, and get that up based on how Google looks at it.
You could instead focus that energy on a subdirectory in your main domain and use that to essentially focus your efforts and increase the authority of that domain versus trying to do it with one subdomain and then another— that’s probably the approach that I would go with. I guess there’s a few different examples I would point to like Craigslist, Angie’s List, and Reddit. Reddit’s got all those different subReddits and stuff in it, but they’re all under, most of them in different subdirectories.
Rob: The reddits? Yup. It’s reddit.com/r/whatever, /startups or whatever.
Mike: Right and that’s not necessarily a two-sided market, but Craiglist is. Based on the location, they will have subdirectories, which are a geographic location, but I wouldn’t worry too much about the subdirectories, at the moment. I guess I’m curious to know whether or not you’re trying to use those subdomains as like the location, like city name, or something like that. Maybe it would make more sense in that case, but at the same time, you could also just use it like it as a different subdirectory as well, and you’ll benefit, for the site authority, through that.
Rob: That’s the thing, and now Google has come out and said, “Oh, subdomain, subdirectory, there’s no difference.” I still think there’s some difference. I still believe, deep down, that subdirectory is better for SEO. I do like your point there. I think if you are going to start a blog, I would try to do it in subdomain, if possible. It’s not always possible to do that. You might need to do reverse-proxy and do some things if you’re running WordPress because you don’t tend to want to run WordPress on a production app server. When I say don’t tend to want to, I mean don’t do it. There’s just too many security holes.
If you want to host it somewhere, I’d go with somebody like the VPNGINE or Pagely or whatever. I think I may have misspoken earlier and said subdomain, but what I mean was subdirectory, if you can do a subdirectory, that’s what I would do.
I don’t think this matters actually, that much. When using a different domain for the lead gen, I would probably lean towards subdirectory, and if you need to use a subdomain, I don’t know—its just apples and oranges, this is small stuff. If you’re going to drive ads to it, it doesn’t matter, nobody cares, they’ll just click on the ad, and they’d go see it. If you’re going to try for SEO then like Mike and I were saying, I would lean towards subdirectory, if possible, I think it’s pretty clean, but in all cases, I don’t know that it matters that much.
Mike: Yeah. The one really nice thing about having everything underneath the same domains—and you’re not dealing with subdomains—is redirecting people back and forth, and then also dealing with the fact that, like any tracking analytics where you’re trying to track like, “Did somebody hit this subdomain and then this other subdomain?” and then you got cookies back and forth between them. With marketing tools, it becomes an absolute nightmare.
You’re much better off just having it all on one domain and then you don’t have to worry about that because the cookies are going to be able to work all on that domain between different directories, versus, like a Google Analytics tracking code. Something as simple as that is going to be an absolute nightmare to work across multiple domains.
Rob: Yeah, and it’s possible, you just got to know how to do it. It’s not out-of-the-box trivial. Sharing cookies is a pain, and then you’ll get the, “Hey, this person came from one of your domains to the other, and they show up as a new visitor.” It’s not ideal. Anyway, I hope that helps.
Our next question is from long-time listeners and friends of ours. Folks that we’ve known that have come to MicroConfs–Dan Taylor and Simon Payne. Dan Taylor runs appsevents.com, which is an events company that runs more than 300 annuals events. Simon Payne was the co-founder of Lead Pages. They both live in Prague, actually, in Czech Republic. Simon was working on an app with Dan Taylor, and Simon has also launched a WordPress button called Convert Player. That’s pretty cool.
Anyway, they wrote in. They said, “Hi, Rob and Mike. Two long-time listeners here, Dan and Simon. We’ve developed and released a SaaS app called EventsFrame. It’s eventsframe.com. It’s ticketing and attendee management system, with fixed low monthly pricing for unlimited events and unlimited attendees. We’ve moved all of my company, AppsEvents more than 300 annual events to this, and done a full public launch last month. We already have paid sign-ups from our listings on sites like Capterra, some content marketing, and some basic Facebook ads, which have converted this in paying customers, which is a good sign. We’re doing an AppSumo launch in a couple of weeks to get a bunch of users on this system, which is taking a lot of our focus, but we’re planning for how we grow this long-term, as Simon and I are focusing all our time on this project.”
“Our question is on pricing. As you know, systems like Eventbrite take a percentage of ticket price, and most systems follow a similar model. With AppsEvents, I was spending thousands of dollars a year on Eventbrite fees. We want to go for a fixed price for unlimited events and attendees. Our initial idea is $97 a month. Now the issue with this is that people running one several small events might prefer a percentage of ticket price, as there is no upfront cost. And on the other end, large event producers would pay a lot more than $97 a month,” or I think he’s saying they should pay a lot more than that cost they’re getting more value. “We guess some pricing tiers could be good. But any ideas to help with our process would be greatly appreciated. All the best, Dan and Simon.” What do you think?
Mike: This is something that I actually looked into pretty heavily and struggled with several years ago. Back when I was running AuditShark, one of the ideas that I had come up with was, ironically, Bluetick, because I was doing a lot of outreach to people and I just needed to follow-up with them and keep on them. But also, as a side note, I was also helping out on the sponsorships side for MicroConf. For that particular problem, I found that I had to do the same thing.
I said, “Oh if I had this product or tool in place that would allow me to do that outreach as an event organizer that would help me out a lot.” I looked around. A bunch of different things didn’t really work very well for what my use case was. I said, “Well, could I build this? Is this something that I could basically move away from AuditShark?” because at the time, it wasn’t really on the best path, and I recognized that at the time.
Anyway, I looked into specifics of whether or not I could target event organizers with that. What I realized was that there’s a wide range of types of event organizers. Some of them, that’s all they do, they organize events like the AppsEvents company. They will organize hundreds of events every single year, and then there’s ones like MicroConf where we do it a couple of times a year, and that’s it.
For ones like that, a monthly pricing model really doesn’t work well because of the fact that you’re only running a couple of events. If you’re doing it on a regular basis, sure, it makes a lot more sense. But as you pointed out, it makes a lot more sense to just do with a percentage of the ticket price for those types of customers.
The other thing I would look at is, Eventbrite, yes, they do charge a percentage of the ticket, but they also give the event organizers the ability to pass that cost onto the attendees. That’s actually what we do with MicroConf. It’s only a couple of percent, but at the same time, it raises the ticket price by that amount. The question you have to ask is, “Well, as the event organizer, is that something that’s going to turn away people? Are they going to, not buy a ticket because they have to pay that extra fee?” That’s again, for the event coordinator to decide. But your problem is, how are you charging?
For us, Eventbrite is I’ll say, “free” and that we’re passing those cost on, and then on the other side, we’re paying the cost of the payment processing, which we would have to pay, regardless. Whether Eventbrite handles it or we do it through PayPal or Stripe or whoever, that fee has to be paid. But our payment to Eventbrite is basically, covered by the attendees buying those tickets, which make it free for us, which makes it a lot more attractive than a $97 a month plan or even a $50 a month plan. Coupled with the fact that, we also don’t run more than a couple of events a year. Why should we be paying for that over the course of the entire year if we’re only running events in a certain time window, I’ll say?
That’s exactly the problem that I ran into when I was trying to identify, “Well, how can I build this email follow-up product aimed at event organizers?” Event organizers, if they run a lot of events, awesome. They’re a good target. But if they don’t, then having them pay a monthly fee is not going to work.
Rob: Yeah. Basically, what Dan and Simon are talking about doing is doing pricing innovation in the events space. While I think it certainly saved Dan money from a customer perspective—he was paying Eventbrite thousands a year—I’m not sure it makes sense to do this from a business perspective.
There’s a reason that most of these events software companies charge the way they do. The reason, as you’ve laid it out, if your event is free, you don’t pay EventBrite anything. If you only sell 20 tickets, and they’re $5 each, then I believe you pay Eventbrite 2.5% of that. If they do the processing, they charge you 3% fee, payment processing fee or we use PayPal, and obviously, it’s whatever it is, 2.9% or 3% there.
Or, if you sell $100,000 worth of tickets in a year, then yeah, you do pay $2500, so I get the […] Eventbrite. It makes sense from a customer perspective of being like, “Man, I’m paying EventBrite so much money,” but now that you’re on the other side of it, and you’re running a business, my thought is like, “Yes, that’s how you want it. You want it so that the people who are getting a little bit of value out of this system aren’t paying that much for it and it scales up perfectly linearly with how they do it.”
If you sell $100,000 for the tickets, you’re probably making a chunk of money. We can argue about whether $2500 is too much money, but you definitely are getting quite a bit of value out of the system if you’re selling $100,000 worth.
Trying to do pricing innovation is a challenge. Is it business model canvas? That something that if you read that book, do you remember the book?
Mike: Yeah, I remember it. There was a whole worksheet that went with it.
Rob: Yup and that talks a lot about trying to do pricing innovation. I don’t know if it has practical enough tips to help you sort this out. But I will say that I tried to innovate on pricing in the early days of Drip, and instead of doing per subscriber just like MailChimp and everybody else is doing, I tried to do new subscribers per month, and it was a bad idea. Not only did they confuse people, but as we started to scale up, we were not growing nearly as fast as we should have.
That’s the thing that you’re going to run into is you’re going to have people who come and are selling half a million dollars’ worth of tickets on your system and they’re going to be paying $97 or even if you do tiers, it’s not going to be that much. They’re not going to be paying you 2.5% of $500,000.
I think since people are used to this, and it is a lucrative model. If anything, you could try to be the low-cost provider which I don’t think is a terrible idea in this space. I don’t know enough about the whole space. I know that EventBrite, yes, it does feel expensive to a lot of people, and it’s clunky, so you have those two things. They have a ton of features, but they’re a little more expensive than everybody wants them to be, and they’re arguably quite a bit harder to use, although they have a lot of features.
This is like going after a QuickBooks or InfusionSoft or Marketo—kind of going after that. If you make your software infinitely usable and slightly less expensive, but you still keep the same model, maybe only try 2.5%, I don’t know. I know you have other bootstrap competitors around you, look at what they’re doing. That’s probably where I would start is doing just a big survey of all the pricing structures of all the events SaaS apps, and mapping that out on a big sheet of paper or mind map or something, and trying to think that through.
I think in the end, you are going to want to be a percentage of revenue is my guess, because otherwise, you’re going to constantly have this problem. Try to think if there’s any way around it with tiers, try to think creatively. It’s like you could have a free tier or you can’t charge for events, and then you could have your $50 a month tier where you go to a certain amount of ticket sales. In essence, you’re taking a percentage, but you’re not, you’re just having tiers of it. That would maybe be the only other thing that I would consider. But man, just taking 1.5%, 2.5%, it’s so clean. It makes your pricing look so clean. It’s simple, and everybody understands that.
Mike: I think the problem that you just alluded to is that, depending on the size of the event that you’re dealing with, if it’s 5 or 10 people, you might have one price tier, and then if it’s 50, you could have another. Whether or not you deal with those, like what’s the price point of those? If it’s $25,000, but they only allow five people in it, is it a free account? Depending on the value that you’re providing to them, that’s really what you’re pricing should be based on.
I think you almost get into this territory of, you have an unlimited number of pricing tiers because how high could those ticket prices go or what is it that you actually basing it on? Is it the number of attendees or is it ticket price? Or is it a combination of the two? Once you get into that territory, it gets overly complicated, and people don’t want to deal with it because they’re like, “This pricing model is too confusing for me. I feel like I’m going to get screwed, so I’m going with the competitor because I understand it.”
Rob: Thanks for the question, Dan and Simon. I hope that was helpful and I definitely wish you guys the best of luck with EventsFrame.
Our next question is from Alex, and he says, “Hi again. Thanks for all the great content. I feel like I’m in a bit of a dilemma. I have an idea that I would like to turn into a business. It’s for a job site. I have the requirements, more or less hammered out to the point I can have a developer build it. I’ve recently been in the process of getting quotes from various companies, and freelancers to build it but I’m hesitant to make this jump. Aside from the inherent risk of it just failing, I’m concerned I will spend all my money on the MVP then quickly run out of money to fund any iterations on the site. I don’t know anyone willing to help me build this for free, and I also don’t know the first thing about raising money or how to prepare for that. I guess my question is, how would you approach building an MVP in the most affordable way?”
One thing I’ll throw out before you dive in Mike is, you’ll not be able to raise money, maybe from family and friends, but you’re not going to be able to raise money without a working app these days. It’s just kind of table stakes. Although he asked us, “How would you approach building an MVP is the most affordable way?” I don’t know that’s a question we should answer. I think the question we should answer is, how do you validate this more before building an MVP. Would you agree?
Mike: Yeah, I would agree. That’s the next step is like, what is the MVP? What question are you trying to answer? The question I think you’re trying to answer is, “How do I know if I should dump this money into this type of product?” I think the answer to that is the same thing that I did with Bluetick. Go to balsamiq.com, and buy a copy of Balsamiq for $80, and mock everything up. Then go try, and sell that to people, and see if people are actually interested in buying what it is that you have.
That will do a couple of different things for you. One is, it will help you find the types of people that you need to talk to, and the second thing it will do is, it’ll give you enough information to say like, “Is this something that people would actually pay for?” and that’s the answer to your question is, if you can get enough people and find the market for it and tap into a channel of people to talk to, to get them excited about it, and find out if they’re going to pay for it, then sure, go for it.
But if you can’t get past that part, if you can’t find the people to talk to, it’s never going to work. You’re just not going to be able to turn it into a working product, regardless whether you have code written or not. That’s not the problem. The problem is trying to find those customers and make sure they are willing to pay for it. There’s obvious concerns here about, Alex’s voice about, “I’m concerned about making the jump because of the risk of it failing,” and that’s how you make sure that it’s not going to fail.
Rob: Yup, I would agree with that. I think the question you need to ask yourself is, “How can you validate this before dumping a bunch of money into it and doing as much of that as possible?” Sometimes, an MVP is not even software. We’ve talked about this in the past. An MVP might be you with an Excel spreadsheet or a Google spreadsheet. It might be you manually writing things, taking in a list of keyword someone gives you, manually running an algorithm on them in Excel, and then giving back the keywords they’re most likely to rank for. That is basically what I would have done if I had built an MVP for HitTail, as an example, or any keyword tool.
There are ways to do it without needing to hire anyone to write a line of code. My second book, which is a collection of essays, is called Start Marketing The Day You Start Coding, but now, I think it’s Start Marketing Or At Least Validating Well Before You Start Coding. With Drip, I had 11 people who said that they would pay $99 a month for what we were going to build before we broke ground on code. I wanted 10, happened to get 11, then Derrick started writing code.
I know for Bluetick you got pre-orders. There is a lot of hustle that can happen up front. It’s hard work. This is the stuff that, “Well, is anyone going to trust me? Who am I? Is anyone going to trust me if I don’t have the software after the software ?” No, that’s an excuse. Yes, it would be better if you had all the software, and could just start marketing it. But that’s not the case.
I think your concern is valid, that going out and building an MVP, it’s very, very unlikely that’s going to have product fit, so you’re going to have to iterate. If you don’t have the money or the time or the skills to iterate on that, then you need to figure out how to get to the point where you feel more confident.
Here’s the thing. If you try to recruit a developer to build it for free—we’ve talked about this in the past—nope, no developer is going to want to do that. If you go to a developer and you say, “Hey, I built all these mockups, I have 25 phone calls, and I got 10 pre-orders, they paid for a quarter, three months of service, and they’ve all committed to—assuming it works and does what I say—it’s going to be $50 or $100 a month after that, boom, we’re going to be at $1000 MRR,” yes, that’s a lot of hustle, and it’s a lot of work, but that’s how you recruit a co-founder or at least a developer who is willing to build it maybe for an equity share or something like that.
I like the way you’re thinking about it. I’m glad you’re hesitant to just dive into the MVP, but I don’t think you should look at building an MVP as software in the most affordable way. I think you should look at, not automating them, doing stuff manually, and think of, “How can I possibly validate this?” The first step is going to be customer conversations, then it’s going to be trying to get pre-orders, then it’s going to be doing it manually until the software’s built, then it’s building a crappy software MVP, and then it’s doing a better job. I bet there’s a lot of steps between where you are today and basically, paying someone to build a complete SaaS app.
Mike: I think part of it just stems from the classic misunderstanding of what an MVP is because MVP has the word Product in it, and that’s not really what it means. I talked about this in my book, Single Founder Handbook, and I quote Wikipedia from […]. It says, “An MVP is not a minimal product. It is a strategy and process directed toward making and selling a product to customers.” What you have to understand there is that it explicitly calls out an MVP as a process, not as a product. Building a product is not your MVP; answering a question is what your MVP is. The first thing that you have to start with is, “What is my question?” and here it’s, “How do I know that I need to pay people to develop software?” It’s all the stuff before that that Rob just talked about, like talk to customers, find out what they really want, and whether they’re going to pay for it, that’s all the stuff that you need to do..
Thanks for the question, Alex. I hope that was really helpful. I think that about wraps us up for the day. If you have a question for us, you can email it to questions@startupsfortherestofus.com, or you can send us a voicemail by calling 1-888-801-9690. Our theme music is an excerpt from We’re Outta Control by MoOt used under Creative Commons. Subscribe to us in iTunes by searching for startups, and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening and we’ll see you next time.
Welcome to Startups For The Rest Of Us. The podcast that helps developers, designers, and entrepreneurs to be awesome at building, launching, and growing software products, whether you’ve built your first product or you’re just thinking about it. I’m Rob.
Mike: And I’m Mike.
Rob: And we’re here to share out experiences to help you avoid the same mistakes we’ve made. Where this week, sir?
Mike: You remember a few weeks ago when I said I had gone unto meetup.com, and had started a Dungeons & Dragons group, and gotten a couple of people together, and started playing a campaign?
Rob: Indeed.
Mike: Because I’m signed up for and have a paid account now, they started emailing me about various groups, like, “Hey, you might be interested in this,” and I was told that I should join the Massachusetts cannabis marketing and sales group.
Rob: You totally should. That’s a growth market, man.
Mike: Yeah.
Rob: Is it legal in Massachusetts?
Mike: It is. Although I don’t think anybody’s licensed to actually sell it yet, that happened two years ago, they said, “Yes, this is now legal in Massachusetts for recreational use.” but they still had to go through all these regulatory hurdles, and people had to get certified, and all these other stuff. They’re like, “Yes, you can use it recreationally, but nobody can sell it to you.” that was the situation for a couple of years, I think that they’re supposedly sometime this summer, starting to do that but I don’t know. Maybe the deadline has already passed. I don’t know.
Rob: Because I was back in California, I think it was when I was at SaaStr, so it was probably, February or March of this year, and it’s legal there. It’s been medically legal for years, so they already have the dispensaries, and they legalized it. I think it was maybe, less than a year later, they were allowed to sell it for recreational use.
I was walking around at night with some friends from the conference, co-workers, there was a lot of pot smoke that you could smell, and it was like, “Oh, yeah.” Of course, I was looking around like, “Oh man, they can’t be doing that, right?” it’s just this sense you get when you smell that. But it’s like, “No, no. It’s just legal, and you can do it on the corner.” It’s such a trip, such a trip. It’s going to be weird to get used to. The way it’s going, it’s going to be legal in all 50 States, eventually. It’ll be an interesting thing to adjust to.
Mike: Yeah. Definitely can be interesting. I just found it funny that they’re like, “Oh, you should join this group.”
Rob: Totally. They know who you are, Mike, deep down.
Mike: I guess, maybe. I don’t know. How about you?
Rob: I’ve been doing some smart home stuff which is something I’ve been interested in for years. But since we had a rental for the past couple of years, obviously, I wasn’t going to put a bunch of stuff in a rental. I now have several Alexas—oops, I just activated.
Mike: We should leave this in. This is good radio.
Rob: Yeah, I have several Echos in the house. I need to, not say A-L-E-X-A. I’m enjoying them. I’m enjoying that you can use them as intercoms because our house has a lot of stairs. There’s three or four stories—depending on how you count.
Mike: I found out about that the other day that you could use it as an intercom. I didn’t know that you could do that. You can just drop into some other room in the house. Although I was told there’s a—not a security loophole or something like that—but something associated with it where you have to disable it by default. Otherwise, if somebody in your contact list, they know you have one, they can drop into your living room and just talk to you through the intercom, I think over the internet, and I didn’t know that.
Rob: Oh, interesting.
Mike: Yeah. It doesn’t sound good.
Rob: Yeah. I enjoyed doing it most from the Echo app on my phone. You can just click a couple of times, and then boom, you’re just speaking out of one of the Amazon Echos. Our kids’ playroom is way downstairs, and it’s easier than running down and telling them dinner is ready. It’s pretty nice.
I’ve definitely bought into the Echo ecosystem, and I like their direction that’s going. I got a Nest for the first time. I tried installing Nest at our old house, but it wasn’t compatible. I have a Nest here, and I can now control that of course with the app, and it’s smart thermostat, and that’s fun. You can even tell the Echo to adjust the temperature, I believe. I haven’t activated that yet.
We moved into this house, it’s in the Midwest, it was built right around 2000, and they wired the whole thing for in-home speakers. There’s speakers in almost every room. There’s this big central places where he had a receiver, a tuner, CD player, and all this stuff. I’m thinking, in the 90s, that’s what I would have done. When in college, I would love big speakers from dorm room to dorm room, as I moved around or apartment to apartment, and you had your receiver, you had your amp and all that stuff.
Now I went online, and I was like, “There’s got to be an easier way here. I want to be able to stream everything.” I researched it, and of course, Sonos is the leader in that space. While I don’t love how proprietary Sonos is, even down to the fact that I can’t just stream from Spotify through my Sonos but I believe that you have to use the Sonos app, and you […] it into your Spotify account like, “I don’t want to use the Sonos app.”
Mike: Oh, geez.
Rob: I know. I know. I need to double-check that because they may have opened it up, but last time I looked, you weren’t able to kind of just airplay it–the equivalent of that through the Sonos thing. But anyway, they have this thing called, Sonos Connect: Amp. The Amp part means it has an amp in it that you can connect to speakers. I just got one, just as an experiment. I put in on the first floor, and sure enough, it takes the place of all of this equipment he had, the speaker wires go in the back, and there’s volume knobs on every wall in the house.
I was going to bail on it altogether and just not do it. But Sherri’s like, “No, no, no. If we have people over, there’d be multiple…” because you can do multiple floors, and there’s all this stuff. All that to say, I reluctantly implemented Sonos in this smart home thing, but man, it’s cool. You can tell your Echo to start this on Spotify on the Sonos, and it will do it, and you go to the wall and turn it up. It’s magical, man. It’s pretty interesting. It feels like we’re living in the future.
Mike: That’s pretty cool. I bought a new amplifier maybe two or three years ago because my old one was 12, 15 years old. Actually, it was more than that. It’s probably close to 20. It still works great. It’s just that it didn’t have any of the connections. It didn’t have an HDMI connection. It still had all the component outputs or inputs and everything else. I couldn’t hook it up to any new equipment that I had, like a Blu-ray player and stuff like that. I was like, “Alright, fine.” I brought it down, and I bought a new amp.
I was looking at all the different options, and it seemed to me like a lot of that type of equipment, is very much like car technology where they’ll build something into it like Spotify or something like that, and it’s obsolete almost the second you buy it. They’re terribly useful. It sucks that it feels like that type of technology is still on that trend, where everything is proprietary, and it’s so hard to connect stuff, and it’s expensive too, but at the same time, it doesn’t really wear out. I still got speakers that were almost 20 years old, and they’re still in great working condition. I don’t really have any need to buy new ones, except for the fact that if something breaks. That’s it.
Rob: Yeah, that makes sense. I agree. I was concerned when I bought this Sonos. I had to research it because I was, “Do they even support speaker outputs anymore? There’s exterior speakers in the patios, is it going to drive those? Is it going to connect to all the stuff?” Sure enough on the back, it looked like it had the right ports and it wound up doing it. They’re called banana clips.
I agree. Trying to interface this newfangled technology with stuff that has existed for 30, 40 years, maybe even longer. I remember twisting speaker wires together. I had four speakers in my dorm room. Certainly, it was quadraphonic, it was a stereo, but I would twist them together, ran them into the amp, and do all the stuff, and that technology is now having to interface with, like you said, this Spotify stuff.
I did evaluate not doing Sonos. There are, obviously, other brands that have streaming music devices that have amps built-in, but they just all seem, like you said, bolted on, and antiquated. I don’t know. It’s interesting to see how this is going to shake out. I’m interested to see how it’s going to shake out over the next few years.
Obviously, I’m investing in ecosystems now. I’ve been on the Alexa ecosystem now. I’m in obviously now, on the Sonos a little bit. I think I’m probably going to have to get at least one more […] perhaps too because there’s different zones and stuff. But I’m trying to pick market leaders because I don’t want to buy the Betamax, and suddenly have to bail on it because they just killed the line or whatever.
Mike: Well, that just means you’ll have to find the one that is selling porn with it, that will be the winner.
Rob: I do think, I might need to stand corrected because I opened Spotify while we were talking, and it does look like I can just connect to the Sonos downstairs, and just stream it through there instead of using their app. I’ll test that later to prove it out. I know for a while they didn’t do that. But if it does it now, they must have added it in the past whatever, six months or something.
Mike: It seems to me, for that type of technology, anything that comes to streaming, you just want something where you can connect to it with Bluetooth or something like that, or with even just a cable, and then from there, it just acts as a dummy piece of equipment that just does its thing, and that’s its sole purpose is, and then you plug other stuff into it. It seems most people would really just want to do that.
My wife used to work at an electronic house, and they had all these high-end stereo systems going up to $100,000-$150,000. Don’t get wrong, they were beautiful, but the reality is you’re going to spend that much money on a stereo system for some downstairs place. Their target market was people who had nothing better to do with their money. Sure, that makes sense, but I think for the average user, it doesn’t matter that much.
Rob: Yeah, that’s the thing. Like you sad, I wouldn’t want to use a cable because the Sonos is in a cabinet set away but Bluetooth or I believe it’s just via wifi because it connects to wifi obviously, and it had its own identity. Once I […] it connects over that. I’m not Bluetooth-connected to Sonos at all. The phone just know where it is.
Mike: Yeah.
Rob: With that, should we do a whole episode?
Mike: We could talk about all the different problems of those too. There was some kid’s device that was out there that connected into the WiFi, but it also would record pretty much anything, and it would send it back to the servers to the company that made it, it wasn’t encrypted, and it was using it to do voice recognition. They were basically collecting voice data from kids. It was like, “Oh boy. That’s not good,” and it’s all not encrypted either. That’s a big problem.
Rob: Yeah. That’s the thing too. The IoT is the term for this—Internet of Things. Everything is going to be on the internet at some point, is what they’re saying. The IoT devices are much like the Nest and the Sonos and even smart toasters, smart microwaves, smart fridges, and all the stuff that’s supposed to be coming.
That stuff is said to be a hacker’s dream. Most of it, it’s super insecure. Some of it, if it doesn’t get patched, then it’s easy to hack. Even a lot of it that is patched is easy to hack into. They’re saying that’s the coming wave of hacks. That’s going to be the zombie nets of the future. Because that’s how folks do DDoSes—they go out, and they take control of a bunch of old PCs that are unpatched, and then they do attacks, distributed denial-of-service, from all those things. They’re saying that the Internet of Things is going to be tenfold or a hundredfold the number of devices. It’s going to have that much power.
Mike: Yeah. I shudder for people who have to deal with those types of problems.
Rob: Seriously, yup. Cool. Let’s dive in. We have some listener questions. We have some comments on some prior episodes. Our first comment is on episode 403 which was titled, Should You Love What You’re Working On? and it’s from Martin. He just came to startupsfortherestofus.com and entered a comment at the bottom of episode 403’s blog post.
He said, “Hi, Rob and Mike. Thanks for another great episode. When you guys talked about love versus opportunity, I was reminded of the idea that it can take hard work to cultivate a passion. If I remember correctly, Cal Newport talks about this idea in one of his books. I don’t know about you guys, but I’ve noticed that there are a lot of things where you need to put in the work first before you start to enjoy them. I’m currently working as a software consultant, and I remembered that the reason I picked up programming in the first place was because as a kid, I was into video games. Now many years later, I really enjoyed developing software, often more than playing games. I think that’s true of many things. For example, when you’re just starting with any kind of sport, and you suck at it, it’s often not that great, but once you put some effort into it and you start to improve, you suddenly get why people enjoyed doing it.”
I think Martin has a good point. Thanks for posting, Martin. This is how I felt about playing music–playing the guitar. When I first started it, it was really hard, and then definitely the better I got, the more I wanted to play my guitar. What do you think about this?
Mike: I remember reading about this. I think that Josh Kaufman wrote a book about learning different things. I’m pretty sure he had a graph in there that showed that. There’s a skill level versus enjoyment. When you first start doing something new, you suck at it which is to be expected, but you don’t enjoy it at all. Then once you get a little skilled at it, then you really start to enjoy it because you feel you know what you’re doing, so you’re on the cusp of always learning this new stuff, but you’re also enjoying the journey. Once you get much more advanced, then it’s about putting the time and effort to practice, and get the muscle memory or the mental connections made so you don’t have to really think about it when you’re doing it. Pretty sure it was Josh’s book that—I can’t remember the name of the book off the top of my head—but I think that that was in there.
Rob: It’s called The First 20 Hours: How to Learn Anything Fast.
Mike: Yes, that was it. Yup. It’s a fascinating read, too. If you are interested in learning new things and the process of learning new things, I’d definitely recommend picking up that book and checking it out. He goes through several different things that he learned, like the ukulele, sailboarding, and a couple of other things. It’s just fascinating how he learned about how to learn stuff.
I always had a problem with that when I was in college. When I got to college, I just authorized, “Go ahead,” relied on my natural ability to just remember things, pay attention in class, and then do well on tests. When I get to college, you have to do the homework. That was always a problem for me in college, but it worked itself out eventually, but it took years for that to happen.
Rob: Yup. For sure, I felt the same thing. The First 20 Hours by Josh Kaufman. It’s also on audible which is I believe how I read that book. Thanks for the comment, Martin. Our first question of the day is from Michael Needle. He’s from alltheguides.com. He says, “Mike and Rob, first, thanks for all you do. I previously called in about building a marketplace, alltheguides.com, to connect adventure travelers and guides. I’m close to finishing the platform, and I took your advice on building one segment first. I went with guides to have providers ready when clients come,” which is the way I believe we should have recommended that you do. It’s a two-sided marketplace, and we said when you start with two-side marketplace you have to get that one side done first.
Now back to his email. “Now ahead of the platform launch, I want to make sure I can bring the clients to the site, the customers, the consumers. I thought I’d follow your advice by starting an informative blog in order to get emails.” Adventure Travel Ideas, I think is the idea of the blog. Here’s the question. “I already have a landing page up from my platform. I assume it would be better to have the lead gen on a different domain as opposed to a subdomain. I just assume that subdomains will be less likely to draw initial visitors. Am I wrong on this? Or if I’m right, and I should go with a different domain, what is the best way to nudge my list towards the platform once it’s launched? Thanks again, guys. You provide invaluable advice and inspiration.” What do you think, Mike?
Mike: I think there’s a natural inclination to believe that you should put your landing page and stuff like that on some sort of a subdomain and that’s how you’re driving traffic to them. But the reality is, I think is that if you’re doing tour guides in a marketplace like this, I don’t think people necessarily really care about the subdomain. I think what really comes into it with the subdomain is that you’re trying to establish new website according to Google, and do all the SEO, and the site ranking, and get that up based on how Google looks at it.
You could instead focus that energy on a subdirectory in your main domain and use that to essentially focus your efforts and increase the authority of that domain versus trying to do it with one subdomain and then another— that’s probably the approach that I would go with. I guess there’s a few different examples I would point to like Craigslist, Angie’s List, and Reddit. Reddit’s got all those different subReddits and stuff in it, but they’re all under, most of them in different subdirectories.
Rob: The reddits? Yup. It’s reddit.com/r/whatever, /startups or whatever.
Mike: Right and that’s not necessarily a two-sided market, but Craiglist is. Based on the location, they will have subdirectories, which are a geographic location, but I wouldn’t worry too much about the subdirectories, at the moment. I guess I’m curious to know whether or not you’re trying to use those subdomains as like the location, like city name, or something like that. Maybe it would make more sense in that case, but at the same time, you could also just use it like it as a different subdirectory as well, and you’ll benefit, for the site authority, through that.
Rob: That’s the thing, and now Google has come out and said, “Oh, subdomain, subdirectory, there’s no difference.” I still think there’s some difference. I still believe, deep down, that subdirectory is better for SEO. I do like your point there. I think if you are going to start a blog, I would try to do it in subdomain, if possible. It’s not always possible to do that. You might need to do reverse-proxy and do some things if you’re running WordPress because you don’t tend to want to run WordPress on a production app server. When I say don’t tend to want to, I mean don’t do it. There’s just too many security holes.
If you want to host it somewhere, I’d go with somebody like the VPNGINE or Pagely or whatever. I think I may have misspoken earlier and said subdomain, but what I mean was subdirectory, if you can do a subdirectory, that’s what I would do.
I don’t think this matters actually, that much. When using a different domain for the lead gen, I would probably lean towards subdirectory, and if you need to use a subdomain, I don’t know—its just apples and oranges, this is small stuff. If you’re going to drive ads to it, it doesn’t matter, nobody cares, they’ll just click on the ad, and they’d go see it. If you’re going to try for SEO then like Mike and I were saying, I would lean towards subdirectory, if possible, I think it’s pretty clean, but in all cases, I don’t know that it matters that much.
Mike: Yeah. The one really nice thing about having everything underneath the same domains—and you’re not dealing with subdomains—is redirecting people back and forth, and then also dealing with the fact that, like any tracking analytics where you’re trying to track like, “Did somebody hit this subdomain and then this other subdomain?” and then you got cookies back and forth between them. With marketing tools, it becomes an absolute nightmare.
You’re much better off just having it all on one domain and then you don’t have to worry about that because the cookies are going to be able to work all on that domain between different directories, versus, like a Google Analytics tracking code. Something as simple as that is going to be an absolute nightmare to work across multiple domains.
Rob: Yeah, and it’s possible, you just got to know how to do it. It’s not out-of-the-box trivial. Sharing cookies is a pain, and then you’ll get the, “Hey, this person came from one of your domains to the other, and they show up as a new visitor.” It’s not ideal. Anyway, I hope that helps.
Our next question is from long-time listeners and friends of ours. Folks that we’ve known that have come to MicroConfs–Dan Taylor and Simon Payne. Dan Taylor runs appsevents.com, which is an events company that runs more than 300 annuals events. Simon Payne was the co-founder of Lead Pages. They both live in Prague, actually, in Czech Republic. Simon was working on an app with Dan Taylor, and Simon has also launched a WordPress button called Convert Player. That’s pretty cool.
Anyway, they wrote in. They said, “Hi, Rob and Mike. Two long-time listeners here, Dan and Simon. We’ve developed and released a SaaS app called EventsFrame. It’s eventsframe.com. It’s ticketing and attendee management system, with fixed low monthly pricing for unlimited events and unlimited attendees. We’ve moved all of my company, AppsEvents more than 300 annual events to this, and done a full public launch last month. We already have paid sign-ups from our listings on sites like Capterra, some content marketing, and some basic Facebook ads, which have converted this in paying customers, which is a good sign. We’re doing an AppSumo launch in a couple of weeks to get a bunch of users on this system, which is taking a lot of our focus, but we’re planning for how we grow this long-term, as Simon and I are focusing all our time on this project.”
“Our question is on pricing. As you know, systems like Eventbrite take a percentage of ticket price, and most systems follow a similar model. With AppsEvents, I was spending thousands of dollars a year on Eventbrite fees. We want to go for a fixed price for unlimited events and attendees. Our initial idea is $97 a month. Now the issue with this is that people running one several small events might prefer a percentage of ticket price, as there is no upfront cost. And on the other end, large event producers would pay a lot more than $97 a month,” or I think he’s saying they should pay a lot more than that cost they’re getting more value. “We guess some pricing tiers could be good. But any ideas to help with our process would be greatly appreciated. All the best, Dan and Simon.” What do you think?
Mike: This is something that I actually looked into pretty heavily and struggled with several years ago. Back when I was running AuditShark, one of the ideas that I had come up with was, ironically, Bluetick, because I was doing a lot of outreach to people and I just needed to follow-up with them and keep on them. But also, as a side note, I was also helping out on the sponsorships side for MicroConf. For that particular problem, I found that I had to do the same thing.
I said, “Oh if I had this product or tool in place that would allow me to do that outreach as an event organizer that would help me out a lot.” I looked around. A bunch of different things didn’t really work very well for what my use case was. I said, “Well, could I build this? Is this something that I could basically move away from AuditShark?” because at the time, it wasn’t really on the best path, and I recognized that at the time.
Anyway, I looked into specifics of whether or not I could target event organizers with that. What I realized was that there’s a wide range of types of event organizers. Some of them, that’s all they do, they organize events like the AppsEvents company. They will organize hundreds of events every single year, and then there’s ones like MicroConf where we do it a couple of times a year, and that’s it.
For ones like that, a monthly pricing model really doesn’t work well because of the fact that you’re only running a couple of events. If you’re doing it on a regular basis, sure, it makes a lot more sense. But as you pointed out, it makes a lot more sense to just do with a percentage of the ticket price for those types of customers.
The other thing I would look at is, Eventbrite, yes, they do charge a percentage of the ticket, but they also give the event organizers the ability to pass that cost onto the attendees. That’s actually what we do with MicroConf. It’s only a couple of percent, but at the same time, it raises the ticket price by that amount. The question you have to ask is, “Well, as the event organizer, is that something that’s going to turn away people? Are they going to, not buy a ticket because they have to pay that extra fee?” That’s again, for the event coordinator to decide. But your problem is, how are you charging?
For us, Eventbrite is I’ll say, “free” and that we’re passing those cost on, and then on the other side, we’re paying the cost of the payment processing, which we would have to pay, regardless. Whether Eventbrite handles it or we do it through PayPal or Stripe or whoever, that fee has to be paid. But our payment to Eventbrite is basically, covered by the attendees buying those tickets, which make it free for us, which makes it a lot more attractive than a $97 a month plan or even a $50 a month plan. Coupled with the fact that, we also don’t run more than a couple of events a year. Why should we be paying for that over the course of the entire year if we’re only running events in a certain time window, I’ll say?
That’s exactly the problem that I ran into when I was trying to identify, “Well, how can I build this email follow-up product aimed at event organizers?” Event organizers, if they run a lot of events, awesome. They’re a good target. But if they don’t, then having them pay a monthly fee is not going to work.
Rob: Yeah. Basically, what Dan and Simon are talking about doing is doing pricing innovation in the events space. While I think it certainly saved Dan money from a customer perspective—he was paying Eventbrite thousands a year—I’m not sure it makes sense to do this from a business perspective.
There’s a reason that most of these events software companies charge the way they do. The reason, as you’ve laid it out, if your event is free, you don’t pay EventBrite anything. If you only sell 20 tickets, and they’re $5 each, then I believe you pay Eventbrite 2.5% of that. If they do the processing, they charge you 3% fee, payment processing fee or we use PayPal, and obviously, it’s whatever it is, 2.9% or 3% there.
Or, if you sell $100,000 worth of tickets in a year, then yeah, you do pay $2500, so I get the […] Eventbrite. It makes sense from a customer perspective of being like, “Man, I’m paying EventBrite so much money,” but now that you’re on the other side of it, and you’re running a business, my thought is like, “Yes, that’s how you want it. You want it so that the people who are getting a little bit of value out of this system aren’t paying that much for it and it scales up perfectly linearly with how they do it.”
If you sell $100,000 for the tickets, you’re probably making a chunk of money. We can argue about whether $2500 is too much money, but you definitely are getting quite a bit of value out of the system if you’re selling $100,000 worth.
Trying to do pricing innovation is a challenge. Is it business model canvas? That something that if you read that book, do you remember the book?
Mike: Yeah, I remember it. There was a whole worksheet that went with it.
Rob: Yup and that talks a lot about trying to do pricing innovation. I don’t know if it has practical enough tips to help you sort this out. But I will say that I tried to innovate on pricing in the early days of Drip, and instead of doing per subscriber just like MailChimp and everybody else is doing, I tried to do new subscribers per month, and it was a bad idea. Not only did they confuse people, but as we started to scale up, we were not growing nearly as fast as we should have.
That’s the thing that you’re going to run into is you’re going to have people who come and are selling half a million dollars’ worth of tickets on your system and they’re going to be paying $97 or even if you do tiers, it’s not going to be that much. They’re not going to be paying you 2.5% of $500,000.
I think since people are used to this, and it is a lucrative model. If anything, you could try to be the low-cost provider which I don’t think is a terrible idea in this space. I don’t know enough about the whole space. I know that EventBrite, yes, it does feel expensive to a lot of people, and it’s clunky, so you have those two things. They have a ton of features, but they’re a little more expensive than everybody wants them to be, and they’re arguably quite a bit harder to use, although they have a lot of features.
This is like going after a QuickBooks or InfusionSoft or Marketo—kind of going after that. If you make your software infinitely usable and slightly less expensive, but you still keep the same model, maybe only try 2.5%, I don’t know. I know you have other bootstrap competitors around you, look at what they’re doing. That’s probably where I would start is doing just a big survey of all the pricing structures of all the events SaaS apps, and mapping that out on a big sheet of paper or mind map or something, and trying to think that through.
I think in the end, you are going to want to be a percentage of revenue is my guess, because otherwise, you’re going to constantly have this problem. Try to think if there’s any way around it with tiers, try to think creatively. It’s like you could have a free tier or you can’t charge for events, and then you could have your $50 a month tier where you go to a certain amount of ticket sales. In essence, you’re taking a percentage, but you’re not, you’re just having tiers of it. That would maybe be the only other thing that I would consider. But man, just taking 1.5%, 2.5%, it’s so clean. It makes your pricing look so clean. It’s simple, and everybody understands that.
Mike: I think the problem that you just alluded to is that, depending on the size of the event that you’re dealing with, if it’s 5 or 10 people, you might have one price tier, and then if it’s 50, you could have another. Whether or not you deal with those, like what’s the price point of those? If it’s $25,000, but they only allow five people in it, is it a free account? Depending on the value that you’re providing to them, that’s really what you’re pricing should be based on.
I think you almost get into this territory of, you have an unlimited number of pricing tiers because how high could those ticket prices go or what is it that you actually basing it on? Is it the number of attendees or is it ticket price? Or is it a combination of the two? Once you get into that territory, it gets overly complicated, and people don’t want to deal with it because they’re like, “This pricing model is too confusing for me. I feel like I’m going to get screwed, so I’m going with the competitor because I understand it.”
Rob: Thanks for the question, Dan and Simon. I hope that was helpful and I definitely wish you guys the best of luck with EventsFrame.
Our next question is from Alex, and he says, “Hi again. Thanks for all the great content. I feel like I’m in a bit of a dilemma. I have an idea that I would like to turn into a business. It’s for a job site. I have the requirements, more or less hammered out to the point I can have a developer build it. I’ve recently been in the process of getting quotes from various companies, and freelancers to build it but I’m hesitant to make this jump. Aside from the inherent risk of it just failing, I’m concerned I will spend all my money on the MVP then quickly run out of money to fund any iterations on the site. I don’t know anyone willing to help me build this for free, and I also don’t know the first thing about raising money or how to prepare for that. I guess my question is, how would you approach building an MVP in the most affordable way?”
One thing I’ll throw out before you dive in Mike is, you’ll not be able to raise money, maybe from family and friends, but you’re not going to be able to raise money without a working app these days. It’s just kind of table stakes. Although he asked us, “How would you approach building an MVP is the most affordable way?” I don’t know that’s a question we should answer. I think the question we should answer is, how do you validate this more before building an MVP. Would you agree?
Mike: Yeah, I would agree. That’s the next step is like, what is the MVP? What question are you trying to answer? The question I think you’re trying to answer is, “How do I know if I should dump this money into this type of product?” I think the answer to that is the same thing that I did with Bluetick. Go to balsamiq.com, and buy a copy of Balsamiq for $80, and mock everything up. Then go try, and sell that to people, and see if people are actually interested in buying what it is that you have.
That will do a couple of different things for you. One is, it will help you find the types of people that you need to talk to, and the second thing it will do is, it’ll give you enough information to say like, “Is this something that people would actually pay for?” and that’s the answer to your question is, if you can get enough people and find the market for it and tap into a channel of people to talk to, to get them excited about it, and find out if they’re going to pay for it, then sure, go for it.
But if you can’t get past that part, if you can’t find the people to talk to, it’s never going to work. You’re just not going to be able to turn it into a working product, regardless whether you have code written or not. That’s not the problem. The problem is trying to find those customers and make sure they are willing to pay for it. There’s obvious concerns here about, Alex’s voice about, “I’m concerned about making the jump because of the risk of it failing,” and that’s how you make sure that it’s not going to fail.
Rob: Yup, I would agree with that. I think the question you need to ask yourself is, “How can you validate this before dumping a bunch of money into it and doing as much of that as possible?” Sometimes, an MVP is not even software. We’ve talked about this in the past. An MVP might be you with an Excel spreadsheet or a Google spreadsheet. It might be you manually writing things, taking in a list of keyword someone gives you, manually running an algorithm on them in Excel, and then giving back the keywords they’re most likely to rank for. That is basically what I would have done if I had built an MVP for HitTail, as an example, or any keyword tool.
There are ways to do it without needing to hire anyone to write a line of code. My second book, which is a collection of essays, is called Start Marketing The Day You Start Coding, but now, I think it’s Start Marketing Or At Least Validating Well Before You Start Coding. With Drip, I had 11 people who said that they would pay $99 a month for what we were going to build before we broke ground on code. I wanted 10, happened to get 11, then Derrick started writing code.
I know for Bluetick you got pre-orders. There is a lot of hustle that can happen up front. It’s hard work. This is the stuff that, “Well, is anyone going to trust me? Who am I? Is anyone going to trust me if I don’t have the software after the software ?” No, that’s an excuse. Yes, it would be better if you had all the software, and could just start marketing it. But that’s not the case.
I think your concern is valid, that going out and building an MVP, it’s very, very unlikely that’s going to have product fit, so you’re going to have to iterate. If you don’t have the money or the time or the skills to iterate on that, then you need to figure out how to get to the point where you feel more confident.
Here’s the thing. If you try to recruit a developer to build it for free—we’ve talked about this in the past—nope, no developer is going to want to do that. If you go to a developer and you say, “Hey, I built all these mockups, I have 25 phone calls, and I got 10 pre-orders, they paid for a quarter, three months of service, and they’ve all committed to—assuming it works and does what I say—it’s going to be $50 or $100 a month after that, boom, we’re going to be at $1000 MRR,” yes, that’s a lot of hustle, and it’s a lot of work, but that’s how you recruit a co-founder or at least a developer who is willing to build it maybe for an equity share or something like that.
I like the way you’re thinking about it. I’m glad you’re hesitant to just dive into the MVP, but I don’t think you should look at building an MVP as software in the most affordable way. I think you should look at, not automating them, doing stuff manually, and think of, “How can I possibly validate this?” The first step is going to be customer conversations, then it’s going to be trying to get pre-orders, then it’s going to be doing it manually until the software’s built, then it’s building a crappy software MVP, and then it’s doing a better job. I bet there’s a lot of steps between where you are today and basically, paying someone to build a complete SaaS app.
Mike: I think part of it just stems from the classic misunderstanding of what an MVP is because MVP has the word Product in it, and that’s not really what it means. I talked about this in my book, Single Founder Handbook, and I quote Wikipedia from […]. It says, “An MVP is not a minimal product. It is a strategy and process directed toward making and selling a product to customers.” What you have to understand there is that it explicitly calls out an MVP as a process, not as a product. Building a product is not your MVP; answering a question is what your MVP is. The first thing that you have to start with is, “What is my question?” and here it’s, “How do I know that I need to pay people to develop software?” It’s all the stuff before that that Rob just talked about, like talk to customers, find out what they really want, and whether they’re going to pay for it, that’s all the stuff that you need to do..
Thanks for the question, Alex. I hope that was really helpful. I think that about wraps us up for the day. If you have a question for us, you can email it to questions@startupsfortherestofus.com, or you can send us a voicemail by calling 1-888-801-9690. Our theme music is an excerpt from We’re Outta Control by MoOt used under Creative Commons. Subscribe to us in iTunes by searching for startups, and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening and we’ll see you next time.
Episode 406 | Should Bootstrappers Raise Money?
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Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike answer the question of should bootstrappers raise money? The guys distinguish the difference between venture capital and angel investing and how raising an angel round may be a good fit for some types of entrepreneurs.
Items mentioned in this episode:
Mike: In this episode of Startups For The Rest Of Us, Rob and I are going to be talking about whether bootstrapper should raise money or not. This is Startups For The Rest Of Us episode 406.
Welcome to Startups For The Rest Of Us. The podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing software products, whether you build your first product or you’re just thinking about it. I’m Mike.
Rob: And I’m Rob.
Mike: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s going on this week, Rob?
Rob: We have new iTunes reviews.
Mike: Oh, cool. What do we got?
Rob: This one from Find Fitness Pros. It says, “This is my go-to podcast every Tuesday morning. Rob and Mike continue to give their insights, not just info on exactly what to do,” and from Nathan Bell, he says, “Great information. I listened to one episode and I’m hooked. It was full of great information I can easily implement. Some of the info was a little bit advanced for me currently, but I’m confident that by selectively listening to more, I will pick up more.”
Those are a couple of new iTunes reviews that we have. I used to keep a worldwide tally of it using CommentCast and when I moved to my new computer, I don’t have the .exe or what is it called, it’s a .app I guess in Mac. I don’t have the executable anymore and you can’t download it anywhere. So I moved over to mypodcastreviews.com but it only gives me reviews, not ratings. We’re up to almost 600 worldwide ratings, I believe. People don’t necessarily need to write sentences or whatever, but I don’t have that tally anymore. Certainly, we’re above 600 at this point.
Now, what I have is I have 347 worldwide reviews and that’s a lesser number. I want to get back to the world’s rating. I think the guy at My Podcast Reviews says that they are going to add ratings but neither here nor there, the more reviews or ratings we get, the more likely people find the show, the more motivation it gives us. If you feel like we’ve given you some value as a listener to the show, it would be awesome if you can open iTunes or Stitcher and just give us a five-star review. Really appreciate it.
Mike: The solution to not having that app that gives you the numbers is just make up a number. So we’re at 3000 reviews I think.
Rob: That’s right. 3422 reviews. That’s great. How about you, man? What’s going on this week?
Mike: Well, this morning, I published a public API for Bluetick. Of course, I say it’s a public API but there’s actually only one person who actually knows about it.
Rob: It’s in beta?
Mike: Yeah, basically.
Rob: Early access, good.
Mike: I had a prospect who wanted to sign on and they’re like, “Yeah, I really need to have a public API that is available for me and Zapier wasn’t going to work for them. Basically as I said, I spun it out because I heard from a bunch of customers that I currently have, and I started talking to them about, “What is it that you need?” and trying to figure out what’s the minimum that I could build that this particular prospect or customer would need to get started. They only needed four things. Build those, put them into it, and then there’s all the infrastructure changes that needed to go into it.
It took a week-and-a-half just to do the infrastructure changes but now the best stuff if all taken cared of. I got that published out there and waiting for them to start using it, and then figure out what needs to change. I already made it very clear upfront, like, “Hey, here are some things that I know we’re going to change, and then over here, based on what you tell me, other things could change, so treat this as an absolute beta. Eventually at some point it will become stable, I guess, and then I’ll start pushing it live to everybody.
Rob: That’s nice. It’s nice to do. You’re basically doing customer development on what is its own little product. You can say it’s a feature but really some entire products are just APIs. You want to get it right from the start, and by start, I mean by the time you publish and people start hooking into it, you can’t change it at that point. I think it’s really good to take this approach of roll it out slowly, roll out one endpoint at a time and really think through how you want to structure it.
I was just on your site trying to guess the URL. I was going to just type in a bunch of stuff so you’re going to see a bunch of 404s in your error logs. Not a hacker, it was me, but I didn’t find it alas.
Mike: No, that sucks. I would tell you if you asked for the right price. Other than that, I also got my first fraudulent charge from Bluetick. It took a lot longer than I expected it to but somebody signed up, then they logged in, and absolutely they didn’t pay any attention to the onboarding emails. Come time when their trial is up, they got charged, and then I forget how long it was later. I was maybe probably three or four days later, I got a notification from Stripe saying, “Hey this charge looks fraudulent,” and I looked at it. I think it’s a debit card too and I was like, “Oh great.” Three hours later though like, “Oh you’ve had a chargeback.” I was like, “Wait, I didn’t even get a chance to decide that to do with this potentially fraudulent charge,” and they already converted it into a chargeback, which cost me an extra $15. Well that sucks, but, oh well.
Rob: Was it a person not using or was it a stolen credit card? Is that what you think? Or do you think that they just went in with the intention that it was their own credit card and they just intended at the whole time?
Mike: I’m not sure. It looks legit. The email address, I couldn’t quite tell whether it was real. I think it was a Gmail email address. I couldn’t really trace it back to a company or anything like that but the name on it seem to match what the email address was. I don’t know. I’m not entirely sure but I think it was from a real estate company or something like that. All right, well, whatever.
Rob: Yeah, that sucks. It’s going to happen. It’s definitely a milestone you don’t want to hit but you’re going to hit it eventually.
Mike: Yup. Certainly not a milestone to celebrate but I definitely hit it.
Rob: Yeah, exactly. Cool. What are we talking about today?
Mike: Today, I thought we would have a discussion about whether or not bootstrapper should be raising money. I guess by definition if you’re raising money, are you no longer a bootstrapper at that point? I think there’s maybe a time during which you are bootstrapping a company and self-funding it. I almost called it self-funding, like should people who are self-funding raise money, but again that would go against it.
The idea came because I saw Justin Jackson had tweeted out a link to an article he wrote over on Indie Hackers called The Bootstrapper’s Paradox. In that article, he shows a graph or what they’re doing for transistor.fm, which is the new startup that he’s working on. Basically it shows a graph of over the course of 60 months was 10% exponential growth and 5% turn. The MRR will get to $21,000. But 60 months is five years of time.
I thought it would be interesting to just have a conversation about this because when I was reading through the tweet that he had put out, there were a bunch of people who chimed in on it, mostly people who were listening to the show would have heard of like Des Traynor, Jason Collin, and Natalie Nagel. They’re giving their thoughts on this stuff and I just thought it would be interesting to talk about it.
Rob: Yeah, that’s for sure. 10% growth every month sounds like an impressive number but when the number starts very small, like $1000 a month, that means you’re growing $100 MRR a month. You just can’t do that early days or if you do, it’s going to take five years. You either need to figure out a way to grow faster or you need to be really patient.
This is a struggle. It’s funny that, Justin called it The Bootstrapper’s Paradox. I don’t know that it’s that as much as this is the reason people raise funding. We know people who are just bootstrapper through and through, you should never raise funding and 37signals used to say that and even mentions it that DHH and Jason Fried took funding from Jeff Bezos two years after launching Basecamp. It wasn’t even funding that went into the company. They took money off the table. If I recall, I think that number is public. I think it’s $10 million that he invested, was my memory and maybe I don’t think I’m making that up. It’s either rumored at that or it was announced.
They had essentially at that point had FU money and it’s really easy to make different decisions or just say, “Hey, we’re going to grow as slow or as fast as we need,” when you have that kind of money in your personal bank account and you’re just running this business day-to-day.
Justin’s article is a bootstrapper’s realization of “Oh Sh*t.” This is why people do raise money. It’s coming to that realization at this point and I think it’s a good thing to call out for sure. I’ve been thinking about this so much so I’m looking forward to today’s episode because in my Microconf talk this year, I talked about things that I learned bootstrapping and then self-funding and then in a venture back company after Leadpages acquired us.
In the last five to seven minutes I did just a little snippet about fundstrapping, which is this term that Colin from customer.io coined, where you’re kind of in-between. You bootstrapped a little bit and you raised a small round. I say it’s between 200,000 and 500,000 and you raise it with the intention of getting to profitability. Without, you’re never going to raise institutional money, or raise it from friends or families or angels, so you don’t give up control, you don’t give up a board seat, you really have the benefits of funding without the institutional chaos of it, the headache.
It wasn’t a throwaway piece but I almost didn’t include it in the talk. That piece has gotten me more emails, more comments, more thoughts, more people came up to me, ask me what that’s like, asked if I would invest or find new people who were doing fundstrapping. It’s just fascinating response to this, this thing that’s been percolating. It’s a long rant on it to start but I just think this is becoming more and more of a viable option and potentially even a necessity as the SaaS market gets more and more crowded.
Mike: Yeah. That’s the part that I think has changed over time, where five or 10 years ago, you could come out with a SaaS and you’d launch it to the public and you would start to grow by virtually the fact that there was nobody else out there or there were very few competitors out there doing what you were doing. Now if you launch anything, you probably got a couple of competitors just right out of the gate. If you don’t, then you probably don’t have a product that’s going to go anywhere. But if you have any competition, it’s probably substantially more competition today than you would’ve had five years ago or 10 years ago. Just by virtue of having launched five or 10 years ago, you were going to be more successful quicker than you would if you did the exact same thing now. It’s going to take longer, which means that you’re going to burn through more runway and it’s just going to be harder.
Rob: Right. Now, five or 10 years ago, there was less competition but the expenses would have been higher, 10 years ago especially because you literally needed a rack server. There was no Amazon EC2. In addition, there was still like when Basecamp first launched on their homepage, they were like, “You don’t have to install any software. No downloads needed.” They were still educating on just the concept of being in the cloud and there were hurdles there.
Mike: That was almost 15 years ago.
Rob: Yeah, that’s true. No, you’re right. That was 2005 or 2006? You’re right, 12 or 13. You’re right. But even with that, say 10 years ago, even with that, it’s still I believe was easier back then. But that doesn’t mean you shouldn’t start something today. It just means you got to house some more, you got to pick a better niche, you got to have more skills, or you need a little more money in the bank.
Whether that means you raise it yourself out of consulting efforts, which is what I did, or if there’s definitely more money being thrown around as funding these days that is, I’m not going to say no strings attached because it’s certainly they take equity, but 10 years ago if you took half-a-million bucks, boy that was typically institutional money, it was a pain in the butt to raise, you are giving up a lot of control, you are giving up a board seat, that is no longer the case. There really is this viable option, this in-between.
Mike: I think if you look at the businesses that, in the past have tried to figure out how to raise capital, one of the things that most people, 15-20 years ago, it was common to say, “Okay, let me go to a bank and get a loan from the bank.” But that is a non-starter for most new businesses. You got SBA loans and things like that where you can use the money to take over an existing business where they’re able to evaluate.
But if you have a business that you’re trying to get off the ground, a bank loan is basically a non-starter, especially when it comes to SaaS because they don’t understand how to calculate how much that business is worth. There isn’t any inventory and with software, it’s going to lag in terms of the revenue over something like a physical goods business, or a coffee shop, or a fitness studio where they know how many people are coming in and they can put a value on the equipment whether it’s the coffee machines or the spin cycles on a fitness studio. Banks are okay with that. They understand that.
But when you got a software business, the expectations today are much higher than they were five or 10 years ago. You have to do a lot more in order to make your product a lot more polished, which means it’s going to take time to do that which burns through your runway. It burns through that money a lot faster today. I guess you wouldn’t burn through it faster. It’s just you burn through more of it than you would have 10 years ago to get to the same point.
Rob: Even if you can get a loan, you have to send a personal guarantee. Now, all your personal assets are on the line. And if you decide to shut the company down, you owe them money. If you borrow $100,000 it’s a big deal. To me, that is more of a risk than I think an entrepreneur should take, unless you’re at the point where you already have, “All right, I’m at $10,000 MRR,” in which case you may or may not need the money, but if you’re at $10,000 MRR, you should raise equity funding anyway.
But if you know the business is going to succeed, that’s fine. When I hear that people charge $50,000 or $100,000 on credit cards to start a SaaS business, I’m like, “Oy vey.” That is going to be catastrophic. That is a really, really stressful way to live and it’s something I would not do, especially when we’re in a space where raising equity capital is relatively inexpensive. Raising a small angel round and selling 10% or even 20% of your company to reduce a lot of stress and to get there faster, I think it’s a pretty reasonable idea these days. It’s not impossible to do, I’ll say.
Mike: I want to talk about that specifically right there. What you just said was raising capital is relatively inexpensive. The reason I like the way that you put that is that when I think of the way I thought about raising funding years ago was that, “Oh, I’m going to have to give up a lot of control, I’m going to have to give up a lot of equity, and I don’t necessarily want to do either of those things.”
But if you’re thinking about putting together a business and you have anybody who’s helping you—a partner or a co-founder, something like that—your immediately giving up 50% of the company anyway, and then there’s a whole lot of difference between doing that and giving up 50% when there’s really nothing there, and yes, it could grow up to be something huge, but you’re giving up 50%.
So there’s like a mental block there of you saying, “Okay, well I’ll raise $250,000 in exchange for 10% of this,” and you don’t want to do that but you’re willing to give up 50% to somebody else when there’s really nothing there that’s being invested except for their time. Do you know what I mean?
Rob: Yeah. It’s cognitive dissonance I believe is the term where two things that don’t agree or paradox, I guess. It’s something in your head you’re rationalizing one way but then you turn around and give away 50% to a co-founder. That’s what you’re saying, It’s like you can give a small amount to get a big chunk of money, or even if it’s a small chunk of money.
Here’s the thing. Let’s say you live in the middle of Minnesota, or the middle of Nebraska, or something and you have an idea and you raised even $100,000 or $150,000 and you paid for your salary for a year or a year-and-a-half. That gives you a year or a year-and-a-half to get to some point of revenue that makes sense. Even if you gave away 15% of your company, you’re valuing it at $1 million right off the bat, or if you give away 20% or $750,000, it still makes your life a lot easier.
I think that’s the realization I’m coming to, is that at Microconf, or through this podcast, or whatever at different conferences, we meet smart people who are trying to launch businesses and something that stands in their way often is that, “I have a wife and kids. I have a house. I can’t do this nights and weekends. But I don’t want to raise funding because it’s really complicated. I don’t know how.”
What’s funny is you outlined this episode and you brought the topic up. But this is something I’ve been thinking a lot about, and there’s a gap here in the space. We do have folks like indie.vc which, if you haven’t heard my interview with Bryce from indie.vc, it’s episode 310 of this podcast, and it’s a more realistic approach to funding. It’s kind of a fundstrapping model. I’d recommend you go listen to that.
In addition, I feel we’re coming to an inflection point where there’s this gap and there’s a level of interest in something, and no one is filling it. No spoilers on what I’m up to next, but I’m starting to feel I might be the person to tackle this, to take it on. I’ve been spreading the word about it. I have been talking about it for years and I’ve been investing in startup like this.
We talk about Churn Buster, LeadFuze, CartHook. These are all small angel investments. I’ve done about 12 angel investments and I think three or four of them were essentially fundstrapped. it’s where they took money from a handful of folks and they never planned to raise a series A. I put my money where my mouth is, but now I’m thinking I only have so much money, how is it that I can take this to the next level in a realistic way. It’s something that’s definitely in the back of my mind and it’s something that I’ve been thinking a lot. Hopefully, we’ll dive into more in the future.
Speaking of that, if you listen to this and your thinking, “Oh, this is an interesting topic,” go to robwalling.com. Enter your email because it’s going to be something that I’m going to be thinking more about in the future as well as on this podcast for sure.
Mike: One of the comments that jumped out of me on the Twitter post that Justin had put out there was from Des Traynor and he said, “I think a second piece people don’t really internalize is that 60 months of the best years of your career is a substantial upfront investment too. Like a seed round but instead of money, it’s your life.”
That’s a fascinating way of looking at this because even back n the day, I would always say, “Oh, well. You know you’re basically trading money for time,” and I don’t think that I really equated time with years of my life. It sounds intuitively obvious. That’s exact same thing. But when you’re in the middle of working on stuff, you don’t think, “Oh, I’m trading five years of my life away of hard toil to get this thing to where it could be a lot sooner if I were just to take some money and trade some of that equity for it.”
Rob: Right. It could feasibly be a lot sooner. It may or may not. Money doesn’t solve all the problems but it certainly makes things, I’ll say less stressful and you having done it with true bootstrapping with basically nothing and doing nights and weekends, to then self-funding with revenue from HitTail going into Drip, and then venture funded. I’ve done all three of these. I will tell you that having that venture money, I didn’t have to raise it and I did attend the board meetings but I didn’t necessarily have to report to the board. My life was less stressful at that point than either of the prior two scenarios.
I think it’s a good point, man. I don’t want to come off. You can tell, I’m coming off kind of pro-raising a small round, and I don’t want to come off too one-sided. We’ve never been anti-funding ever. From the start, Microconf, I think in the original sales letter. It was, we’re not anti-funding. We’re anti everyone thinks the only way to start a software company or a startup is with funding. That maybe from the introduction of my book, actually—Start Small, Stay Small.
Even back then in 2010, I was saying, “Look, raising funding is not evil in and of itself. It’s the things that you have to give up by raising funding. Just know what you’re getting into.” Yes, we have seen founders that get kicked out of their own company. There was, I figure what that app it was. Was it Tinder? Something sold for $460 million. No. It’s FanDuel. It’s sold for $460 million and the founder who started it, and I believe was CEO when it started, he got no money because of liquidation preferences and he’s suing them.
That’s a huge exit. He got I believe it was zero dollars from the exit. There was an article or something that was like, he’s suing them now. If the contract say this is what the liquidation preference is, that’s one thing but he’s suing them because he thinks they screwed with the valuation intentionally and there was fraud or something. He’s not going to win if he just says, “No, that wasn’t the deal,” because he signed the papers. These VCs are not stupid but he’s trying to do that.
Yes, that does happen. But I believe there is a way to do this and I’m seeing it with these smaller SaaS apps. A way to do it without that much stress, without giving up that much equity. Brennan Dunn, RightMessage. That’s another one. I also wrote a check. And Rand Fishkin’s SparkToro. He’s doing the same thing. He’s not calling it fundstrapping, but he said, “Hey, we’re going to raise around, and we’re going to get to profitability, and we don’t want to do institutional money. If you listen to Lost and Founder which is his book, he talks about the perils of all that and you couldn’t read that and say, I can see really they didn’t like – once they raise funding, he really didn’t like it.
You can look and say, “Well, Rand’s anti-funding now.” But no, he’s more anti-institutional money, and there’s a difference. Venture capital is institutional money. These angel rounds tend not to be.
Mike: But I think even back, we’ve talked about it on the podcast before. As you said, we always had the position that, it’s not that we’re anti-funding, we’re anti-this-is-the-only-way-to-do-it. That’s always been my thought behind it. I’ll say the majority of my career and thought process has been like, “Yeah, I really just don’t want to take funding in this more because I don’t want to necessarily give up control.” Back then there weren’t really the options for that. Now, things have changed a lot. It’s not, say, front and center on my radar, but it’s something I’m definitely looking at niche and exploring a little bit more.
I definitely think that—like with Bluetick for example—there’s ways to go further faster, but I just don’t necessarily have the money to be able to do it, which sucks but at the same time, it’s always a trade-off. I think that’s what you always have to consider is, what is the trade-off and what am I going to have to give up in order for me to get X amount of influx and then what are you going to do with that?
You have to have a plan. You can’t just say, “I want to raise money.” You got to have a plan for not just raising money but also what are you going to do with that money when you get it? How are you going to deploy it? How are you going to build the company and how are you going to grow things? You can’t just drop $100,000 in your bank account or $500,000 and say, “Okay great. I’ve raised money. Now what?” They’re not going to give you the money if you don’t have a plan.
Rob: And if you don’t know what you’re doing, money’s not going to fix that. You’re just going to make bigger mistakes. This comes back to the stair-step approach. No chance I would have raised money in 2005-2009 with ,DotNetInvoice, and Wedding Toolbox and just beach towels and stuff. Even if I could have made the case that DotNetInvoice would grow to something, I would have made huge mistakes because I made small ones back then. But I learned and I gained experience and I gained confidence.
By the time I get to HitTail, I remember thinking, “Yeah,” because remember, I bought HitTail for $30,000 and then I grew it up to basically that much MRR per month but end and I value at it. Maybe I should raise a little bit of money in it. It would make this a little easier. But to me, it was the headache of it. I was like, “I do not want to slog around and spend months asking people and the paperwork.” It just felt like a pain in the butt to me. I don’t know if I could have. Did I have the name recognition? Could I have raised enough?
Arguably, yes. By the time I got to Drip, it was definitely like it. If I haven’t had that HitTail money, let’s just say I’d had none of it. I basically used a bunch or revenue from HitTail to fund Drip. If I hadn’t had that? I absolutely would have seriously considered doing what we’re talking about raising a small round. I knew Drip was ambitious, I knew it was going to get big at least by the time we are six or eight months in, and it had a need for that.
That’s what we’re saying here is the words always, never, and should, they’re not helpful words. Don’t say, “I should always raise funding.” “I should never raise funding.” “I should raise funding other people think I should or shouldn’t.” These are not helpful words. Just evaluate things and look at them, and like you said, look at the trade-offs. Pluses and the minuses, and the realities of them, not the FUD. Not the fear, uncertainty, and doubt.
I can tell you the story, “Oh, look. The founder of Fandle. He got screwed by his investors. Therefore, I’m never going to raise investing or I’m never going to raise funds.” That’s dumb. Actually look at the black-and-white of it. I think that’s what we’re talking about today. We;re not saying you should or should not, but it’s look at the reality of it.
Now, you and I talked about this in-depth in episode 211, When To Consider Outside Investment For Your Startup. We went in-depth on what are funds and family round, an angel round, or often called a seed round was. We talked about series A, B, C. Once you get to the serieses, that’s when you get to institutional money, which is when things get way more complicated. Once you raise a series A, it’s the point of no return. It’s implied you’re going to raise a B, a C, and go on to either have this huge exit or an IPO, and it’s growth at all cost for the most part.
But if you’re able to stop before that series A and stick to people who are on board with you, angel investors and such are on board with, “Hey, let’s build a $5 million, $10 million, $15 million company with it, it’ SaaS. Let’s do a 30%, 40%, 50% net margin on this thing.” That’s great. That’s the kind of company I want to build and that’s the kind of company I want to invest in.
But venture capitalists don’t want to invest in that. If that’s not your goal, to go to $100 million and do what it takes to do that, then you don’t want to go down that road. You want to have those expectations clear both in your head upfront, as well as anybody who’s writing you a check.
Mike: Right. The problem with that is that episode 211 when we talked about that, that was four years ago. That’s a long time in internet time.
Rob: I might need to go back and listen to that episode to hear what we said. How much you want to bet? Oh, I’m going to go search it and see if the word fundstrapping if I mentioned it in there.
Mike: I don’t think so. Oh, it is.
Rob: Is it?
Mike: Yup. About 20 minutes in, you said, “I heard the term fundstrapping and I really like it. It was from Colin at customer.io.”
Rob: There it is. In 20 minute then boom. This is 2014, November of 2014 even back then.
Mike: But you were in the middle of Drip at the time, were you?
Rob: Yeah.
Mike: Was that right?
Rob: Yup. In the middle of Drip and I was probably already thinking about because at this point, we were growing fast and I was dumping all the money I had into it, both from that revenue and from HitTail, and I was thinking, “Boy, if I had half a million bucks right now, given our growth rate could have raised it. If I had half a million bucks right now, we could grow faster. I can hire more and have more servers and not shut down EC2 instances on the weekend.”
We used to do that to save money that’s insane, that lengths. I remember valuating Wistia versus SproutVideo, and Wistia, for what we need, it was $150 a month and Sprout was $30. It’s a nice tool but now way it was Wistia. I went with SproutVideo because I needed that $120 bucks to pay something else. We had to migrate later and it was a bunch of time and all that stuff. I never would have made that choice if we’d had a little more money in the bank. It’s the luxury of having some investment capital.
Mike: Yeah and unfortunately, you have to make a lot of trade-offs like that. You spend a lot of mental cycles and overhead making those trade-offs and just making the decisions because you don’t have the money, which is a crappy situation to be in. All that said, part of the problem is, you don’t necessarily want to raise money if the idea itself or the business model just simply doesn’t have merit. Maybe that’s partly what those investors are there for is to make sure that they act as something of a filter.
That’s always the problem that I’ve seen with angel investors is that they’re the ones who are in control, not you. Maybe angel investors isn’t the right word, but outside investment where they basically end up getting control of enough of it that you don’t get to make the decisions anymore. They’re the ones who make the decisions whether or not your business is going to succeed based on whether or not you get the money. If you can’t set aside the time, like nights and weekends, to be able to do it, it’s just not going to work out. You need that money in order to make the business work, then it’s going to be a problem for you down the road.
Rob: And that’s the thing is the losing control of your business tends to be if you raised multiple rounds because each round you sell, let’s say, 15%-20% is typical. May 15%-25% and if you do one round, you still have control. You and your co-founder or you if you’re a solo founder still own that 80%. But if you do another round, another right you get two, three rounds in, it’s typically by series C or D where the founders are the minority shareholder and investors now own most of it. If you don’t been on the path, it’s unlikely, or if you just make bad decisions.
I saw someone on Shark Tank where they had no money upfront and they sold 80% of their company to an investor, to an angel investor. Shark Tank was like, “We can’t fund you because you’re working for nothing.” All the work is for the investor. If you make a bad choice, that’s another way to do it too. You do need to educate yourself about it and I think that’s something that some people don’t want to do because it is boring stuff.
I really like the books that Brad Feld does and this one is maybe like venture funding or like a guide to venture funding. I got four chapters in and I just couldn’t stand it because it was all terms. He didn’t write it. It was more of a series that he’s involved in. The terms were just so boring that I stopped. I understand if you don’t want to learn at all. You need to learn enough about it to do it.
I want to flip back to something that Natalie Nagele responded to Justin Jackson and then it was actually just what I was thinking when I saw his graph. It was five years to $21,000 MRR. In all honesty dude, I would shut that business down before I wait it that long. I forget how long it took Drip but it was maybe a year. I don’t think it was even a year from when we launched and it was probably 12-18 months from when we broke around on code, that we had $21,000 MRR.
Drip was admittedly a bit of a Cinderella story. It was fast at growth than most but if you’re growing $100 a month in the beginning and you continue that 10% growth like that, you can’t do that. You need to get it up—
Mike: But I don’t think that’s a fair comparison, though, because if you look at the way Drip was funded into, you said 21 months or so to get to that point? He’s talking about a completed self-funded company versus something where you put money in from HitTail. Those are two entirely different things. I don’t know all about the details of Transistor but my guess is that there’s a huge disparity in terms of the amount of code and the quality of code that needs to go into something like Drip because of the sheer complexity of it versus something like Transistor.
Rob: Yeah, that’s true. I was for the long entrepreneurial journey too, I would say. I had successes that I’ve parlaid into it. You’re right. It’s not a fair comparison. I shouldn’t say with the Drip but…
Mike: I was just arguing about the point of, if it was five years to get to the $20,000 in MRR, should you shut that down? I think it’s a very different answer based on what it is that you’re putting into it. If you’re dumping $200,000 into it, yeah, you probably should shut it down if it’s still going to take you five years to get to that. But if you put nothing into it, or $10,000 into it but it takes five years to get there, it’s like, “Uh, well, I don’t know.” It’s a judgment call.
Rob: It’s interesting and that’s the thing. When I think back in 2005, I started with DotNetInvoice, making a couple of grand a month. It took me until late 2008 to get to where I was making about $100,000 a year, between $100,000-$120,000 a year and that’s when I stopped consulting.
So it took me three and a half years. But again, I did it with no funding and I cobbled it all together myself. That’s the situation we’re talking. I wasn’t doing SaaS. I did it with these multiple products. I think if I was less risk-averse, I’ve could’ve done it faster. I think that’s probably what we’re talking about here. It’s getting a little bit more ambitious and trying to speed things up. How do you do that?
Mike: Part of being more ambitious these days, I think, is because you’re forced to, because of the level of competition that’s out there. You have to do something that’s quite a bit above and beyond what you would have done three or five years ago because the competition is there and people are going to be asking for features that they see in other products that you’re trying to compete against. If you don’t have those features, they’re going to say, “Well, I could pay the same amount of money to you versus this other product and they’ve already got those features so why would I go with you?”
You’re just not able to compete unless you have those features there that you can demonstrate. It’s not even just about the marking. It’s about having the things they need. If you don’t have them, they can’t go with you. It’s not even that they like you. They just won’t do it.
Rob: Yeah and that’s true. Again, funding even the way we’re talking about it, it’s not going to fix all ills. If you pick those markets that’s too small or you don’t build a good product, you’re not going to get to action. Or if it’s a market that people aren’t interested, or you don’t know how to market, you don’t have the experience, you don’t suddenly become an expert startup founder just because you raise funding but if you have the chops and funding is a big piece.
Time is a big piece because you’re only working nights and weekends. You can only put 10 hours a weekend or rather 15 hours. It’s a big difference if you can suddenly go to 40 or 50 hours with two co-founders. It doesn’t fix everything. In addition, does it come with complexity? Yes. You have to report to your investors once a month with an email. You can feel the stress of that.
That was actually something that I asked Justin McGill, Jordan Gal, and Matt Goldman, those are the co-founders of those three businesses that I mentioned earlier, CartHook, LeadFuze, and Churn Buster, and I said, “Hey, do you feel raising this money made things more stressful or less stressful?” They each have their own take on it. If I recall, Justin McGill was like, “It’s more stressful because I feel like if we don’t grow, we’re going to let you guys down.” A lot of the investors he has a lot of respect for. That’s one way it cut through. It can make it more stressful.
I don’t want to put words in people’s mouths but I think Jordan had said, “It’s more stressful but better because it motivates him to succeed.” you got to think about how your personality is and if you feel like it’s going to add more stress, if suddenly five or 10 people that you really respect, that are friends, colleagues, and fellow Microconf attendees write a check to you, how does that make you feel?
Mike: Yeah. I think the answer’s going to be different for every person, especially depending on what your product is like, what the expectations are, how you’ve position it, and how the investor views it. Some investors just say, “Yeah, I may lose all this and that’s totally okay,” and other ones may say, “I have these expectations and you’re not meeting them,” if you miss a deadline or something like that.
There’s a lot of dynamics and complexity there. Some people will thrive in it and some people won’t. I think at the end of the day, I also feel having money has the potential to make the downsides of your product or business model worse. It will just exacerbate some of those issues. If you don’t have a market that you can actually go to, if you think you do but you don’t, and you get a bunch of money in, I think it’s just going to make it worse because yes, you can try a bunch of things and you’ll be able to throw money on it, but then you’re burning more money than you would have otherwise.
Rob: That’s the thing. I know we’re going long on time but really important. I would not raise any type of funding before I have product market fit. That’s a personal thing because (a) your valuation is way last before then, and (b) no one is going to give you money if you don’t have a product, period. You have to have a product these days. You can’t raise money on an idea unless you’re Rand Fishkin, or Jason Cohen, or a founder who’s been there and done that.
You have to have a product, you have to probably be live or at least have beta users, your should have paying customers. That’s a bare minimum to even think about trying to raise funding. You have to get there. You have to write the code, you have to beg, steal and, borrow to get someone to write the code. But the valuation is going to be way less and you’re probably going to burn though a lot of that money just trying to get to product market fit. From the time you launch until you’re part of market fit, I’m going to say it’s 6-12 months if you know what you’re doing.
You see founders like Shawn Ellis, you saw Jason Cohen, you saw me do a Drip. You see people who are pretty good at it and know what they’re doing, and it still takes them six months, and ours still takes 9-12 months to do it. At that point, once you do it and you do kick it in a little bit of that growth mode where it’s like, “Okay people, are really starting to uptick it.” That’s when you pour gasoline on the fire.
But before that, I have seen at least one startup in the last year raise a small round before product market fit, and just burned through it really fast because they staffed up, do a lot of marketing and do a lot of sales, and it just that their churn was so high. That’s typically where you can tell his people aren’t converting to pay it or they aren’t sticking around. There are dangers there. Like a samurai sword, like a said in the past, it’s a weapon that you need to know what you’re doing with to wield well and I think you need to be smart about when you raise.
Mike: Yeah and it sounds like there’s obviously different takes on it. If you want to go down like the VC or angel route, series A funding down the road, I think it’s possible to probably raise money if you have any sort of history or relationship with them, like if you don’t have a product yet. But you’re still also going to get eaten alive in terms of the equity shares and everything.
I think that point that you raised about you have to have a product and you have to have paying customers before you start to go raise money, that’s how you maintain your equity, a fair amount of the equity, enough of the control to be able to what you want, need to with the business, and also be reasonable sure and confident that you’re not going to just waste the investor’s money and burn those relationships. You can use that money for good, and you know what that money will do for you versus you’re still trying to get to product market fit. You don’t know who’s going to but it or who uses it, or why.
Rob: Yeah and the once exception as I’m thinking about it is if you raise a big chunk, let’s say you raise $250,000 or $500,000 and you feel like you need to spend it, and so you staff up but your not part of market fit, you’re going to treat their money. But the exception I can think of, is like I said earlier. What if you just bought yourself 12 months of time and you didn’t staff up but you just worked on it, or 18 months. You didn’t raise this huge amount of money or raise a small amount to just focus on it and work, I could see doing that before product market fit. That would get you to the point where then you can raise that next round.
I’m not trying to be wish-wash but I’m realizing I never said never raise before product market fit but I did say I wouldn’t personally. But I have the resources to get me to product market fit and I could work on a full-time to do that. It’s an exception. If was I doing it nights and weekends, then I would take money before I see I have to think about where the advice is coming from or where the thoughts are coming from. I’m just thinking it through as if I were literally doing this nights and weekends, I would consider taking money as soon as I could. If I was going down this road because going full-time is a game-changer. Being able to focus full-time, being able to leave everything behind is a big deal. It really is and a night and day difference.
Mike: I know there’ll be a range of opinions on it, but I wonder what most investors would think about, somebody saying, “Hey, we got this product. I’ve been working on it and I’d like to get some funding and money in the bank, basically to extend the runway because I got a little bit of something going here, I got partial product in place, I got some customers, but it’s not a lot. I need runway in order to make it work but I don’t know specifically how much runway I necessarily need or how I’m going to get to having $10,000-$20,000 MRR, but I need time to get there. There’s something here but I don’t know what.” I think it’s hard to evaluate for anybody what that looks like.
Rob: Yeah. I don’t know of any investors today that would work with that. I think that’s a good thing to bring up. It’s like, is that a gap in the market then? Could that be a successful funding model of looking at people who essentially have the potential and have, like you said, pre-product market fit but have something to show for it and looking at backing them for a period of time.
Anyway, I love this topic and I think that we’ll probably talking about it again, just soon you’ll be hearing more on it from me, but I feel we might need to wrap this one up today.
Mike: Yeah. Great talk. I like it.
Rob: Me as well. So if you have a question for us about this or any other topic, call our voicemail number 888-801-9690 or email us at questions@startupsfortherestofus.com. Our theme music is an excerpt from We’re Outta Control by MoOt used under Creative Commons. Subscribe to us in iTunes by searching for startups and visit startupsfortherestofus.com for a full transcript of each and every episode. Thanks for listening and we’ll see you next time.
Welcome to Startups For The Rest Of Us. The podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing software products, whether you build your first product or you’re just thinking about it. I’m Mike.
Rob: And I’m Rob.
Mike: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s going on this week, Rob?
Rob: We have new iTunes reviews.
Mike: Oh, cool. What do we got?
Rob: This one from Find Fitness Pros. It says, “This is my go-to podcast every Tuesday morning. Rob and Mike continue to give their insights, not just info on exactly what to do,” and from Nathan Bell, he says, “Great information. I listened to one episode and I’m hooked. It was full of great information I can easily implement. Some of the info was a little bit advanced for me currently, but I’m confident that by selectively listening to more, I will pick up more.”
Those are a couple of new iTunes reviews that we have. I used to keep a worldwide tally of it using CommentCast and when I moved to my new computer, I don’t have the .exe or what is it called, it’s a .app I guess in Mac. I don’t have the executable anymore and you can’t download it anywhere. So I moved over to mypodcastreviews.com but it only gives me reviews, not ratings. We’re up to almost 600 worldwide ratings, I believe. People don’t necessarily need to write sentences or whatever, but I don’t have that tally anymore. Certainly, we’re above 600 at this point.
Now, what I have is I have 347 worldwide reviews and that’s a lesser number. I want to get back to the world’s rating. I think the guy at My Podcast Reviews says that they are going to add ratings but neither here nor there, the more reviews or ratings we get, the more likely people find the show, the more motivation it gives us. If you feel like we’ve given you some value as a listener to the show, it would be awesome if you can open iTunes or Stitcher and just give us a five-star review. Really appreciate it.
Mike: The solution to not having that app that gives you the numbers is just make up a number. So we’re at 3000 reviews I think.
Rob: That’s right. 3422 reviews. That’s great. How about you, man? What’s going on this week?
Mike: Well, this morning, I published a public API for Bluetick. Of course, I say it’s a public API but there’s actually only one person who actually knows about it.
Rob: It’s in beta?
Mike: Yeah, basically.
Rob: Early access, good.
Mike: I had a prospect who wanted to sign on and they’re like, “Yeah, I really need to have a public API that is available for me and Zapier wasn’t going to work for them. Basically as I said, I spun it out because I heard from a bunch of customers that I currently have, and I started talking to them about, “What is it that you need?” and trying to figure out what’s the minimum that I could build that this particular prospect or customer would need to get started. They only needed four things. Build those, put them into it, and then there’s all the infrastructure changes that needed to go into it.
It took a week-and-a-half just to do the infrastructure changes but now the best stuff if all taken cared of. I got that published out there and waiting for them to start using it, and then figure out what needs to change. I already made it very clear upfront, like, “Hey, here are some things that I know we’re going to change, and then over here, based on what you tell me, other things could change, so treat this as an absolute beta. Eventually at some point it will become stable, I guess, and then I’ll start pushing it live to everybody.
Rob: That’s nice. It’s nice to do. You’re basically doing customer development on what is its own little product. You can say it’s a feature but really some entire products are just APIs. You want to get it right from the start, and by start, I mean by the time you publish and people start hooking into it, you can’t change it at that point. I think it’s really good to take this approach of roll it out slowly, roll out one endpoint at a time and really think through how you want to structure it.
I was just on your site trying to guess the URL. I was going to just type in a bunch of stuff so you’re going to see a bunch of 404s in your error logs. Not a hacker, it was me, but I didn’t find it alas.
Mike: No, that sucks. I would tell you if you asked for the right price. Other than that, I also got my first fraudulent charge from Bluetick. It took a lot longer than I expected it to but somebody signed up, then they logged in, and absolutely they didn’t pay any attention to the onboarding emails. Come time when their trial is up, they got charged, and then I forget how long it was later. I was maybe probably three or four days later, I got a notification from Stripe saying, “Hey this charge looks fraudulent,” and I looked at it. I think it’s a debit card too and I was like, “Oh great.” Three hours later though like, “Oh you’ve had a chargeback.” I was like, “Wait, I didn’t even get a chance to decide that to do with this potentially fraudulent charge,” and they already converted it into a chargeback, which cost me an extra $15. Well that sucks, but, oh well.
Rob: Was it a person not using or was it a stolen credit card? Is that what you think? Or do you think that they just went in with the intention that it was their own credit card and they just intended at the whole time?
Mike: I’m not sure. It looks legit. The email address, I couldn’t quite tell whether it was real. I think it was a Gmail email address. I couldn’t really trace it back to a company or anything like that but the name on it seem to match what the email address was. I don’t know. I’m not entirely sure but I think it was from a real estate company or something like that. All right, well, whatever.
Rob: Yeah, that sucks. It’s going to happen. It’s definitely a milestone you don’t want to hit but you’re going to hit it eventually.
Mike: Yup. Certainly not a milestone to celebrate but I definitely hit it.
Rob: Yeah, exactly. Cool. What are we talking about today?
Mike: Today, I thought we would have a discussion about whether or not bootstrapper should be raising money. I guess by definition if you’re raising money, are you no longer a bootstrapper at that point? I think there’s maybe a time during which you are bootstrapping a company and self-funding it. I almost called it self-funding, like should people who are self-funding raise money, but again that would go against it.
The idea came because I saw Justin Jackson had tweeted out a link to an article he wrote over on Indie Hackers called The Bootstrapper’s Paradox. In that article, he shows a graph or what they’re doing for transistor.fm, which is the new startup that he’s working on. Basically it shows a graph of over the course of 60 months was 10% exponential growth and 5% turn. The MRR will get to $21,000. But 60 months is five years of time.
I thought it would be interesting to just have a conversation about this because when I was reading through the tweet that he had put out, there were a bunch of people who chimed in on it, mostly people who were listening to the show would have heard of like Des Traynor, Jason Collin, and Natalie Nagel. They’re giving their thoughts on this stuff and I just thought it would be interesting to talk about it.
Rob: Yeah, that’s for sure. 10% growth every month sounds like an impressive number but when the number starts very small, like $1000 a month, that means you’re growing $100 MRR a month. You just can’t do that early days or if you do, it’s going to take five years. You either need to figure out a way to grow faster or you need to be really patient.
This is a struggle. It’s funny that, Justin called it The Bootstrapper’s Paradox. I don’t know that it’s that as much as this is the reason people raise funding. We know people who are just bootstrapper through and through, you should never raise funding and 37signals used to say that and even mentions it that DHH and Jason Fried took funding from Jeff Bezos two years after launching Basecamp. It wasn’t even funding that went into the company. They took money off the table. If I recall, I think that number is public. I think it’s $10 million that he invested, was my memory and maybe I don’t think I’m making that up. It’s either rumored at that or it was announced.
They had essentially at that point had FU money and it’s really easy to make different decisions or just say, “Hey, we’re going to grow as slow or as fast as we need,” when you have that kind of money in your personal bank account and you’re just running this business day-to-day.
Justin’s article is a bootstrapper’s realization of “Oh Sh*t.” This is why people do raise money. It’s coming to that realization at this point and I think it’s a good thing to call out for sure. I’ve been thinking about this so much so I’m looking forward to today’s episode because in my Microconf talk this year, I talked about things that I learned bootstrapping and then self-funding and then in a venture back company after Leadpages acquired us.
In the last five to seven minutes I did just a little snippet about fundstrapping, which is this term that Colin from customer.io coined, where you’re kind of in-between. You bootstrapped a little bit and you raised a small round. I say it’s between 200,000 and 500,000 and you raise it with the intention of getting to profitability. Without, you’re never going to raise institutional money, or raise it from friends or families or angels, so you don’t give up control, you don’t give up a board seat, you really have the benefits of funding without the institutional chaos of it, the headache.
It wasn’t a throwaway piece but I almost didn’t include it in the talk. That piece has gotten me more emails, more comments, more thoughts, more people came up to me, ask me what that’s like, asked if I would invest or find new people who were doing fundstrapping. It’s just fascinating response to this, this thing that’s been percolating. It’s a long rant on it to start but I just think this is becoming more and more of a viable option and potentially even a necessity as the SaaS market gets more and more crowded.
Mike: Yeah. That’s the part that I think has changed over time, where five or 10 years ago, you could come out with a SaaS and you’d launch it to the public and you would start to grow by virtually the fact that there was nobody else out there or there were very few competitors out there doing what you were doing. Now if you launch anything, you probably got a couple of competitors just right out of the gate. If you don’t, then you probably don’t have a product that’s going to go anywhere. But if you have any competition, it’s probably substantially more competition today than you would’ve had five years ago or 10 years ago. Just by virtue of having launched five or 10 years ago, you were going to be more successful quicker than you would if you did the exact same thing now. It’s going to take longer, which means that you’re going to burn through more runway and it’s just going to be harder.
Rob: Right. Now, five or 10 years ago, there was less competition but the expenses would have been higher, 10 years ago especially because you literally needed a rack server. There was no Amazon EC2. In addition, there was still like when Basecamp first launched on their homepage, they were like, “You don’t have to install any software. No downloads needed.” They were still educating on just the concept of being in the cloud and there were hurdles there.
Mike: That was almost 15 years ago.
Rob: Yeah, that’s true. No, you’re right. That was 2005 or 2006? You’re right, 12 or 13. You’re right. But even with that, say 10 years ago, even with that, it’s still I believe was easier back then. But that doesn’t mean you shouldn’t start something today. It just means you got to house some more, you got to pick a better niche, you got to have more skills, or you need a little more money in the bank.
Whether that means you raise it yourself out of consulting efforts, which is what I did, or if there’s definitely more money being thrown around as funding these days that is, I’m not going to say no strings attached because it’s certainly they take equity, but 10 years ago if you took half-a-million bucks, boy that was typically institutional money, it was a pain in the butt to raise, you are giving up a lot of control, you are giving up a board seat, that is no longer the case. There really is this viable option, this in-between.
Mike: I think if you look at the businesses that, in the past have tried to figure out how to raise capital, one of the things that most people, 15-20 years ago, it was common to say, “Okay, let me go to a bank and get a loan from the bank.” But that is a non-starter for most new businesses. You got SBA loans and things like that where you can use the money to take over an existing business where they’re able to evaluate.
But if you have a business that you’re trying to get off the ground, a bank loan is basically a non-starter, especially when it comes to SaaS because they don’t understand how to calculate how much that business is worth. There isn’t any inventory and with software, it’s going to lag in terms of the revenue over something like a physical goods business, or a coffee shop, or a fitness studio where they know how many people are coming in and they can put a value on the equipment whether it’s the coffee machines or the spin cycles on a fitness studio. Banks are okay with that. They understand that.
But when you got a software business, the expectations today are much higher than they were five or 10 years ago. You have to do a lot more in order to make your product a lot more polished, which means it’s going to take time to do that which burns through your runway. It burns through that money a lot faster today. I guess you wouldn’t burn through it faster. It’s just you burn through more of it than you would have 10 years ago to get to the same point.
Rob: Even if you can get a loan, you have to send a personal guarantee. Now, all your personal assets are on the line. And if you decide to shut the company down, you owe them money. If you borrow $100,000 it’s a big deal. To me, that is more of a risk than I think an entrepreneur should take, unless you’re at the point where you already have, “All right, I’m at $10,000 MRR,” in which case you may or may not need the money, but if you’re at $10,000 MRR, you should raise equity funding anyway.
But if you know the business is going to succeed, that’s fine. When I hear that people charge $50,000 or $100,000 on credit cards to start a SaaS business, I’m like, “Oy vey.” That is going to be catastrophic. That is a really, really stressful way to live and it’s something I would not do, especially when we’re in a space where raising equity capital is relatively inexpensive. Raising a small angel round and selling 10% or even 20% of your company to reduce a lot of stress and to get there faster, I think it’s a pretty reasonable idea these days. It’s not impossible to do, I’ll say.
Mike: I want to talk about that specifically right there. What you just said was raising capital is relatively inexpensive. The reason I like the way that you put that is that when I think of the way I thought about raising funding years ago was that, “Oh, I’m going to have to give up a lot of control, I’m going to have to give up a lot of equity, and I don’t necessarily want to do either of those things.”
But if you’re thinking about putting together a business and you have anybody who’s helping you—a partner or a co-founder, something like that—your immediately giving up 50% of the company anyway, and then there’s a whole lot of difference between doing that and giving up 50% when there’s really nothing there, and yes, it could grow up to be something huge, but you’re giving up 50%.
So there’s like a mental block there of you saying, “Okay, well I’ll raise $250,000 in exchange for 10% of this,” and you don’t want to do that but you’re willing to give up 50% to somebody else when there’s really nothing there that’s being invested except for their time. Do you know what I mean?
Rob: Yeah. It’s cognitive dissonance I believe is the term where two things that don’t agree or paradox, I guess. It’s something in your head you’re rationalizing one way but then you turn around and give away 50% to a co-founder. That’s what you’re saying, It’s like you can give a small amount to get a big chunk of money, or even if it’s a small chunk of money.
Here’s the thing. Let’s say you live in the middle of Minnesota, or the middle of Nebraska, or something and you have an idea and you raised even $100,000 or $150,000 and you paid for your salary for a year or a year-and-a-half. That gives you a year or a year-and-a-half to get to some point of revenue that makes sense. Even if you gave away 15% of your company, you’re valuing it at $1 million right off the bat, or if you give away 20% or $750,000, it still makes your life a lot easier.
I think that’s the realization I’m coming to, is that at Microconf, or through this podcast, or whatever at different conferences, we meet smart people who are trying to launch businesses and something that stands in their way often is that, “I have a wife and kids. I have a house. I can’t do this nights and weekends. But I don’t want to raise funding because it’s really complicated. I don’t know how.”
What’s funny is you outlined this episode and you brought the topic up. But this is something I’ve been thinking a lot about, and there’s a gap here in the space. We do have folks like indie.vc which, if you haven’t heard my interview with Bryce from indie.vc, it’s episode 310 of this podcast, and it’s a more realistic approach to funding. It’s kind of a fundstrapping model. I’d recommend you go listen to that.
In addition, I feel we’re coming to an inflection point where there’s this gap and there’s a level of interest in something, and no one is filling it. No spoilers on what I’m up to next, but I’m starting to feel I might be the person to tackle this, to take it on. I’ve been spreading the word about it. I have been talking about it for years and I’ve been investing in startup like this.
We talk about Churn Buster, LeadFuze, CartHook. These are all small angel investments. I’ve done about 12 angel investments and I think three or four of them were essentially fundstrapped. it’s where they took money from a handful of folks and they never planned to raise a series A. I put my money where my mouth is, but now I’m thinking I only have so much money, how is it that I can take this to the next level in a realistic way. It’s something that’s definitely in the back of my mind and it’s something that I’ve been thinking a lot. Hopefully, we’ll dive into more in the future.
Speaking of that, if you listen to this and your thinking, “Oh, this is an interesting topic,” go to robwalling.com. Enter your email because it’s going to be something that I’m going to be thinking more about in the future as well as on this podcast for sure.
Mike: One of the comments that jumped out of me on the Twitter post that Justin had put out there was from Des Traynor and he said, “I think a second piece people don’t really internalize is that 60 months of the best years of your career is a substantial upfront investment too. Like a seed round but instead of money, it’s your life.”
That’s a fascinating way of looking at this because even back n the day, I would always say, “Oh, well. You know you’re basically trading money for time,” and I don’t think that I really equated time with years of my life. It sounds intuitively obvious. That’s exact same thing. But when you’re in the middle of working on stuff, you don’t think, “Oh, I’m trading five years of my life away of hard toil to get this thing to where it could be a lot sooner if I were just to take some money and trade some of that equity for it.”
Rob: Right. It could feasibly be a lot sooner. It may or may not. Money doesn’t solve all the problems but it certainly makes things, I’ll say less stressful and you having done it with true bootstrapping with basically nothing and doing nights and weekends, to then self-funding with revenue from HitTail going into Drip, and then venture funded. I’ve done all three of these. I will tell you that having that venture money, I didn’t have to raise it and I did attend the board meetings but I didn’t necessarily have to report to the board. My life was less stressful at that point than either of the prior two scenarios.
I think it’s a good point, man. I don’t want to come off. You can tell, I’m coming off kind of pro-raising a small round, and I don’t want to come off too one-sided. We’ve never been anti-funding ever. From the start, Microconf, I think in the original sales letter. It was, we’re not anti-funding. We’re anti everyone thinks the only way to start a software company or a startup is with funding. That maybe from the introduction of my book, actually—Start Small, Stay Small.
Even back then in 2010, I was saying, “Look, raising funding is not evil in and of itself. It’s the things that you have to give up by raising funding. Just know what you’re getting into.” Yes, we have seen founders that get kicked out of their own company. There was, I figure what that app it was. Was it Tinder? Something sold for $460 million. No. It’s FanDuel. It’s sold for $460 million and the founder who started it, and I believe was CEO when it started, he got no money because of liquidation preferences and he’s suing them.
That’s a huge exit. He got I believe it was zero dollars from the exit. There was an article or something that was like, he’s suing them now. If the contract say this is what the liquidation preference is, that’s one thing but he’s suing them because he thinks they screwed with the valuation intentionally and there was fraud or something. He’s not going to win if he just says, “No, that wasn’t the deal,” because he signed the papers. These VCs are not stupid but he’s trying to do that.
Yes, that does happen. But I believe there is a way to do this and I’m seeing it with these smaller SaaS apps. A way to do it without that much stress, without giving up that much equity. Brennan Dunn, RightMessage. That’s another one. I also wrote a check. And Rand Fishkin’s SparkToro. He’s doing the same thing. He’s not calling it fundstrapping, but he said, “Hey, we’re going to raise around, and we’re going to get to profitability, and we don’t want to do institutional money. If you listen to Lost and Founder which is his book, he talks about the perils of all that and you couldn’t read that and say, I can see really they didn’t like – once they raise funding, he really didn’t like it.
You can look and say, “Well, Rand’s anti-funding now.” But no, he’s more anti-institutional money, and there’s a difference. Venture capital is institutional money. These angel rounds tend not to be.
Mike: But I think even back, we’ve talked about it on the podcast before. As you said, we always had the position that, it’s not that we’re anti-funding, we’re anti-this-is-the-only-way-to-do-it. That’s always been my thought behind it. I’ll say the majority of my career and thought process has been like, “Yeah, I really just don’t want to take funding in this more because I don’t want to necessarily give up control.” Back then there weren’t really the options for that. Now, things have changed a lot. It’s not, say, front and center on my radar, but it’s something I’m definitely looking at niche and exploring a little bit more.
I definitely think that—like with Bluetick for example—there’s ways to go further faster, but I just don’t necessarily have the money to be able to do it, which sucks but at the same time, it’s always a trade-off. I think that’s what you always have to consider is, what is the trade-off and what am I going to have to give up in order for me to get X amount of influx and then what are you going to do with that?
You have to have a plan. You can’t just say, “I want to raise money.” You got to have a plan for not just raising money but also what are you going to do with that money when you get it? How are you going to deploy it? How are you going to build the company and how are you going to grow things? You can’t just drop $100,000 in your bank account or $500,000 and say, “Okay great. I’ve raised money. Now what?” They’re not going to give you the money if you don’t have a plan.
Rob: And if you don’t know what you’re doing, money’s not going to fix that. You’re just going to make bigger mistakes. This comes back to the stair-step approach. No chance I would have raised money in 2005-2009 with ,DotNetInvoice, and Wedding Toolbox and just beach towels and stuff. Even if I could have made the case that DotNetInvoice would grow to something, I would have made huge mistakes because I made small ones back then. But I learned and I gained experience and I gained confidence.
By the time I get to HitTail, I remember thinking, “Yeah,” because remember, I bought HitTail for $30,000 and then I grew it up to basically that much MRR per month but end and I value at it. Maybe I should raise a little bit of money in it. It would make this a little easier. But to me, it was the headache of it. I was like, “I do not want to slog around and spend months asking people and the paperwork.” It just felt like a pain in the butt to me. I don’t know if I could have. Did I have the name recognition? Could I have raised enough?
Arguably, yes. By the time I got to Drip, it was definitely like it. If I haven’t had that HitTail money, let’s just say I’d had none of it. I basically used a bunch or revenue from HitTail to fund Drip. If I hadn’t had that? I absolutely would have seriously considered doing what we’re talking about raising a small round. I knew Drip was ambitious, I knew it was going to get big at least by the time we are six or eight months in, and it had a need for that.
That’s what we’re saying here is the words always, never, and should, they’re not helpful words. Don’t say, “I should always raise funding.” “I should never raise funding.” “I should raise funding other people think I should or shouldn’t.” These are not helpful words. Just evaluate things and look at them, and like you said, look at the trade-offs. Pluses and the minuses, and the realities of them, not the FUD. Not the fear, uncertainty, and doubt.
I can tell you the story, “Oh, look. The founder of Fandle. He got screwed by his investors. Therefore, I’m never going to raise investing or I’m never going to raise funds.” That’s dumb. Actually look at the black-and-white of it. I think that’s what we’re talking about today. We;re not saying you should or should not, but it’s look at the reality of it.
Now, you and I talked about this in-depth in episode 211, When To Consider Outside Investment For Your Startup. We went in-depth on what are funds and family round, an angel round, or often called a seed round was. We talked about series A, B, C. Once you get to the serieses, that’s when you get to institutional money, which is when things get way more complicated. Once you raise a series A, it’s the point of no return. It’s implied you’re going to raise a B, a C, and go on to either have this huge exit or an IPO, and it’s growth at all cost for the most part.
But if you’re able to stop before that series A and stick to people who are on board with you, angel investors and such are on board with, “Hey, let’s build a $5 million, $10 million, $15 million company with it, it’ SaaS. Let’s do a 30%, 40%, 50% net margin on this thing.” That’s great. That’s the kind of company I want to build and that’s the kind of company I want to invest in.
But venture capitalists don’t want to invest in that. If that’s not your goal, to go to $100 million and do what it takes to do that, then you don’t want to go down that road. You want to have those expectations clear both in your head upfront, as well as anybody who’s writing you a check.
Mike: Right. The problem with that is that episode 211 when we talked about that, that was four years ago. That’s a long time in internet time.
Rob: I might need to go back and listen to that episode to hear what we said. How much you want to bet? Oh, I’m going to go search it and see if the word fundstrapping if I mentioned it in there.
Mike: I don’t think so. Oh, it is.
Rob: Is it?
Mike: Yup. About 20 minutes in, you said, “I heard the term fundstrapping and I really like it. It was from Colin at customer.io.”
Rob: There it is. In 20 minute then boom. This is 2014, November of 2014 even back then.
Mike: But you were in the middle of Drip at the time, were you?
Rob: Yeah.
Mike: Was that right?
Rob: Yup. In the middle of Drip and I was probably already thinking about because at this point, we were growing fast and I was dumping all the money I had into it, both from that revenue and from HitTail, and I was thinking, “Boy, if I had half a million bucks right now, given our growth rate could have raised it. If I had half a million bucks right now, we could grow faster. I can hire more and have more servers and not shut down EC2 instances on the weekend.”
We used to do that to save money that’s insane, that lengths. I remember valuating Wistia versus SproutVideo, and Wistia, for what we need, it was $150 a month and Sprout was $30. It’s a nice tool but now way it was Wistia. I went with SproutVideo because I needed that $120 bucks to pay something else. We had to migrate later and it was a bunch of time and all that stuff. I never would have made that choice if we’d had a little more money in the bank. It’s the luxury of having some investment capital.
Mike: Yeah and unfortunately, you have to make a lot of trade-offs like that. You spend a lot of mental cycles and overhead making those trade-offs and just making the decisions because you don’t have the money, which is a crappy situation to be in. All that said, part of the problem is, you don’t necessarily want to raise money if the idea itself or the business model just simply doesn’t have merit. Maybe that’s partly what those investors are there for is to make sure that they act as something of a filter.
That’s always the problem that I’ve seen with angel investors is that they’re the ones who are in control, not you. Maybe angel investors isn’t the right word, but outside investment where they basically end up getting control of enough of it that you don’t get to make the decisions anymore. They’re the ones who make the decisions whether or not your business is going to succeed based on whether or not you get the money. If you can’t set aside the time, like nights and weekends, to be able to do it, it’s just not going to work out. You need that money in order to make the business work, then it’s going to be a problem for you down the road.
Rob: And that’s the thing is the losing control of your business tends to be if you raised multiple rounds because each round you sell, let’s say, 15%-20% is typical. May 15%-25% and if you do one round, you still have control. You and your co-founder or you if you’re a solo founder still own that 80%. But if you do another round, another right you get two, three rounds in, it’s typically by series C or D where the founders are the minority shareholder and investors now own most of it. If you don’t been on the path, it’s unlikely, or if you just make bad decisions.
I saw someone on Shark Tank where they had no money upfront and they sold 80% of their company to an investor, to an angel investor. Shark Tank was like, “We can’t fund you because you’re working for nothing.” All the work is for the investor. If you make a bad choice, that’s another way to do it too. You do need to educate yourself about it and I think that’s something that some people don’t want to do because it is boring stuff.
I really like the books that Brad Feld does and this one is maybe like venture funding or like a guide to venture funding. I got four chapters in and I just couldn’t stand it because it was all terms. He didn’t write it. It was more of a series that he’s involved in. The terms were just so boring that I stopped. I understand if you don’t want to learn at all. You need to learn enough about it to do it.
I want to flip back to something that Natalie Nagele responded to Justin Jackson and then it was actually just what I was thinking when I saw his graph. It was five years to $21,000 MRR. In all honesty dude, I would shut that business down before I wait it that long. I forget how long it took Drip but it was maybe a year. I don’t think it was even a year from when we launched and it was probably 12-18 months from when we broke around on code, that we had $21,000 MRR.
Drip was admittedly a bit of a Cinderella story. It was fast at growth than most but if you’re growing $100 a month in the beginning and you continue that 10% growth like that, you can’t do that. You need to get it up—
Mike: But I don’t think that’s a fair comparison, though, because if you look at the way Drip was funded into, you said 21 months or so to get to that point? He’s talking about a completed self-funded company versus something where you put money in from HitTail. Those are two entirely different things. I don’t know all about the details of Transistor but my guess is that there’s a huge disparity in terms of the amount of code and the quality of code that needs to go into something like Drip because of the sheer complexity of it versus something like Transistor.
Rob: Yeah, that’s true. I was for the long entrepreneurial journey too, I would say. I had successes that I’ve parlaid into it. You’re right. It’s not a fair comparison. I shouldn’t say with the Drip but…
Mike: I was just arguing about the point of, if it was five years to get to the $20,000 in MRR, should you shut that down? I think it’s a very different answer based on what it is that you’re putting into it. If you’re dumping $200,000 into it, yeah, you probably should shut it down if it’s still going to take you five years to get to that. But if you put nothing into it, or $10,000 into it but it takes five years to get there, it’s like, “Uh, well, I don’t know.” It’s a judgment call.
Rob: It’s interesting and that’s the thing. When I think back in 2005, I started with DotNetInvoice, making a couple of grand a month. It took me until late 2008 to get to where I was making about $100,000 a year, between $100,000-$120,000 a year and that’s when I stopped consulting.
So it took me three and a half years. But again, I did it with no funding and I cobbled it all together myself. That’s the situation we’re talking. I wasn’t doing SaaS. I did it with these multiple products. I think if I was less risk-averse, I’ve could’ve done it faster. I think that’s probably what we’re talking about here. It’s getting a little bit more ambitious and trying to speed things up. How do you do that?
Mike: Part of being more ambitious these days, I think, is because you’re forced to, because of the level of competition that’s out there. You have to do something that’s quite a bit above and beyond what you would have done three or five years ago because the competition is there and people are going to be asking for features that they see in other products that you’re trying to compete against. If you don’t have those features, they’re going to say, “Well, I could pay the same amount of money to you versus this other product and they’ve already got those features so why would I go with you?”
You’re just not able to compete unless you have those features there that you can demonstrate. It’s not even just about the marking. It’s about having the things they need. If you don’t have them, they can’t go with you. It’s not even that they like you. They just won’t do it.
Rob: Yeah and that’s true. Again, funding even the way we’re talking about it, it’s not going to fix all ills. If you pick those markets that’s too small or you don’t build a good product, you’re not going to get to action. Or if it’s a market that people aren’t interested, or you don’t know how to market, you don’t have the experience, you don’t suddenly become an expert startup founder just because you raise funding but if you have the chops and funding is a big piece.
Time is a big piece because you’re only working nights and weekends. You can only put 10 hours a weekend or rather 15 hours. It’s a big difference if you can suddenly go to 40 or 50 hours with two co-founders. It doesn’t fix everything. In addition, does it come with complexity? Yes. You have to report to your investors once a month with an email. You can feel the stress of that.
That was actually something that I asked Justin McGill, Jordan Gal, and Matt Goldman, those are the co-founders of those three businesses that I mentioned earlier, CartHook, LeadFuze, and Churn Buster, and I said, “Hey, do you feel raising this money made things more stressful or less stressful?” They each have their own take on it. If I recall, Justin McGill was like, “It’s more stressful because I feel like if we don’t grow, we’re going to let you guys down.” A lot of the investors he has a lot of respect for. That’s one way it cut through. It can make it more stressful.
I don’t want to put words in people’s mouths but I think Jordan had said, “It’s more stressful but better because it motivates him to succeed.” you got to think about how your personality is and if you feel like it’s going to add more stress, if suddenly five or 10 people that you really respect, that are friends, colleagues, and fellow Microconf attendees write a check to you, how does that make you feel?
Mike: Yeah. I think the answer’s going to be different for every person, especially depending on what your product is like, what the expectations are, how you’ve position it, and how the investor views it. Some investors just say, “Yeah, I may lose all this and that’s totally okay,” and other ones may say, “I have these expectations and you’re not meeting them,” if you miss a deadline or something like that.
There’s a lot of dynamics and complexity there. Some people will thrive in it and some people won’t. I think at the end of the day, I also feel having money has the potential to make the downsides of your product or business model worse. It will just exacerbate some of those issues. If you don’t have a market that you can actually go to, if you think you do but you don’t, and you get a bunch of money in, I think it’s just going to make it worse because yes, you can try a bunch of things and you’ll be able to throw money on it, but then you’re burning more money than you would have otherwise.
Rob: That’s the thing. I know we’re going long on time but really important. I would not raise any type of funding before I have product market fit. That’s a personal thing because (a) your valuation is way last before then, and (b) no one is going to give you money if you don’t have a product, period. You have to have a product these days. You can’t raise money on an idea unless you’re Rand Fishkin, or Jason Cohen, or a founder who’s been there and done that.
You have to have a product, you have to probably be live or at least have beta users, your should have paying customers. That’s a bare minimum to even think about trying to raise funding. You have to get there. You have to write the code, you have to beg, steal and, borrow to get someone to write the code. But the valuation is going to be way less and you’re probably going to burn though a lot of that money just trying to get to product market fit. From the time you launch until you’re part of market fit, I’m going to say it’s 6-12 months if you know what you’re doing.
You see founders like Shawn Ellis, you saw Jason Cohen, you saw me do a Drip. You see people who are pretty good at it and know what they’re doing, and it still takes them six months, and ours still takes 9-12 months to do it. At that point, once you do it and you do kick it in a little bit of that growth mode where it’s like, “Okay people, are really starting to uptick it.” That’s when you pour gasoline on the fire.
But before that, I have seen at least one startup in the last year raise a small round before product market fit, and just burned through it really fast because they staffed up, do a lot of marketing and do a lot of sales, and it just that their churn was so high. That’s typically where you can tell his people aren’t converting to pay it or they aren’t sticking around. There are dangers there. Like a samurai sword, like a said in the past, it’s a weapon that you need to know what you’re doing with to wield well and I think you need to be smart about when you raise.
Mike: Yeah and it sounds like there’s obviously different takes on it. If you want to go down like the VC or angel route, series A funding down the road, I think it’s possible to probably raise money if you have any sort of history or relationship with them, like if you don’t have a product yet. But you’re still also going to get eaten alive in terms of the equity shares and everything.
I think that point that you raised about you have to have a product and you have to have paying customers before you start to go raise money, that’s how you maintain your equity, a fair amount of the equity, enough of the control to be able to what you want, need to with the business, and also be reasonable sure and confident that you’re not going to just waste the investor’s money and burn those relationships. You can use that money for good, and you know what that money will do for you versus you’re still trying to get to product market fit. You don’t know who’s going to but it or who uses it, or why.
Rob: Yeah and the once exception as I’m thinking about it is if you raise a big chunk, let’s say you raise $250,000 or $500,000 and you feel like you need to spend it, and so you staff up but your not part of market fit, you’re going to treat their money. But the exception I can think of, is like I said earlier. What if you just bought yourself 12 months of time and you didn’t staff up but you just worked on it, or 18 months. You didn’t raise this huge amount of money or raise a small amount to just focus on it and work, I could see doing that before product market fit. That would get you to the point where then you can raise that next round.
I’m not trying to be wish-wash but I’m realizing I never said never raise before product market fit but I did say I wouldn’t personally. But I have the resources to get me to product market fit and I could work on a full-time to do that. It’s an exception. If was I doing it nights and weekends, then I would take money before I see I have to think about where the advice is coming from or where the thoughts are coming from. I’m just thinking it through as if I were literally doing this nights and weekends, I would consider taking money as soon as I could. If I was going down this road because going full-time is a game-changer. Being able to focus full-time, being able to leave everything behind is a big deal. It really is and a night and day difference.
Mike: I know there’ll be a range of opinions on it, but I wonder what most investors would think about, somebody saying, “Hey, we got this product. I’ve been working on it and I’d like to get some funding and money in the bank, basically to extend the runway because I got a little bit of something going here, I got partial product in place, I got some customers, but it’s not a lot. I need runway in order to make it work but I don’t know specifically how much runway I necessarily need or how I’m going to get to having $10,000-$20,000 MRR, but I need time to get there. There’s something here but I don’t know what.” I think it’s hard to evaluate for anybody what that looks like.
Rob: Yeah. I don’t know of any investors today that would work with that. I think that’s a good thing to bring up. It’s like, is that a gap in the market then? Could that be a successful funding model of looking at people who essentially have the potential and have, like you said, pre-product market fit but have something to show for it and looking at backing them for a period of time.
Anyway, I love this topic and I think that we’ll probably talking about it again, just soon you’ll be hearing more on it from me, but I feel we might need to wrap this one up today.
Mike: Yeah. Great talk. I like it.
Rob: Me as well. So if you have a question for us about this or any other topic, call our voicemail number 888-801-9690 or email us at questions@startupsfortherestofus.com. Our theme music is an excerpt from We’re Outta Control by MoOt used under Creative Commons. Subscribe to us in iTunes by searching for startups and visit startupsfortherestofus.com for a full transcript of each and every episode. Thanks for listening and we’ll see you next time.
Episode 405 | Minimum Viable Security, Moving on from AuditShark, and More Listener Questions
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Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike answer a number of listener questions on topics including Mike’s thoughts on moving on from AuditShark, minimum viable security, and more.
Items mentioned in this episode:
- Indie Hackers Podcast with Mike Taber
- Release Notes Podcast with Mike Taber
- Segment
- Zapier
- Nomad List
- Comics ‘N’ Coffee
- Medium.com Post
- Medium.com Post #2
- Safestack.io Post (Security)
- SaaS Security Checklist
Rob: In this episode of Startups For The Rest Of Us, Mike and I talk about minimum viable security, moving on from AuditShark and answering more of our listener questions. This is Startups For The Rest Of Us episode 405.
Welcome to Startups For The Rest Of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing software products, whether you’ve built your first product or you’re just thinking about it. I’m Rob.
Mike: And I’m officially the answer to the ultimate question of life, the universe, and everything.
Rob: 42.
Mike: Yes.
Rob: Did you just turn 42?
Mike: Yup.
Rob: Congratulations man. Happy birthday!
Mike: Yeah, I finally made it. It’s like my kids. I keep telling them, “Oh if only you make it to 10, or 11, or 12.”
Rob: You finally made it to the end. I can’t believe I didn’t even think about that when I was 42. Ooh, people get to guess now how old I am. It’s fun.
Mike: I know. Oh you’re screwing up the intro.
Rob: And we’re here to share our experiences to help you avoid the same mistakes that we’ve made. Where are we this week sir aside from happy birthday wishes to you?
Mike: Well, I was in The Indie Hackers podcast, I think about a week and a half ago. That was with Courtland Allen. I was also on the Release Notes podcast with Charles Perry. There are actually two episodes to that. They split it up into part one and part two. I think that part two will be live by the time this episode goes out. Both were a lot of fun. I’ve got a lot of feedback from both The Indie Hackers podcast through The Indie Hackers forum and then over Twitter. It was nice to see the stuff I was talking about was resonating with people in terms of my journey, and path, and things with Bluetick and how that was validated, and how AuditShark went off the rails and everything else.
Rob: That’s cool. I heard the Release Notes episode. It actually came up in a Google alert. I have a Google alert on maybe Founder Cafe or maybe Startups For The Rest Of Us or something, and so it came up because it was in the show notes, and I so I picked up the episode. I actually enjoy hearing you on other podcasts because they ask you questions that we never cover on this show, and so I learn something, “Oh I didn’t know he did that.” You talked about your past and then even just hearing your retelling of the story of AuditShark, and Bluetick and stuff was kind of fun. I enjoyed it. We’re going to link up both of those episodes in this week’s show notes, episode 405.
Mike: Aside from that, I’ve started working on public API for Bluetick. I knew that I wanted to do it, at some point but the entire application itself is a single page application, so everything’s driven with an API. But in the process of building the app and creating that API, I found all these things that are just, I’ll say, are not probably done in the best of ways. It’s nice to have version 2–is the API that will be public versus 1, which is for internal use only.
Rob: Yeah, I was going to say that. But obviously, be sure to have a /V1 or /V2 when you publish it because you’re going to need to update it at some point and you don’t want to break retroactively. The other thing is, have rate limiting in from the start because, by the time you get to the point where you need it. It’s not good to have somebody take your API down.
I would also, this is all just from experience, if possible, put the API on a separate server or separate banks of servers because if someone takes your API down, you don’t want your main app to go down. What else? I bet there’s like four of these totally off the top of my head. I had not pre-planned these, but yeah, there’s really good ways to do APIs at this point.
I remember, again, dating my years back 10 or 12 years ago, all the APIs were different, REST was not a thing, it was all post-APIs. It was really jenky, and I guess, they were what, it was like web service, it was like XML. Remember, it was all XML?
Mike: Yeah, Microsoft came up with this thing as WSDL.
Rob: It was WSDL, SOAP, all that crap. It was terrible. You’ll still see some old APIs use that, but REST APIs now are so clean. A lot of them are stateless. There’s these best practices that people use. I would really try to implement because they definitely makes a cleaner experience for everyone.
Mike: I use Swagger to document the API, kind of hooked it, so if I make any changes to the API, I’ve got to document that basically says how it works. That’s an easy enough thing to incorporate into the public API but the other nice thing that I found is that there are utilities out there that you can use to query your Swagger documentation, and then it will build libraries for you in various languages so, Python, C#, and various other things. It’ll just create a library for you, and then you can make it available to people so that if they want to hook it directly into their application, they’ve got the code to do it, and they don’t have to write all of the wrapper stuff that goes with it which is awesome.
Rob: Assuming that it works well, that is awesome. Really, really cool. I know that with Drip early on, obviously, we released a Ruby wrapper because Drip was written in Ruby, and then someone built an open source. Python was one, I believe, and then someone built a .NET one. I think they kind of just open sourced it, and we linked out to it which was cool especially in the early days. It did kind of stink as we got further on because they weren’t actively maintaining it because they have built it for themselves and implemented it.
We added more to the API later on, a bunch of more methods, they didn’t implement them, so people would email us and be like, “Hey you need to add this.” It’s like, “We don’t even know anything on the code base.” and we didn’t have any .NET developers on staff. There’s different things. Everybody wants a wrapper in every language, and you just can’t do it, and it’s just not feasible. But if you are able to roll up the top two or three most common ones and then be able to maintain them, that would be a big deal.
Mike: I don’t know how many people are going to hooking into it, but I have talked to other people who run apps like SaaS apps, and they are interested in hooking into Bluetick. Question is, “How do I make it available for them? How do I make it available as a public API for customers? Do I have separate endpoints for each of them?” I’m not entirely sure on it yet but I suspect it’d probably be easier to maintain if I just have one public API, and that was it, regardless of whether you’re integrating directly or not.
Rob: I would tend to do that although—we had the public API and anyone could consume it. If we wanted like, when Leadpages wanted to integrate with us or if it was an official integration that we were both going to promote, and it was going to be on our integrations page, we typically fork off a separate endpoint so that we could handle that differently. Because sometimes, with that one, we wanted to give it a higher rate limit or we wanted to route the traffic slightly differently based on what it was, and if it was coming to the public API we didn’t know–that is one thing to think about. In the end, we had 35-40 integrations. We did not have a full, 40 different endpoints but I do think we had a handful for especially the most popular ones.
Mike: I could see having a third party integration API, like a dedicated endpoint for that, and then for certain ones, you say, “Okay, we’re going to fork this code and give it additional functionality or put it on a different server.” Because it justifies having higher rate limits just because of the data going back and you trust them to send you things in a normal fashion versus if you just have that public endpoint, who knows what they could be doing or sending. Most of those are going to be for regular customers versus somebody who is sending stuff over on behalf of a lot of customers.
Rob: Yeah, totally. Here is something to think about as well. For some reason, segment.com—at least last I heard when I still at Drip—they don’t honor rate limits, they just never implemented it. They said that they were working on it but they would DDoS us about every two months or three months. They would take the API pretty much down, and we would be frantically emailing them because we would return a 403 I believe which is, “You’re over your rate limit. Please stop sending.” and there’s a bunch of stuff in the response code. You say, “You have to wait 57 minutes before you can send another whatever.”
Zapier is an example, has a rate limit, and when we would go out and webhook into Zapier, we would read that response, and then we’d throw it into a queue for 57 minutes later. It would say, “You can have up to 1000 per hour.” You can just read the response, and it will allow us to rate limit stuff out. Segment never bothered to build that, and so someone would come in with half a million uniques a day, and they would be pumping everything into the segment, and they just click the check the box of like, “Yes, stuff everything into Drip.” All of a sudden it will be just, boom. Beware of that.
Again, we talked with Segment quite a bit about it, and they were like, “We’re working on this. It’s a problem for other folks too.” But at one point, we, for a couple of hours, we had to block all of Segment’s IPs. It was crazy. We’re at the firewall, and then they would get it turned off. Just beware. It’s not going to happen day one, but it will happen eventually.
Mike: I don’t know. It may happen day one.
Rob: Yeah, that’s the thing, right? You never know.
Mike: I’ve seen, just because of the volume of data that Bluetick handles on the backend because it’s a mailbox. When I split things off onto two servers. Part of the reason I ended up having to do two servers was because when I got a new sign-up, if they had a large mailbox, the first thing it does is it indexes everything. Right there, just adding a new customer will basically DDoS the entire application, it depends on how large they were, so I added a bunch of code to back things off a little bit and do internal rate limiting on how much calculations and stuff it does, and how quickly it does stuff.
I even added code that would monitor the process that was currently running, and then throttle it up and down in terms of the CPU usage which was kind of crazy because it works across the entire process, you can’t do that on a […] basis in Windows. I don’t know. I considered moving it off into its own separate process, but that one involved a different service. I was just like, “I’ll put it on a different server, and I then I won’t have to worry about it.” that was the solution I ended up with.
Rob: Yeah, that makes sense. Something else to consider, in the early days, reset the rate limit pretty low knowing you can always increase it but decreasing it later is not going to go well. We set it low and when people come in and say, “I need to import 100,000, and your rate limit is going to take me two days to do it.” So we’d said, “Okay, we’re going to build a bulk endpoint for you.” so then we build a public endpoint that was, instead of add subscriber, it was bulk add subscriber, and you could I think it was 1000 per payload, 1000 subscribers. It was still the same amount of submissions, it was still rate limited at that, but you could then send 1000 instead of just one. We built several bulk endpoints both in, and I believe out as the troubleshooting.
This is one of those things where customers say, “No. I need a higher rate limit.” It’s like, “What do you actually need?” “What I actually need to do is import 100,000 people.” “Oh well, there’s a better solution than increasing the rate limit across the board for all 30,000 people or whatever who use this app because that could be catastrophic for the thing.” so we did do that. It’s just something to think about. It’s product decisions. But there’s often more elegant ways to do things than just what the customer is asking for.
Mike: Yeah. I like to have early conversations with pretty much every customer that comes on to Bluetick just because I want to know what it is that you’re actually trying to do. Like yesterday, I had a call with somebody who had signed up, and I was trying to figure out what it was they were trying to do. They’re in the fashion industry, and they have all these samples and stuff of people, like manufacturers and vendors, that they have to follow up with, and they ask for samples, and if they don’t get them or they don’t hear back, they have to follow-up with them.
It was very interesting hearing the conversation about exactly the specifics of the problem that they were trying to solve. Ultimately, we concluded that the volume isn’t high enough right now to justify using Bluetick, but once it starts scaling up, which they expect that to happen, then Bluetick is going to be really helpful for them.
Rob: On my end, as you know, I recently moved. We were in California for two weeks, and then we flew in and landed at midnight on a Wednesday, and we closed on the house on Friday. When we were in California, I really wasn’t thinking much about the house closing. All of the stuff was in-flight, and there wasn’t much work to do on it. When we got back, I’m like, “I need to start changing our address.” Thursday and Friday, as we’re about to get the keys, I start changing the address, I start moving utilities, I start doing all that. I forget that for internet access, a: how critical it is—it is perhaps more important than a lot of other things.
Mike: […]?
Rob: Yeah, I was going to say electricity, but it’s really not because you need both. It is as important to me as having electricity. It was crazy to not have it. What I forget is that cable, internet, and DSL—they can turn it on same day or they overnight you the equipment, and you get it the next day. That’s what I was thinking. But of course, we have fiber here. We’re at the luxury of having fiber gigabit fiber.
There’s two companies that offer it in the neighborhood, really cool. I call up, and they’re like, “Yeah, we can get to you in 11 days.” Then the other one said, “We have to trench…” not trench but put pipe under the ground, so it’s going to take 30 days. I was like, “No, this is catastrophic,” because we’ve been spoiled by having this fiber at the other house, so I set up the appointment. The 30-day fiber is a local company called US Internet, and super fast, and it’s $70 per gig, up and down. They are at the street, but it’ll take them about a month to get in.
But I signed up for cable. I’m going to basically have it for a month. I had them overnight the equipment, so within 36-48 hours of moving in we had real internet but it is cable which is crazy. It used to be blazing fast, but now it feels–I think if Sherri and I if we’re both on video calls, and the kids are streaming, you start to have issues. It’s funny how quickly you get spoiled by having gigabit which you never, I will say, we never maxed it out.
Mike: Yup.
Rob: The moral of the story is a couple of things; if you’re moving, and you’d only need DSL or cable, you can probably just give them a few days’ notice assuming it’s already wired in but if you’re going to do something like fiber, this is a reminder to myself be like, “Yeah, you wanna give somebody a few weeks because it may not actually be wired to all the houses.”
Do we want to answer some listener questions today?
Mike: Let’s get to it.
Rob: Alright. Our first question comes from Nick Malcolm, and he recorded an audio question, and so he went straight to the top of the pile—as they always do—so voicemail to us or emailing us with an MP3 or M4A gets you to the top of the stacks. Let’s listen to that audio here.
“Hello, Mike and Rob. I’m a long time listener from New Zealand. I’ve been involved in startups in the past, in technical roles but now I’m working as a consultant helping companies to better at security. I work alongside development teams doing things like threat modeling and teaching about common risks like […] and also at an organizational level with processes and policy and risk management. I’d be really interested to hear your thoughts on what minimum viable security should look like for startups and how this might change as the company grows. Thank you for everything you both give to the startup community, that’s much appreciated. Thanks.”
Mike: I think the trouble with security or trying to address the problem of minimum viable security in a startup is it competes with the aims of the business especially when you’re first starting out. There’re pre-profitability and then post-profitability. If you’re talking about pre-profitability, you need to do at least the varied minimum basics such as making sure that the code that you’re writing is, if it’s proprietary code, you’re not going to be releasing it, just make sure that it’s in a secret repository someplace, it’s not like a public repo. But obviously, if it’s open source, that kind of stuff doesn’t matter.
In terms of the server and infrastructure, for a startup, it so depends on what the startup is doing, how their infrastructure is configured, and the, I’ll say, knowledge of security that the people who are building it have. If you’re the type of person who is like, “Oh let me handle all these edge cases and make sure that I’m doing the right things,” then that’s fine. But if you’re not, then you just have to be aware that those things are probably going to need to be dealt with at some point down the road. Maybe not today but you have to do a good job of being diligent about marking where your code could potentially be exploited or places where things could go sideways. Whether it’s cross-site scripting attacks or things going into the query string and the API being used for things that it really shouldn’t be. Beyond that, you can go so far into the weeds that it’s just not even funny.
Security companies make their living basically, sort of being ambulance chasers to start with. If somebody has a security breach, they suddenly come up with all these articles about, “Hey, you have to be careful of these two, and this just happened to this person.” because it’s scare tactics. That’s really what they’re trying to sell on. But in terms of the basics, if you’re using password, make sure they’re one-way encrypted, make sure that anything that is sensitive is being encrypted inside of the database.
Those are the types of things that you want to at least pay minimum attention to. If you’re running Windows, obviously, you’d probably want to be running antivirus software of some kind on each of the machines in the environment. But as I’ve said, you can go so far into the weeds like putting data loss prevention things on your phones or laptops or all these other stuff. You don’t need to go that far, in most cases, I don’t think. Unless you are a security company selling security software, in which case, being hacked would obviously, be the worst thing in the world for you.
Beyond that, just do what you need to do in order to protect the customer’s data. Making sure information does not bleed from one customer over to another. That’s a pretty basic thing, but sometimes it can go wrong if you’re not careful about how you’re doing database queries or packeting data between customers.
Rob: I agree with you. This is the kind of stuff that you have to worry about just enough, and not any more than that because it will slow your business down, it’ll slow building features down, but you have to pay attention to it as you go. These days, when I think of minimum viable security for startups, I think of starting with a language that has that built-in or a framework that does. I know that Rails has a bunch of stuff that validates the incoming request streams, and it’ll pull out cross-site scripting sequence injection, and all of the stuff. That‘s a good place to start.
If you use Azure or if you use EC2 or Google cloud, there’s a lot of security best practices built into there. Nick, who sent the question, included what looks like three blog posts that we will link up in the show notes as well as a SaaS CTO security checklist. Again, this is stuff that you do it just enough to where you feel comfortable. It’s like GDPR. Do you implement a full-blown thing and pay $10,000 to hire a lawyer or do you pay someone $500 and the be mostly compliant?
The TLDR that Nick sent over is like, “Use version control, have logging and monitoring, and continuous integration.” so that you’re constantly running unit tests. I think you should have some unit tests that are testing security, and making sure that things are not going to be easily hacked or whatever. Hopefully, those thoughts are helpful. I realized that it’s kind of an “it depends”, and it’s definitely always a “there’s a continuum” when you’re doing these things but it’s also similar to a question of, “How much should I worry about the legal stuff surrounding getting my LLC set-up and getting every trademarked.” and getting all that. It’s like, “Well, I should worry about it just enough.” It depends on your risk tolerance in all honesty. Thanks for the question, Nick. That was a good one.
Next, we have a comment about moving on from AuditShark. He says, “Hey, guys. I’ve been listening for a while now. Over two years ago, I started an app part-time. Finally, after all these time and all the money I’ve sunk into it, I’ve decided to let it go. There were a number of reasons it failed. Most important being that I’ve never launched my own product before and didn’t fully understand what it took. Listening to Mike’s decision to move from AuditShark…” we have an episode called Moving On from AuditShark. It’s probably 150, 200 episodes ago. He said, “It’s given me the confidence to know this is the right decision. I felt his pain in the episode because it’s the same pain I’m going through now. I’ve decided to do this stair-step approach and practice learning simpler products like an e-book or audio course. Hopefully, this will both give me the confidence and an audience when I’m ready to launch another product. It still hurts and I still think what if all the time but I know I’m making the right decision. Love the show and congrats on 400.”
Thanks for writing in, Greg. It’s always good to hear from folks who experienced things. We talked about trying to help people avoid the same mistakes we’ve made. Sometimes you’re going to make the same mistakes we’ve made but maybe knowing that we made them, there’s some solidarity in knowing, “Oh, other people make them too,” and kind of we’ve all been there so. I think this thing will go away over time. Mike, from your perspective, you went through it, and now you’re in the middle of AuditShark building something that’s obviously starting to get some traction. What are your thoughts on this?
Mike: I’m not in the middle of audit shark anymore. What are you saying?
Rob: Freudian slip, that’s funny. What do you think?
Mike: Well, I definitely get how you can think what if all the time. I really don’t. AuditShark would not have been a good fit for me long-term. I didn’t realize that when I started out. I didn’t realize it ‘til I was probably very close to the end but it didn’t fit me as founder, and it wasn’t the type of business that I probably would have wanted to own long-term. I looked at it from more of a financial perspective of, “Oh I really want to be able to sell this and make a lot of money from it.” I enjoyed the problem space itself, but I did not enjoy trying to sell that type of a product versus Bluetick where I actually do it because I feel it’s legitimately helping people that need that help, and with AuditShark it was more about meeting the checkbox requirement for people, and nobody actually cared about it. It was just like, “Oh, our company says we have to do this so we’ll do it.”
Rob: Yup, that makes sense. I think early on you probably thought what if a bit, and then you moved past it. That’s the healing process of letting something like this go.
Mike: Yup, definitely.
Rob: Cool. Our next question/comment is a comment on episode 403, so go to startupsfortherestofus.com if you ever want to leave a comment, read all your comments. Doug said, “First of all where do you find the time to play D&D?” which I think is funny. From my perspective, I am trying to think, I got back into it, what is it, my kid is 12, and I think I taught him when he was maybe eight, and so it’s been about four years so yeah, Drip was going on. Frankly, we don’t play D&D very much. I mean, we do more now that I’m not working on Drop anymore, but when I was growing Drip, we would maybe play every few months. It really was not an on-going campaign thing, but it’s definitely gotten easier for me to carve out the time.
I think if we have a recurring campaign that was with other people, you just kind of find the time. If it’s every week or twice a month on a Thursday at seven, and you know that you’re going to let people down if you don’t show up, that would be something. The other thing for me is we keep our sessions short. They’re typically 60-90 minutes. They’re not these four-hour campaigns, and we enjoy it that way. How about you, Mike? How do you find the time?
Mike: I have two different ones. […] morning is with a friend of mine and our kids, kind of collectively, that we’ve run very sporadically. We might need once in a month or once every two or three months. That’s been going on for probably close to two years at this point. The other one that I just started up, I think we’ve had three sessions so far, but it’s every Tuesday night. We meet up at 7:30 PM. Two nights ago we’ve had a rather lengthy one. It went until 12:30 AM. It was almost 1:00 in the morning by the time I got home. It was 7:30 PM to 12:30 AM, that was kind of the ballpark thing.
We’re shooting for 2-3 hours, three hours is kind of the minimum that we want, and then after that, it’s kind of wherever is a decent stopping point. That session just happened to be longer. But I agree with you that having a set time of the day each week or every couple of weeks that you’re shooting for, that’s the best way to go just because you’re making a commitment to other people to be there and show up. I think that’s really helpful.
Rob: Here’s the thing, when I was doing startups on nights and weekends and had a day job, I didn’t play any of this. There were years where I didn’t go to happy hours with friends when they would go. I didn’t play any type of tabletop games because I work all day, and then I work all night. My kids were either not born yet, or they were really young, so they would go to sleep at seven, and then I would just work ‘till 1:00 in the morning, and I was tired, but that was the slog.
You and I both moved into the position. Once I’m working on it full-time during the day, and I’m putting the seven-nine hours a day of startup work, then in the evenings I actually like to not continue to do that, and so it depends on the phase you’re in. If you are still working nights and weekends, I would say don’t get involved, like don’t have a hobby. It’s crazy advice, but I really put all my hobbies on hold while I was getting that initial traction. It was definitely a couple of years, it was even more than that, actually. It was probably over the span of about five or six years, but it wasn’t constantly I would tackle a project, work on it for six months, and I wasn’t doing anything nights and weekends, and yeah, it sucked, but I had that goal. I wanted to get that financial freedom. I wanted to get out of my day job. It would crash and burn, and then I’d be all dejected and disappointed. I would go back to having a hobby for a while until I got motivated enough to do the next effort.
Mike: I find that setting aside the time is a nice distraction as well because it’s very easy to get stuck into the pattern of working on the same thing all day every day and let it bleed into other parts of your life which ultimately is probably not good for you. I think that they’re just making sure that there’s a set commitment that I have that is external to work in any way, shape or form. I find that that’s helpful.
Rob: I agree. I fully agree. I think of this podcast a little bit like that. Every week, no matter how bad things were, how hard they were, how stressed I was, you and I would have this one hour blocked off to sit and talk about this stuff, and that’s something that we’ve done for a long time. Even though it’s talking about work, in essence, it did help the days. I think you have to have some variety to them.
Doug has another question, he says, “Rob, you say wanting financial freedom was motivating. Is that another way of saying I hated my day job? How far can not liking the cubicle and office get you on a startup journey? Comfortable paycheck is the enemy of great startup ideas. I am proof of that.”
It’s an interesting question. In all honesty, I hear this from people time to time, and they’re like, “Well, my day job’s good enough. I’m kind of motivated to do. It sounds like it’s fun to do a startup.” In my opinion, if you’re not all in on it, you’re just not going to put in the time to do it. If it really is a major pain point, like for me, yes, I hated my day job. I hated all of the day jobs I did. Hate is a strong word, but I was never happy for very long. Maybe it was 12-18 months, and then it was like, “No, I have to move onto the next thing.”
The further I got along, not only would I burn out on a job within, let’s say, 12-24 months. But I also realized I wanted to make money more as a salaried or even as a contractor. I wanted mobility. I wanted to be able to travel, and not have to worry about being in one place or living in the same city or being concerned that I was going to get laid off, so I wanted the confidence that I was in control of my own destiny. Frankly, I did want more control of my time.
I hated having to be in an office at 8:30 AM or needing to be available at these hours, so I just wanted that. Especially as I got older, when I’ve gotten to my early 30s, I realized, “This was not going to work for me.” It was a real, true pain point in my life and I was willing to put it all on the table. I was willing to sacrifice nights and weekends for years to do this. If that’s not you and you don’t have the burning desire, that’s okay. I’ve some good friends who I envy because they’ve been happy.
Mien, a really good friend of mine in Sacramento, started the day job the same week back in 2000. He still works at that company. It’s 18 years later. He’s a developer, and he works at a consulting firm. I’ve had 20 jobs since then. I bounced to different jobs, different products if you count it all, maybe even more than that. We’re just cut from a different cloth. I would be so hopelessly unhappy and depressed if I had his life but I don’t judge him and say, “Oh you could do better if you’ve done startups.” because I don’t think he really had the desire. I don’t know if his personality is cut out for it. He really didn’t want the stress. He’s just more conventional than I am.
We each have different priorities, and we have different personalities. I think you really have to look in the mirror and ask yourself, “Am I willing to do what it takes?” because this startups stuff is not easy. I hope that’s something we’ve communicated in the past 405 episodes both through just talking about stuff theoretically and also the agony of episodes like moving on from AuditShark and the agony of some of the stuff that I’ve talked about here. That was a good rant for me. What do you think, Mike? You have other thoughts?
Mike: The summary of what you just said is like, it’s a personal decision for each person. I can relate to your friend out of Seattle. I was up in Rochester within the past couple of years, and one of the reasons I had left Wagman’s was there was a guy who’d recently got promoted to a position that I had wanted, not that I was going to get promoted to it, it’s just that it was one that I aspired to. He got promoted to it after being at the company for 18 years. I was like, “I’m not waiting 18 years to get promoted to that level.”
I ran into him a couple of years ago, and he’s still there working at the same company that he’s been at for 30 years. That would not have worked for me. I don’t have the personality to have been working in that business for that long and not transition around. I’m sure that he works on different things, but it would not be a good fit for me.
Rob: Thanks for the questions, Doug. I enjoyed them so much. I didn’t answer them on the blog. I wanted to talk about them on the show. Our final listener question for the day is from Ricardo Feliciano, and he says, “Hey Mike and Rob. I love the podcast. I find it very valuable. My question is, what is the best way to charge for an online and real-life community? The two best examples I’ve seen are Founder Cafe from the two of you and Nomad List, nomadlist.com. I ask because I’m starting a community for Marvel and DC fans called Comics and Coffee, that’s comicsncoffer.com. I don’t know if I should pay wallet or try to monetize it through merchandise. Perhaps through a premium program such as what Reddit does with Reddit Gold or Discord with Nitro. Thanks for your time. PS for comics and coffee background: We started up with a podcast, and we’re adding a form, and in-person meetups for movie nights soon.” What do you think?
Mike: I think if you’re going to have a community, there has to be some compelling reason for people to join and stick with their membership is, really what it comes down to. When you look at something like Nomad List, that’s aimed at people who are traveling around the world—and they’re probably constantly traveling—they’re more likely to become and remain a member for longer periods of time. Because even though they may be in Thailand for three months or six months or even a year or two, then they go over to Belarus or Spain or Africa or wherever, and then they’re going to need to be able to connect to other people either locally or online or potentially both, that’s one of those communities where it’s an ongoing thing, that they don’t just need the service once versus something like, trying to meet up with other people locally and those people are not moving around.
Everybody lives in the same community. For example, I live here in Massachusetts. If I wanted to get together with people and wanted to form a group or an organization or something like that, I might use meetup.com for that. The benefit of that is finding other people but if you’ve already got an established location, and a group of people that are coming, chances are good that they associate with other people outside of that who are also involved in comics. They’re going to invite their friends.
Now, the advantage of your platform or your community is that you are going to be able to attract more people to it and that’s the value proposition you have which is, “Hey, find other people and stick with a local community.” The problem is that once they have found your community and are coming to whatever meeting’s there are on a regular basis or semi-regular basis, what additional value are you offering? I’m not clear on what that would be.
With Founder Cafe, it’s a little different because everybody’s remote. Because it’s all remote like, if you join the community and then you leave, you no longer have access to it versus if it’s a local, in-person meet up and there’s a regular meeting every Tuesday at 7:00 o’clock, everybody comes at 7:00 and once you’ve found it, you kind of no longer need the platform anymore, so what value is it that you offer?
I think that’s what you need to focus in on in terms of trying to figure out how to monetize it. You might be able to pay wallet and have some sort of merchandise behind it, I’m not sure how would that go though. I don’t know is charging on ongoing basis is for would be terribly lucrative, I’ll say.
Rob: Yeah. B2B is easier than B2C. In this case, Founder Cafe or the Dynamite Circle or Nomad List, they tend to surround people who run businesses, who are making money through something, who the network they know can help them make more money, help them to have a more successful business whereas going to gamers, I mean gamers are notoriously cheap. They’ll spend money on games but trying to ask consumer to do a subscription tends to be a harder thing to do. I’m not saying that you shouldn’t do it but know that when I think about the $99 every quarter that we charge for Founder Cafe, most business owners see that and think, “Yeah, that’s not very much money compared to what I’m paying for all the other services I’m using.” But if you were to try to charge that in your case, it will be very hard.
Basically, no one would sign-up. I bet people would be like, “Are you kidding me? $33 a month to have access to this list?” You’re going to be more down in the, I’ll say, the Netflix zone where you’re probably looking at $5-$10 a month, I would think. I would probably either charge it quarterly or charge it annually. It’s such a small dollar amount. You don’t want to have these $5 charges all over the place. Maybe it’s $50 a year, $80 a year, $100 a year, somewhere in that range is what I initially think about.
I don’t think it’s a bad experiment. I mean depending on how many people you already have on the list, merch is fun, but merch is going to take time, the margins are low, and you really need a lot of people on your list in order to sell enough merch to get any type of revenue, you’re only getting, what’s the net margin on merch? Is it 10%, 20%? It’s going to be very small. I think that could be an interesting revenue stream to explore, but I would do that later. Having a premium membership, I think could be very interesting.
You could also consider doing a Patreon but again, you need quite a few people to do that, then you can have that insider’s group pretty easily, and all the mechanics are handled for it. People already know, it’s becoming pretty popular to hear this word Patreon and to know what that means. It’s not like reinvent the wheel and introduce everybody to, “Yeah, this premium membership,” blah blah blah. It’s just like, “Go to your Patreon account. You already potentially support some other podcast creators, support it, and if you support it at the $5 a month level,” and then Patreon handles all that for you—all the billing and all that—then you get this extra perk of getting this log in, or getting this episode earlier, getting these episodes that are only published on the Patreon feeds.”
Those are my initial thoughts on it. I love the idea of Chris. I’d love to do something like this, but it is going to be hard to pull the viable business out of it. You’re going to need a lot of people listening to you. B2C is the volume play. You need a lot more people selling something for $5 a month versus $50 or $100 a month.
Mike: The other thing that occurs to me is something like this seems similar to there’s a website called Roll20 which is mainly aimed at roleplaying games but obviously, there’s a lot of Dungeons and Dragons players on there, but playing various editions, and Pathfinder, and various other roleplaying games and they have a mechanism where they’re charging, I think it’s either $5 or $10 a month and it’s an annual fee.
I agree with Rob but I think going the annual route is probably the best way to go to get some of that initial revenue and then down the road, you could look at that and say, “Okay, now that I’ve got 500, 1000, or 10,000 who have paid that much money.” Again, with 1000 people paying $50 for a year, that’s $50,000, it’s not enough to support one person for the most part full-time.
One thing you could do is start offering like an escrow service for people who want to buy or sell comic books. Yes, you can do it on eBay, but then you have to deal with PayPal, and all these other stuff, for higher-end, and Rob maybe you could speak into this because I know you’re in the comic books but would you pay for an escrow service for something like a high-value comic book? Because we’ve talked about, in episode 403, about analyzing another type of business but I think part of that is looking at the type of customer that you want. People who are buying and selling extremely valuable comic books, they want to make sure that what they’re getting is good quality, and that they’re actually going to get it and not going to get ripped off. By offering an escrow service as an add-on later, that might be an option.
Rob: Yeah, I think that could get traction. I don’t know if that exists today, to be honest. I wish there was a text box, we could type search terms into, and it could potentially tell us if that exists today.
Mike: I know. That’d be fantastic.
Rob: It’s crazy. Anyway, enough daydreaming. But yeah, I think that’s a good point. Again, then do you have to build a large enough community that the small percentage who use whatever service offshoot making enough money to be viable. But I do think that’s a cool thought experiment or an interesting way to think about it. It’s a creative way to think about, I’ll say. I think adding offshoot businesses rather than just charging directly is another way you could potentially monetize it.
Mike: Thanks for the question, Ricardo. I think that about wraps us up for the day.
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Welcome to Startups For The Rest Of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing software products, whether you’ve built your first product or you’re just thinking about it. I’m Rob.
Mike: And I’m officially the answer to the ultimate question of life, the universe, and everything.
Rob: 42.
Mike: Yes.
Rob: Did you just turn 42?
Mike: Yup.
Rob: Congratulations man. Happy birthday!
Mike: Yeah, I finally made it. It’s like my kids. I keep telling them, “Oh if only you make it to 10, or 11, or 12.”
Rob: You finally made it to the end. I can’t believe I didn’t even think about that when I was 42. Ooh, people get to guess now how old I am. It’s fun.
Mike: I know. Oh you’re screwing up the intro.
Rob: And we’re here to share our experiences to help you avoid the same mistakes that we’ve made. Where are we this week sir aside from happy birthday wishes to you?
Mike: Well, I was in The Indie Hackers podcast, I think about a week and a half ago. That was with Courtland Allen. I was also on the Release Notes podcast with Charles Perry. There are actually two episodes to that. They split it up into part one and part two. I think that part two will be live by the time this episode goes out. Both were a lot of fun. I’ve got a lot of feedback from both The Indie Hackers podcast through The Indie Hackers forum and then over Twitter. It was nice to see the stuff I was talking about was resonating with people in terms of my journey, and path, and things with Bluetick and how that was validated, and how AuditShark went off the rails and everything else.
Rob: That’s cool. I heard the Release Notes episode. It actually came up in a Google alert. I have a Google alert on maybe Founder Cafe or maybe Startups For The Rest Of Us or something, and so it came up because it was in the show notes, and I so I picked up the episode. I actually enjoy hearing you on other podcasts because they ask you questions that we never cover on this show, and so I learn something, “Oh I didn’t know he did that.” You talked about your past and then even just hearing your retelling of the story of AuditShark, and Bluetick and stuff was kind of fun. I enjoyed it. We’re going to link up both of those episodes in this week’s show notes, episode 405.
Mike: Aside from that, I’ve started working on public API for Bluetick. I knew that I wanted to do it, at some point but the entire application itself is a single page application, so everything’s driven with an API. But in the process of building the app and creating that API, I found all these things that are just, I’ll say, are not probably done in the best of ways. It’s nice to have version 2–is the API that will be public versus 1, which is for internal use only.
Rob: Yeah, I was going to say that. But obviously, be sure to have a /V1 or /V2 when you publish it because you’re going to need to update it at some point and you don’t want to break retroactively. The other thing is, have rate limiting in from the start because, by the time you get to the point where you need it. It’s not good to have somebody take your API down.
I would also, this is all just from experience, if possible, put the API on a separate server or separate banks of servers because if someone takes your API down, you don’t want your main app to go down. What else? I bet there’s like four of these totally off the top of my head. I had not pre-planned these, but yeah, there’s really good ways to do APIs at this point.
I remember, again, dating my years back 10 or 12 years ago, all the APIs were different, REST was not a thing, it was all post-APIs. It was really jenky, and I guess, they were what, it was like web service, it was like XML. Remember, it was all XML?
Mike: Yeah, Microsoft came up with this thing as WSDL.
Rob: It was WSDL, SOAP, all that crap. It was terrible. You’ll still see some old APIs use that, but REST APIs now are so clean. A lot of them are stateless. There’s these best practices that people use. I would really try to implement because they definitely makes a cleaner experience for everyone.
Mike: I use Swagger to document the API, kind of hooked it, so if I make any changes to the API, I’ve got to document that basically says how it works. That’s an easy enough thing to incorporate into the public API but the other nice thing that I found is that there are utilities out there that you can use to query your Swagger documentation, and then it will build libraries for you in various languages so, Python, C#, and various other things. It’ll just create a library for you, and then you can make it available to people so that if they want to hook it directly into their application, they’ve got the code to do it, and they don’t have to write all of the wrapper stuff that goes with it which is awesome.
Rob: Assuming that it works well, that is awesome. Really, really cool. I know that with Drip early on, obviously, we released a Ruby wrapper because Drip was written in Ruby, and then someone built an open source. Python was one, I believe, and then someone built a .NET one. I think they kind of just open sourced it, and we linked out to it which was cool especially in the early days. It did kind of stink as we got further on because they weren’t actively maintaining it because they have built it for themselves and implemented it.
We added more to the API later on, a bunch of more methods, they didn’t implement them, so people would email us and be like, “Hey you need to add this.” It’s like, “We don’t even know anything on the code base.” and we didn’t have any .NET developers on staff. There’s different things. Everybody wants a wrapper in every language, and you just can’t do it, and it’s just not feasible. But if you are able to roll up the top two or three most common ones and then be able to maintain them, that would be a big deal.
Mike: I don’t know how many people are going to hooking into it, but I have talked to other people who run apps like SaaS apps, and they are interested in hooking into Bluetick. Question is, “How do I make it available for them? How do I make it available as a public API for customers? Do I have separate endpoints for each of them?” I’m not entirely sure on it yet but I suspect it’d probably be easier to maintain if I just have one public API, and that was it, regardless of whether you’re integrating directly or not.
Rob: I would tend to do that although—we had the public API and anyone could consume it. If we wanted like, when Leadpages wanted to integrate with us or if it was an official integration that we were both going to promote, and it was going to be on our integrations page, we typically fork off a separate endpoint so that we could handle that differently. Because sometimes, with that one, we wanted to give it a higher rate limit or we wanted to route the traffic slightly differently based on what it was, and if it was coming to the public API we didn’t know–that is one thing to think about. In the end, we had 35-40 integrations. We did not have a full, 40 different endpoints but I do think we had a handful for especially the most popular ones.
Mike: I could see having a third party integration API, like a dedicated endpoint for that, and then for certain ones, you say, “Okay, we’re going to fork this code and give it additional functionality or put it on a different server.” Because it justifies having higher rate limits just because of the data going back and you trust them to send you things in a normal fashion versus if you just have that public endpoint, who knows what they could be doing or sending. Most of those are going to be for regular customers versus somebody who is sending stuff over on behalf of a lot of customers.
Rob: Yeah, totally. Here is something to think about as well. For some reason, segment.com—at least last I heard when I still at Drip—they don’t honor rate limits, they just never implemented it. They said that they were working on it but they would DDoS us about every two months or three months. They would take the API pretty much down, and we would be frantically emailing them because we would return a 403 I believe which is, “You’re over your rate limit. Please stop sending.” and there’s a bunch of stuff in the response code. You say, “You have to wait 57 minutes before you can send another whatever.”
Zapier is an example, has a rate limit, and when we would go out and webhook into Zapier, we would read that response, and then we’d throw it into a queue for 57 minutes later. It would say, “You can have up to 1000 per hour.” You can just read the response, and it will allow us to rate limit stuff out. Segment never bothered to build that, and so someone would come in with half a million uniques a day, and they would be pumping everything into the segment, and they just click the check the box of like, “Yes, stuff everything into Drip.” All of a sudden it will be just, boom. Beware of that.
Again, we talked with Segment quite a bit about it, and they were like, “We’re working on this. It’s a problem for other folks too.” But at one point, we, for a couple of hours, we had to block all of Segment’s IPs. It was crazy. We’re at the firewall, and then they would get it turned off. Just beware. It’s not going to happen day one, but it will happen eventually.
Mike: I don’t know. It may happen day one.
Rob: Yeah, that’s the thing, right? You never know.
Mike: I’ve seen, just because of the volume of data that Bluetick handles on the backend because it’s a mailbox. When I split things off onto two servers. Part of the reason I ended up having to do two servers was because when I got a new sign-up, if they had a large mailbox, the first thing it does is it indexes everything. Right there, just adding a new customer will basically DDoS the entire application, it depends on how large they were, so I added a bunch of code to back things off a little bit and do internal rate limiting on how much calculations and stuff it does, and how quickly it does stuff.
I even added code that would monitor the process that was currently running, and then throttle it up and down in terms of the CPU usage which was kind of crazy because it works across the entire process, you can’t do that on a […] basis in Windows. I don’t know. I considered moving it off into its own separate process, but that one involved a different service. I was just like, “I’ll put it on a different server, and I then I won’t have to worry about it.” that was the solution I ended up with.
Rob: Yeah, that makes sense. Something else to consider, in the early days, reset the rate limit pretty low knowing you can always increase it but decreasing it later is not going to go well. We set it low and when people come in and say, “I need to import 100,000, and your rate limit is going to take me two days to do it.” So we’d said, “Okay, we’re going to build a bulk endpoint for you.” so then we build a public endpoint that was, instead of add subscriber, it was bulk add subscriber, and you could I think it was 1000 per payload, 1000 subscribers. It was still the same amount of submissions, it was still rate limited at that, but you could then send 1000 instead of just one. We built several bulk endpoints both in, and I believe out as the troubleshooting.
This is one of those things where customers say, “No. I need a higher rate limit.” It’s like, “What do you actually need?” “What I actually need to do is import 100,000 people.” “Oh well, there’s a better solution than increasing the rate limit across the board for all 30,000 people or whatever who use this app because that could be catastrophic for the thing.” so we did do that. It’s just something to think about. It’s product decisions. But there’s often more elegant ways to do things than just what the customer is asking for.
Mike: Yeah. I like to have early conversations with pretty much every customer that comes on to Bluetick just because I want to know what it is that you’re actually trying to do. Like yesterday, I had a call with somebody who had signed up, and I was trying to figure out what it was they were trying to do. They’re in the fashion industry, and they have all these samples and stuff of people, like manufacturers and vendors, that they have to follow up with, and they ask for samples, and if they don’t get them or they don’t hear back, they have to follow-up with them.
It was very interesting hearing the conversation about exactly the specifics of the problem that they were trying to solve. Ultimately, we concluded that the volume isn’t high enough right now to justify using Bluetick, but once it starts scaling up, which they expect that to happen, then Bluetick is going to be really helpful for them.
Rob: On my end, as you know, I recently moved. We were in California for two weeks, and then we flew in and landed at midnight on a Wednesday, and we closed on the house on Friday. When we were in California, I really wasn’t thinking much about the house closing. All of the stuff was in-flight, and there wasn’t much work to do on it. When we got back, I’m like, “I need to start changing our address.” Thursday and Friday, as we’re about to get the keys, I start changing the address, I start moving utilities, I start doing all that. I forget that for internet access, a: how critical it is—it is perhaps more important than a lot of other things.
Mike: […]?
Rob: Yeah, I was going to say electricity, but it’s really not because you need both. It is as important to me as having electricity. It was crazy to not have it. What I forget is that cable, internet, and DSL—they can turn it on same day or they overnight you the equipment, and you get it the next day. That’s what I was thinking. But of course, we have fiber here. We’re at the luxury of having fiber gigabit fiber.
There’s two companies that offer it in the neighborhood, really cool. I call up, and they’re like, “Yeah, we can get to you in 11 days.” Then the other one said, “We have to trench…” not trench but put pipe under the ground, so it’s going to take 30 days. I was like, “No, this is catastrophic,” because we’ve been spoiled by having this fiber at the other house, so I set up the appointment. The 30-day fiber is a local company called US Internet, and super fast, and it’s $70 per gig, up and down. They are at the street, but it’ll take them about a month to get in.
But I signed up for cable. I’m going to basically have it for a month. I had them overnight the equipment, so within 36-48 hours of moving in we had real internet but it is cable which is crazy. It used to be blazing fast, but now it feels–I think if Sherri and I if we’re both on video calls, and the kids are streaming, you start to have issues. It’s funny how quickly you get spoiled by having gigabit which you never, I will say, we never maxed it out.
Mike: Yup.
Rob: The moral of the story is a couple of things; if you’re moving, and you’d only need DSL or cable, you can probably just give them a few days’ notice assuming it’s already wired in but if you’re going to do something like fiber, this is a reminder to myself be like, “Yeah, you wanna give somebody a few weeks because it may not actually be wired to all the houses.”
Do we want to answer some listener questions today?
Mike: Let’s get to it.
Rob: Alright. Our first question comes from Nick Malcolm, and he recorded an audio question, and so he went straight to the top of the pile—as they always do—so voicemail to us or emailing us with an MP3 or M4A gets you to the top of the stacks. Let’s listen to that audio here.
“Hello, Mike and Rob. I’m a long time listener from New Zealand. I’ve been involved in startups in the past, in technical roles but now I’m working as a consultant helping companies to better at security. I work alongside development teams doing things like threat modeling and teaching about common risks like […] and also at an organizational level with processes and policy and risk management. I’d be really interested to hear your thoughts on what minimum viable security should look like for startups and how this might change as the company grows. Thank you for everything you both give to the startup community, that’s much appreciated. Thanks.”
Mike: I think the trouble with security or trying to address the problem of minimum viable security in a startup is it competes with the aims of the business especially when you’re first starting out. There’re pre-profitability and then post-profitability. If you’re talking about pre-profitability, you need to do at least the varied minimum basics such as making sure that the code that you’re writing is, if it’s proprietary code, you’re not going to be releasing it, just make sure that it’s in a secret repository someplace, it’s not like a public repo. But obviously, if it’s open source, that kind of stuff doesn’t matter.
In terms of the server and infrastructure, for a startup, it so depends on what the startup is doing, how their infrastructure is configured, and the, I’ll say, knowledge of security that the people who are building it have. If you’re the type of person who is like, “Oh let me handle all these edge cases and make sure that I’m doing the right things,” then that’s fine. But if you’re not, then you just have to be aware that those things are probably going to need to be dealt with at some point down the road. Maybe not today but you have to do a good job of being diligent about marking where your code could potentially be exploited or places where things could go sideways. Whether it’s cross-site scripting attacks or things going into the query string and the API being used for things that it really shouldn’t be. Beyond that, you can go so far into the weeds that it’s just not even funny.
Security companies make their living basically, sort of being ambulance chasers to start with. If somebody has a security breach, they suddenly come up with all these articles about, “Hey, you have to be careful of these two, and this just happened to this person.” because it’s scare tactics. That’s really what they’re trying to sell on. But in terms of the basics, if you’re using password, make sure they’re one-way encrypted, make sure that anything that is sensitive is being encrypted inside of the database.
Those are the types of things that you want to at least pay minimum attention to. If you’re running Windows, obviously, you’d probably want to be running antivirus software of some kind on each of the machines in the environment. But as I’ve said, you can go so far into the weeds like putting data loss prevention things on your phones or laptops or all these other stuff. You don’t need to go that far, in most cases, I don’t think. Unless you are a security company selling security software, in which case, being hacked would obviously, be the worst thing in the world for you.
Beyond that, just do what you need to do in order to protect the customer’s data. Making sure information does not bleed from one customer over to another. That’s a pretty basic thing, but sometimes it can go wrong if you’re not careful about how you’re doing database queries or packeting data between customers.
Rob: I agree with you. This is the kind of stuff that you have to worry about just enough, and not any more than that because it will slow your business down, it’ll slow building features down, but you have to pay attention to it as you go. These days, when I think of minimum viable security for startups, I think of starting with a language that has that built-in or a framework that does. I know that Rails has a bunch of stuff that validates the incoming request streams, and it’ll pull out cross-site scripting sequence injection, and all of the stuff. That‘s a good place to start.
If you use Azure or if you use EC2 or Google cloud, there’s a lot of security best practices built into there. Nick, who sent the question, included what looks like three blog posts that we will link up in the show notes as well as a SaaS CTO security checklist. Again, this is stuff that you do it just enough to where you feel comfortable. It’s like GDPR. Do you implement a full-blown thing and pay $10,000 to hire a lawyer or do you pay someone $500 and the be mostly compliant?
The TLDR that Nick sent over is like, “Use version control, have logging and monitoring, and continuous integration.” so that you’re constantly running unit tests. I think you should have some unit tests that are testing security, and making sure that things are not going to be easily hacked or whatever. Hopefully, those thoughts are helpful. I realized that it’s kind of an “it depends”, and it’s definitely always a “there’s a continuum” when you’re doing these things but it’s also similar to a question of, “How much should I worry about the legal stuff surrounding getting my LLC set-up and getting every trademarked.” and getting all that. It’s like, “Well, I should worry about it just enough.” It depends on your risk tolerance in all honesty. Thanks for the question, Nick. That was a good one.
Next, we have a comment about moving on from AuditShark. He says, “Hey, guys. I’ve been listening for a while now. Over two years ago, I started an app part-time. Finally, after all these time and all the money I’ve sunk into it, I’ve decided to let it go. There were a number of reasons it failed. Most important being that I’ve never launched my own product before and didn’t fully understand what it took. Listening to Mike’s decision to move from AuditShark…” we have an episode called Moving On from AuditShark. It’s probably 150, 200 episodes ago. He said, “It’s given me the confidence to know this is the right decision. I felt his pain in the episode because it’s the same pain I’m going through now. I’ve decided to do this stair-step approach and practice learning simpler products like an e-book or audio course. Hopefully, this will both give me the confidence and an audience when I’m ready to launch another product. It still hurts and I still think what if all the time but I know I’m making the right decision. Love the show and congrats on 400.”
Thanks for writing in, Greg. It’s always good to hear from folks who experienced things. We talked about trying to help people avoid the same mistakes we’ve made. Sometimes you’re going to make the same mistakes we’ve made but maybe knowing that we made them, there’s some solidarity in knowing, “Oh, other people make them too,” and kind of we’ve all been there so. I think this thing will go away over time. Mike, from your perspective, you went through it, and now you’re in the middle of AuditShark building something that’s obviously starting to get some traction. What are your thoughts on this?
Mike: I’m not in the middle of audit shark anymore. What are you saying?
Rob: Freudian slip, that’s funny. What do you think?
Mike: Well, I definitely get how you can think what if all the time. I really don’t. AuditShark would not have been a good fit for me long-term. I didn’t realize that when I started out. I didn’t realize it ‘til I was probably very close to the end but it didn’t fit me as founder, and it wasn’t the type of business that I probably would have wanted to own long-term. I looked at it from more of a financial perspective of, “Oh I really want to be able to sell this and make a lot of money from it.” I enjoyed the problem space itself, but I did not enjoy trying to sell that type of a product versus Bluetick where I actually do it because I feel it’s legitimately helping people that need that help, and with AuditShark it was more about meeting the checkbox requirement for people, and nobody actually cared about it. It was just like, “Oh, our company says we have to do this so we’ll do it.”
Rob: Yup, that makes sense. I think early on you probably thought what if a bit, and then you moved past it. That’s the healing process of letting something like this go.
Mike: Yup, definitely.
Rob: Cool. Our next question/comment is a comment on episode 403, so go to startupsfortherestofus.com if you ever want to leave a comment, read all your comments. Doug said, “First of all where do you find the time to play D&D?” which I think is funny. From my perspective, I am trying to think, I got back into it, what is it, my kid is 12, and I think I taught him when he was maybe eight, and so it’s been about four years so yeah, Drip was going on. Frankly, we don’t play D&D very much. I mean, we do more now that I’m not working on Drop anymore, but when I was growing Drip, we would maybe play every few months. It really was not an on-going campaign thing, but it’s definitely gotten easier for me to carve out the time.
I think if we have a recurring campaign that was with other people, you just kind of find the time. If it’s every week or twice a month on a Thursday at seven, and you know that you’re going to let people down if you don’t show up, that would be something. The other thing for me is we keep our sessions short. They’re typically 60-90 minutes. They’re not these four-hour campaigns, and we enjoy it that way. How about you, Mike? How do you find the time?
Mike: I have two different ones. […] morning is with a friend of mine and our kids, kind of collectively, that we’ve run very sporadically. We might need once in a month or once every two or three months. That’s been going on for probably close to two years at this point. The other one that I just started up, I think we’ve had three sessions so far, but it’s every Tuesday night. We meet up at 7:30 PM. Two nights ago we’ve had a rather lengthy one. It went until 12:30 AM. It was almost 1:00 in the morning by the time I got home. It was 7:30 PM to 12:30 AM, that was kind of the ballpark thing.
We’re shooting for 2-3 hours, three hours is kind of the minimum that we want, and then after that, it’s kind of wherever is a decent stopping point. That session just happened to be longer. But I agree with you that having a set time of the day each week or every couple of weeks that you’re shooting for, that’s the best way to go just because you’re making a commitment to other people to be there and show up. I think that’s really helpful.
Rob: Here’s the thing, when I was doing startups on nights and weekends and had a day job, I didn’t play any of this. There were years where I didn’t go to happy hours with friends when they would go. I didn’t play any type of tabletop games because I work all day, and then I work all night. My kids were either not born yet, or they were really young, so they would go to sleep at seven, and then I would just work ‘till 1:00 in the morning, and I was tired, but that was the slog.
You and I both moved into the position. Once I’m working on it full-time during the day, and I’m putting the seven-nine hours a day of startup work, then in the evenings I actually like to not continue to do that, and so it depends on the phase you’re in. If you are still working nights and weekends, I would say don’t get involved, like don’t have a hobby. It’s crazy advice, but I really put all my hobbies on hold while I was getting that initial traction. It was definitely a couple of years, it was even more than that, actually. It was probably over the span of about five or six years, but it wasn’t constantly I would tackle a project, work on it for six months, and I wasn’t doing anything nights and weekends, and yeah, it sucked, but I had that goal. I wanted to get that financial freedom. I wanted to get out of my day job. It would crash and burn, and then I’d be all dejected and disappointed. I would go back to having a hobby for a while until I got motivated enough to do the next effort.
Mike: I find that setting aside the time is a nice distraction as well because it’s very easy to get stuck into the pattern of working on the same thing all day every day and let it bleed into other parts of your life which ultimately is probably not good for you. I think that they’re just making sure that there’s a set commitment that I have that is external to work in any way, shape or form. I find that that’s helpful.
Rob: I agree. I fully agree. I think of this podcast a little bit like that. Every week, no matter how bad things were, how hard they were, how stressed I was, you and I would have this one hour blocked off to sit and talk about this stuff, and that’s something that we’ve done for a long time. Even though it’s talking about work, in essence, it did help the days. I think you have to have some variety to them.
Doug has another question, he says, “Rob, you say wanting financial freedom was motivating. Is that another way of saying I hated my day job? How far can not liking the cubicle and office get you on a startup journey? Comfortable paycheck is the enemy of great startup ideas. I am proof of that.”
It’s an interesting question. In all honesty, I hear this from people time to time, and they’re like, “Well, my day job’s good enough. I’m kind of motivated to do. It sounds like it’s fun to do a startup.” In my opinion, if you’re not all in on it, you’re just not going to put in the time to do it. If it really is a major pain point, like for me, yes, I hated my day job. I hated all of the day jobs I did. Hate is a strong word, but I was never happy for very long. Maybe it was 12-18 months, and then it was like, “No, I have to move onto the next thing.”
The further I got along, not only would I burn out on a job within, let’s say, 12-24 months. But I also realized I wanted to make money more as a salaried or even as a contractor. I wanted mobility. I wanted to be able to travel, and not have to worry about being in one place or living in the same city or being concerned that I was going to get laid off, so I wanted the confidence that I was in control of my own destiny. Frankly, I did want more control of my time.
I hated having to be in an office at 8:30 AM or needing to be available at these hours, so I just wanted that. Especially as I got older, when I’ve gotten to my early 30s, I realized, “This was not going to work for me.” It was a real, true pain point in my life and I was willing to put it all on the table. I was willing to sacrifice nights and weekends for years to do this. If that’s not you and you don’t have the burning desire, that’s okay. I’ve some good friends who I envy because they’ve been happy.
Mien, a really good friend of mine in Sacramento, started the day job the same week back in 2000. He still works at that company. It’s 18 years later. He’s a developer, and he works at a consulting firm. I’ve had 20 jobs since then. I bounced to different jobs, different products if you count it all, maybe even more than that. We’re just cut from a different cloth. I would be so hopelessly unhappy and depressed if I had his life but I don’t judge him and say, “Oh you could do better if you’ve done startups.” because I don’t think he really had the desire. I don’t know if his personality is cut out for it. He really didn’t want the stress. He’s just more conventional than I am.
We each have different priorities, and we have different personalities. I think you really have to look in the mirror and ask yourself, “Am I willing to do what it takes?” because this startups stuff is not easy. I hope that’s something we’ve communicated in the past 405 episodes both through just talking about stuff theoretically and also the agony of episodes like moving on from AuditShark and the agony of some of the stuff that I’ve talked about here. That was a good rant for me. What do you think, Mike? You have other thoughts?
Mike: The summary of what you just said is like, it’s a personal decision for each person. I can relate to your friend out of Seattle. I was up in Rochester within the past couple of years, and one of the reasons I had left Wagman’s was there was a guy who’d recently got promoted to a position that I had wanted, not that I was going to get promoted to it, it’s just that it was one that I aspired to. He got promoted to it after being at the company for 18 years. I was like, “I’m not waiting 18 years to get promoted to that level.”
I ran into him a couple of years ago, and he’s still there working at the same company that he’s been at for 30 years. That would not have worked for me. I don’t have the personality to have been working in that business for that long and not transition around. I’m sure that he works on different things, but it would not be a good fit for me.
Rob: Thanks for the questions, Doug. I enjoyed them so much. I didn’t answer them on the blog. I wanted to talk about them on the show. Our final listener question for the day is from Ricardo Feliciano, and he says, “Hey Mike and Rob. I love the podcast. I find it very valuable. My question is, what is the best way to charge for an online and real-life community? The two best examples I’ve seen are Founder Cafe from the two of you and Nomad List, nomadlist.com. I ask because I’m starting a community for Marvel and DC fans called Comics and Coffee, that’s comicsncoffer.com. I don’t know if I should pay wallet or try to monetize it through merchandise. Perhaps through a premium program such as what Reddit does with Reddit Gold or Discord with Nitro. Thanks for your time. PS for comics and coffee background: We started up with a podcast, and we’re adding a form, and in-person meetups for movie nights soon.” What do you think?
Mike: I think if you’re going to have a community, there has to be some compelling reason for people to join and stick with their membership is, really what it comes down to. When you look at something like Nomad List, that’s aimed at people who are traveling around the world—and they’re probably constantly traveling—they’re more likely to become and remain a member for longer periods of time. Because even though they may be in Thailand for three months or six months or even a year or two, then they go over to Belarus or Spain or Africa or wherever, and then they’re going to need to be able to connect to other people either locally or online or potentially both, that’s one of those communities where it’s an ongoing thing, that they don’t just need the service once versus something like, trying to meet up with other people locally and those people are not moving around.
Everybody lives in the same community. For example, I live here in Massachusetts. If I wanted to get together with people and wanted to form a group or an organization or something like that, I might use meetup.com for that. The benefit of that is finding other people but if you’ve already got an established location, and a group of people that are coming, chances are good that they associate with other people outside of that who are also involved in comics. They’re going to invite their friends.
Now, the advantage of your platform or your community is that you are going to be able to attract more people to it and that’s the value proposition you have which is, “Hey, find other people and stick with a local community.” The problem is that once they have found your community and are coming to whatever meeting’s there are on a regular basis or semi-regular basis, what additional value are you offering? I’m not clear on what that would be.
With Founder Cafe, it’s a little different because everybody’s remote. Because it’s all remote like, if you join the community and then you leave, you no longer have access to it versus if it’s a local, in-person meet up and there’s a regular meeting every Tuesday at 7:00 o’clock, everybody comes at 7:00 and once you’ve found it, you kind of no longer need the platform anymore, so what value is it that you offer?
I think that’s what you need to focus in on in terms of trying to figure out how to monetize it. You might be able to pay wallet and have some sort of merchandise behind it, I’m not sure how would that go though. I don’t know is charging on ongoing basis is for would be terribly lucrative, I’ll say.
Rob: Yeah. B2B is easier than B2C. In this case, Founder Cafe or the Dynamite Circle or Nomad List, they tend to surround people who run businesses, who are making money through something, who the network they know can help them make more money, help them to have a more successful business whereas going to gamers, I mean gamers are notoriously cheap. They’ll spend money on games but trying to ask consumer to do a subscription tends to be a harder thing to do. I’m not saying that you shouldn’t do it but know that when I think about the $99 every quarter that we charge for Founder Cafe, most business owners see that and think, “Yeah, that’s not very much money compared to what I’m paying for all the other services I’m using.” But if you were to try to charge that in your case, it will be very hard.
Basically, no one would sign-up. I bet people would be like, “Are you kidding me? $33 a month to have access to this list?” You’re going to be more down in the, I’ll say, the Netflix zone where you’re probably looking at $5-$10 a month, I would think. I would probably either charge it quarterly or charge it annually. It’s such a small dollar amount. You don’t want to have these $5 charges all over the place. Maybe it’s $50 a year, $80 a year, $100 a year, somewhere in that range is what I initially think about.
I don’t think it’s a bad experiment. I mean depending on how many people you already have on the list, merch is fun, but merch is going to take time, the margins are low, and you really need a lot of people on your list in order to sell enough merch to get any type of revenue, you’re only getting, what’s the net margin on merch? Is it 10%, 20%? It’s going to be very small. I think that could be an interesting revenue stream to explore, but I would do that later. Having a premium membership, I think could be very interesting.
You could also consider doing a Patreon but again, you need quite a few people to do that, then you can have that insider’s group pretty easily, and all the mechanics are handled for it. People already know, it’s becoming pretty popular to hear this word Patreon and to know what that means. It’s not like reinvent the wheel and introduce everybody to, “Yeah, this premium membership,” blah blah blah. It’s just like, “Go to your Patreon account. You already potentially support some other podcast creators, support it, and if you support it at the $5 a month level,” and then Patreon handles all that for you—all the billing and all that—then you get this extra perk of getting this log in, or getting this episode earlier, getting these episodes that are only published on the Patreon feeds.”
Those are my initial thoughts on it. I love the idea of Chris. I’d love to do something like this, but it is going to be hard to pull the viable business out of it. You’re going to need a lot of people listening to you. B2C is the volume play. You need a lot more people selling something for $5 a month versus $50 or $100 a month.
Mike: The other thing that occurs to me is something like this seems similar to there’s a website called Roll20 which is mainly aimed at roleplaying games but obviously, there’s a lot of Dungeons and Dragons players on there, but playing various editions, and Pathfinder, and various other roleplaying games and they have a mechanism where they’re charging, I think it’s either $5 or $10 a month and it’s an annual fee.
I agree with Rob but I think going the annual route is probably the best way to go to get some of that initial revenue and then down the road, you could look at that and say, “Okay, now that I’ve got 500, 1000, or 10,000 who have paid that much money.” Again, with 1000 people paying $50 for a year, that’s $50,000, it’s not enough to support one person for the most part full-time.
One thing you could do is start offering like an escrow service for people who want to buy or sell comic books. Yes, you can do it on eBay, but then you have to deal with PayPal, and all these other stuff, for higher-end, and Rob maybe you could speak into this because I know you’re in the comic books but would you pay for an escrow service for something like a high-value comic book? Because we’ve talked about, in episode 403, about analyzing another type of business but I think part of that is looking at the type of customer that you want. People who are buying and selling extremely valuable comic books, they want to make sure that what they’re getting is good quality, and that they’re actually going to get it and not going to get ripped off. By offering an escrow service as an add-on later, that might be an option.
Rob: Yeah, I think that could get traction. I don’t know if that exists today, to be honest. I wish there was a text box, we could type search terms into, and it could potentially tell us if that exists today.
Mike: I know. That’d be fantastic.
Rob: It’s crazy. Anyway, enough daydreaming. But yeah, I think that’s a good point. Again, then do you have to build a large enough community that the small percentage who use whatever service offshoot making enough money to be viable. But I do think that’s a cool thought experiment or an interesting way to think about it. It’s a creative way to think about, I’ll say. I think adding offshoot businesses rather than just charging directly is another way you could potentially monetize it.
Mike: Thanks for the question, Ricardo. I think that about wraps us up for the day.
If you have a question for us, you can call it into our voicemail number at 1-888-801-9690 or you can email it to us at questions@startupsfortherestofus.com.
Our theme music is an excerpt from We’re Out of Control by MoOt, used under Creative Commons. Subscribe to us on iTunes by searching for Startups and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening. We’ll see you next time.
Episode 404 | How to Dissect Your Business Competitors
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Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about how to dissect your business competitors. Gaining insight can help with validating an ideas and understanding the landscape. The guys give you 8 ways to better understand your competitors.
Items mentioned in this episode:
Mike: In this episode of Startups for the Rest of Us, Rob and I talk about how to dissect your business competitors. This is Startups for the Rest of Us episode 404. Is this podcast not found?
Rob: What?
Mike: Is that what this episode is?
Rob: Why?
Mike: I don’t know. Because it’s episode 404. Come on! Give me the nerd joke.
Rob: Oh, sorry. I totally missed the prompt.
Mike: Come on man. Alright. Theme music.
Welcome to Startups For The Rest Of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing software products, whether you’ve built your first product or just thinking about it. I’m Mike.
Rob: And I’m the guy that doesn’t know what 404 means.
Mike: And we’re here to share our experiences to help you avoid the same mistakes that we’ve made. How are you doing this week, Rob?
Rob: I’m doing pretty good, actually. Aside from missing that bump set that you just gave me at the top of the intro there, we have wrapped up our move. Sherry and I bought a house in Minneapolis, we decided to stick around for a few years. We’ve been renting for two years. Have I gone on my rant about how buying a home is like not a good financial decision? Have I done that?
Mike: You have not done that but I have seen various people say that.
Rob: Yeah. I won’t do that here. I’ll spare everyone, maybe in an after show at some point I’ll dig into that. But I realized that sometimes you make decisions that are not the best financial but you make it more for your life, your lifestyle, or your family, or really, we wanted more control of exactly where we lived. We wanted to live right around this lake in Minneapolis called Lake Calhoun. There are just very, very few rentals here, we have lived in one for two years. It was kind of a crappy house, it was fine but the landlord didn’t do much upkeep on it, I’ll put it that way.
Really, we just wanted more control. Also, didn’t want to ever be like, “Hey, we sold the house. You guys have to move in 30 days.” you know that type of thing because we know that would have happened at the worst possible time. It wouldn’t happen when I’m totally off and not working. It would happen right in the middle of me starting a new startup or something.
Anyway, it’s all I have to say, we bought a house, we’re just one block away from where we lived before. Got the keys on a Friday, packed or showed up on Sunday, moved or showed up on Monday.
Of all the moves we’ve done, it was by far the most seamless and least stressful. It really helped neither Sherri and I really worked very much last week, and so we’re almost unpacked. We’re also motivated by our packers. They gave us two prices; one was to pack into cardboard boxes where you have all the waste and you have to get rid of it or to pack in these plastic reusable tubs that they take back and you basically just rent it for the move. The fact that you only have them for a few weeks, it was just motivational like, get those things returned and get the whole house unpacked quickly.
Mike: That’s cool. I’ve always had to move myself. I haven’t moved in more than 10 years at this point. It’s been close to 13. I don’t look forward to ever moving again. It’s one of those things where—I know at some point we’ll probably have to—but I just don’t feel like it at the moment.
Rob: It’s not fun. It’s a short-term pain for what could be a long-term gain. In our case, now that we’re in this house that’s larger, closer to the lake, we like it more, it’s newer, just all of these things. It was totally worth it but yeah, coming up to it I was just filled with anxiety, “Oh, god. This is going to be such a terrible experience,” because so many of them have been in the past. We used to move ourselves. When Sherri got the job in Fresno, they paid to move us across the country, and then obviously, Leadpages, they offered for anybody on the Drip team to move here.
Now that we’ve done it a few times and paid someone to do it, it would be hard to go back especially we have three kids. There’s a lot of moving parts in it, I can imagine. Even packing our stuff at this point will take a couple of weeks. It’s not ideal. We could obviously do it if we need to, we’ve done it before, but it really does help to reduce the stress of the move knowing that in one day they’re going to come and it was three guys showed up and in seven hours they’ve packed our whole house. It’s crazy how fast they are.
Mike: Well, because they don’t care because none of the stuff is theirs. It’s easier for them to just throw out stuff in a box because they’re not like, “Oh, I’m going to reminisce about this for a few minutes or talk to so and so, have a conversation about it.” because you’re going to procrastinate to some extent because you don’t want to move because it sucks.
Rob: Totally.
Mike: They’re just going to go in, get the stuff done, get it taken cared of. They also don’t necessarily need to worry as much about like, “Oh, this item here, I want that in the new living room,” versus right now it’s in the dining room, they just throw it in a box.
Rob: Right, they just throw it in the box. To tell you the truth, the other things that made it really less stressful than it used to be—aside from the Minneapolis move—we were in Fresno for seven years, I believe. Something that’s different now is we got in this house and it’s like, “Oh, the doorbell doesn’t work. Well, I’m going to need to go get a doorbell. I need this halogen lamp that burned out in here and I’m certain it’s some specialty halogen lamp so I don’t have that. This towel rack is broken.” there’s just a bunch of stuff.
In general, the house is in great shape but there’s little things, those little things tend to bother me. I don’t have to drive all over town doing that. I jump on Amazon, I order it. I probably spent $300 in the last week on little knick-knacks and parts and things that used to be a 3-hour drive all around town to find all these things. Now, it shows up in 48 hours. It really kind of reduces the time commitment of this move because I’m able to add on an ongoing basis. Then, of course, I would have driven around, I would’ve found the halogen, come home, put it in, and the next day notice something else, so then I would’ve driven around again. It reduces the need to waste time which I think is good.
The other thing—and then I’ll stop talking about the move—is changing addresses is way easier than it used to be. Eight, ten years ago, I used to call everybody. I would have this huge list of our credit card companies and all the stuff, and I would call the 800 numbers, you wait on hold, you change the address. Now, I just went through LastPass and I looked through all of our accounts. We also have a list, there’s a few alumni associations or whatever that I don’t have accounts for but it was so much faster. It probably took me 90 minutes. I was able to do it without talking to anybody on the phone, I was listening to some music, and just hammering through different tabs in Chrome to be able to change them all. I don’t know, I think life’s a little better than it used to be.
Mike: Cool.
Rob: How about you? What’s going on?
Mike: Not a lot. Just kind of keeping track of the MicroConf Europe tickets, they’re going on sale. We’ve released those to FounderCafe members and then we went out to a second round for the previous attendees for MicroConf. I think by the time this episode goes live, the next round of tickets is just going to be available. This episode go live on Tuesday and then the following is when it will go out to the early bird list. If you’re interested in meeting up with us in Croatia and 120-150 other entrepreneurs, go over to microconfeurope.com, sign-up for the mailing list. As long as you do that on Tuesday before the email goes out on Wednesday, you should be able to get into that. We’ll send out the links and you’ll be good to go.
Rob: Sounds good. It’s going to be a good time. What are we talking about today?
Mike: Today, we’re going to be talking about how to dissect your business competitors. I’ve done this—I’ll say somewhat ad hoc—over the years where I’ve been talking to somebody and the conversation would come up about who their competitors are and how big they are and how well they’re doing.
There’s some several rules of thumb that I learned from the VP of Marketing at Pedestal Software back 12-15 years ago. He basically laid out, he’s like, “Oh, well, this is how I go about doing it.” so we just got to talking and he talked about revenue, how you look at the number of employees, and all these different things. I’ve kind of had these things in my head for a while. What I did was I’ve put them down into a list and walked thru how you can go through and analyze how big a competitor is, and how much, I’ll say, strength or resources they have to bring to bear on a particular problem in their space or to turn around and crush you.
If you’re looking at a market and you’re trying to figure out, should I even go in here or not? Is there a valid business here just knowing that there is another business in that space is a good data point but knowing the specifics and being able to drill into those, it’s good to know how it is that they make their money, and how you can do it as well. Because what you don’t want to do is you don’t want to go into a market and decide to do things in a completely different way without any justification. If something is already working well, especially if it’s an entrenched competitor, they’ve been there for a while, and the industry is already used to operating in that way, then you can come in and do kind of the same thing but you have to know what the lay of the land is, how things are currently working in order to be able to make it successful for yourself.
Rob: Why is it important to do this? What are the benefits that you get from learning all these information that we’re going to talk about a competitor?
Mike: This is a way to basically go partly through the validation process. If you already have a product for example, and you want to know like, “Are there other people in an adjacent market that I could serve?” Looking at one of your competitors who already serves that market would be a good way for you to decide whether or not you should go into that. If so, how you would position yourself in the market to them. Obviously, there is low-end, there’s mid-tier, and then there’s higher-end like enterprise level sales, there’s B2B, B2C—all these different things that you can talk about or look at in terms of the business—just knowing where all of the different pieces are is going to help you figure out where to position yourself. It’s partly about market validation but it’s also about being able to position yourself in the market and explain to people why it is that they should buy from you.
Rob: Yep, that makes a lot of sense. I also think it can help you perhaps know the […] economics or the profitability potential of the business. Because if you find out the revenue is $5 million and they have 10 employees, that’s probably a very, very profitable business and easy to run. You can think to yourself, “Oh, I can do it with only 10 employees.” or, “I should keep my headcount down if I’m going to be a similar business model.” Versus if they’re at $5 million and they have 100 or 200 employees it’s like, “It’s a very labor-intensive company. Do I even want to get into this business? Or, “Are they just hiring out ahead of growth?” and you can listen to that.
If they’ve raised funding, you know how much they raised, and you know they’re at x million in revenue and these many employees, you can back-of-the-napkin calculate their burn rate, and you can back-of-the-napkin calculate when they need to start raising another round or if they’re going to run out of funding or that kind of stuff. I think the more of these things that you learn—and we’re going to talk about revenue and target customer type and other things—it just helps you get that mental map of the landscape. You don’t just do this for one competitor, you do it for four or five of your closest competitors, and you put it all up on a whiteboard or in a doc and you start to get this understanding of the landscape and how they think about things. Let’s dive into the first one.
Mike: The first one is trying to figure out how much revenue they make. There’s a couple of back-of-the-envelope calculations you can do for this and it does depend greatly on the industry. For example, with a software type business, most of those types of businesses tend to make somewhere between $150,000 and $200,000, that’s kind of like the, I’ll say, the average range but there are certainly exceptions to that. If you look around, there are companies like Apple, and I think, Balsamiq and several others that have been public about what some of their numbers. But you can get up above $200,000 in revenue per full-time employee. You have to remember that’s revenue, not profit and that’s per full-time employee.
Usually, you can do a back-of-the-envelope calculation to figure out how much money a business is making based on the number of employees they have. If it’s a software company, they probably make somewhere between $150,000 and $200,000 per employee. You say, “Okay, well, just quick math on that, $1.5 to $2 million.” That’s not exact, obviously. There’s a range there and it could also be much lower. They could be making $100,000 per employee or they could be making $250,000 or $300,000 per employee. That also depends a lot on whether or not they’re funded. We’ll talk about some of those things but just a raw calculation, that gets you in the ballpark but, it’s by no means, exact. You have to make sure you bear that in mind. It is not exact at all.
In terms of the industry, it can vary greatly from there. I have a friend who’s in the oil industry and we got to talking about this exact same topic. I kind of gave him that ballpark estimate and he’s like, “You’re off by a factor of 10.” I was like, “Well, why is that?” He’s like, “Because in the oil industry, we sell based on margins and we have to sell a lot more. Our margins are much lower. Basically, you have to multiply by 10 in order to get the revenue.” and then their profit is basically what they support their employees on. It was 9x off.
Rob: Right. Because their profit margins are so slim that they have to make a way more revenue. That’s the thing, we should probably stick to online businesses when talking about this, bringing up the oil example is fine but we should clarify that we’re really talking about startups. Even physical e-commerce is tough because I know someone who runs a $2 million or $3 million e-commerce business but the net margin on that is 10-15%. You can imagine, they couldn’t support 30 employees on that because you just don’t make enough. I think we’re talking more about software companies.
Mike: Yep, I agree. I brought up the oil example just to point out that when you get into physical goods, like with software, your profit margins tend to be 90% or upwards of 90% but with something like selling oil, for example, you sell oil at $2 per gallon, your actual profit on that is only ¢10 or ¢20. That ¢10 or ¢20 is what comes back into your business and you can use that to support your employees. That’s why my back-of-the-envelope calculation was so far off by a magnitude of 10 when I was talking to that guy who’s an executive in the oil company.
Just keep in mind, physical production costs really eat into that, and your revenue will be substantially higher or their revenue will be substantially higher because of that but it doesn’t necessarily translate to profit and […].
Rob: Yeah. This is the formula, the 100k-200k per employee that I use in my head just when I ballpark things. As you said, there can be outliers. You can have some startups will be five people and they’re doing $5 million or $10 million, and they’re super profitable. Then others that have raised funding are the exact opposite. They’re doing 200k in ARR–Annual Recurring Revenue and they have 20 employees because they’ve staffed up. It can be skewed but this is for a—when I think of it—it’s like a bootstrapped and profitable or even funded but kind of well-run and capital efficient company, I think this is a reasonable number. If someone is growing really fast, this number can get skewed in one direction or another. As you said in the outline here, you have early-stage or pre-employees where it’s just founders, it’s pretty much guesswork. Unless, you hear them comment in a podcast, or in a blog post, or they posted it live on Baremetrics or something, it’s just pure guesswork at that point.
Mike: The second thing to look at is their target customer type. To do this, you can look at their pricing and specifically who they are targeting. By who they are targeting, there’s two different classifications. Generally, it’s either B2B or B2C, and within B2B, there’s several different levels; there’s the high-end enterprise, there’s the small-medium business market, and then there’s the professionals, so freelancers, various small agencies, or partnerships–things like that. I would throw prosumers in there as well. Those are people who are professional freelancers but maybe they do it on the side or it’s something that they are interested in but they don’t necessarily gain their full time living from it.
Then B2C, it’s something like a mass market where you’re trying to sell one of every single thing to every person on the planet. Then there’s well-off individuals or trying to sell the families or pro-hobbyists sort of prosumers. Those are the two general classifications; B2B and B2C and then within each of those you have to also be aware of what type of customer they’re selling to. That’s mostly a function of price but again, it depends on what it is they’re selling, whether it’s a software, or digital asset, or a physical product.
Rob: I think pricing is a big indicator here and then just with their marketing–look at their headlines, look at their copy, look at their colors and their design. I was thinking, what’s a mobile phone company that really caters to the youth these days? They’re going to have a different logo. Is Boost Mobile still around or am I totally dating myself?
Mike: I don’t know. I don’t think so. I think they’re part of, I don’t know, the one with the purple logo.
Rob: Yeah, exactly. This is great radio here. Sorry folks. Some brand like that that’s targeting kids in college is going to have a very different language and very different logo than salesforce.com–that’s B2B enterprise, all that stuff. You can get a feel from that if they’re positioning themselves well and then price, of course, is a big deal.
When I was first trying to figure out pricing for Drip and I was really agonizing over it. I went out to all the competitors that I knew about and I put it all in a single doc of what everyone’s pricing was. All the grids and I was just trying to analyze it. It really helped me get a feel for where we should land that as a new startup that’s launching. Of course, pricing is tough, it’s always a lot of guesswork but it gave me a really clear picture of again, the landscape.
What was interesting is that I returned back to that doc every six months or so, and so many of the prices were just dramatically different. The people had different tier levels, some had raised prices, some had lowered prices, some had raised them on the low-end, lowered them on a high-end. It was really interesting to watch that over time. I updated it a few times and did a snapshot over time but it is fascinating if you watch competitors and make it, every 60 days or every 3 or 4 months, go into this group and whether you have a VA do it or do it yourself, then just take another snapshot of their pricing and you can watch how stuff shifts over time in a space.
Mike: The next thing to look at is what their sales and acquisition channels are. There’s a few different categories. Obviously, there’s online which includes either website, their content marketing, advertising, email list, etc, and then there’s offline channels which are much, much more difficult to find and analyze the effectiveness of. The things like trade shows, physical mailings, relationships and partnerships that they’re leveraging, if they have a brick and mortar store, there’s obviously heavy infrastructure cost and logistical cost of just getting products to those.
Again, we’re probably going to lean away from the physical product side of things but you can imagine that with offline channel such as a trade show, how do you know how many customers they’re getting in contact with, or what their cost to acquire those customers. You can guess based on what it costs to attend the trade show. You could go to some of them, like a competitor, let’s say they go to trade show x and you go to trade show x and say, “Hey, can I see your sponsorship rate card?” You look through that, figure out what sponsorship level they went in on and then figure out how many people they probably sent. If you are at the trade show then it makes obviously, that easier because you can just go up to those people and ask them questions. But you can get a sense of what their marketing budget is like based on some of the different things that they do.
Obviously, trade shows are easier to calculate but if they’re doing physical mailings, it’s really hard to get any insight there because you don’t know how they’re getting their list, what they’re paying for it, or the effectiveness of it. All that stuff is going to be, very much siloed inside their company. It’s going to be much harder for you to figure out, not just how much money they’re spending on it, but whether or not it’s effective.
Rob: You know, one way to also get an idea is to use an online tool to look at your competitors’ keywords that they rank for, to look at ads they’ve run or are running. There are tools like Spyfu and ahrefs.com which you can type in a competitor website and it’ll give you a good idea of what they rank for, and what the terms are, and how much traffic potentially. It’s all estimates but it gives you some idea.
Then, just to get an idea of their top-level traffic like, “How many uniques do we think they get?” I used to go to compete.com but that shut down and so now, I’ve really been using rank2traffic.com. There is another one—I can’t think off the top of my head—but what I did is I searched for compete.com competitors or replacements and there’s actually a Quora thread where folks named a bunch of them and I tried 10 of them, and Rank2Traffic and another one was I felt like had at least the best guesses.
Again, these can be off by a factor of two or three in either direction. It is a bummer but at least it gives you some idea. Sometimes you’ll put in a competitor and it’ll just say, “Not enough traffic to list here.” It’s like, “Oh, they’re probably getting less than 5000 uniques.” That’s not a major channel for them most likely.
Mike: The next thing to look at is the type of products they’re offering. We’re going to neglect the physical product side of the equation and focus on digital products. But even within digital products, you’ve got things like software, you’ve got courses, all sorts of things that fall under that digital category. There’s going to be support costs differences for them, and engineering, and research and development costs that are radically different.
If you have a course, for example, the support cost on that is way, way less than they are for a software product. Just because with software products, you have to train and educate people versus a course that is the whole goal of it.
In addition with most software products, you’re going to have to offer some sort of ongoing support. If it’s a SaaS application, that is a monthly ongoing support that you’re offering but with training courses, if there’s a bug or a problem in it, you typically fix it and roll out the new version to everybody and that’s it. You don’t have to continually update it–at least in terms of fixing things inside that. It doesn’t mean you can’t offer a new version of it or an updated version for 2018 versus 2016 but the length of the time that you’re going to be spending doing support and offering any sort of warranties or bug fixes or anything like that is dramatically lower for a course than it is for a SaaS product.
Rob: Another thing that you can look at is the length of time they’ve been in business. Older businesses do tend to be more stable without massive revenue fluctuations, they also tend to be in the software space slower. They’re slower to release features. There’s a lot of opportunity when competing against older businesses that have gotten kind of big and bloated.
Newer businesses can obviously have a lot more revenue swings or faster revenue growth in terms of percentage wise, but they can be harder competitors for you to compete against because a lot of times, if you’re just a team of one, two, three people, your advantage is that you can move quickly and you can take refugees from those older, larger companies. I think there’s a lot of opportunity. It was the playbook of Drip–that we were the young upstart, and we were smaller but we were shipping features so much faster than a lot of our competitors. It was kind of easy pickings against companies that had been around for 10 years and had a bunch of legacy.
That’s the thing with oil companies, or paper manufacturing–kind of typical brick and mortar businesses. If you’re 50 years old or 100 years old, you have a brand name, you can be entrenched in a space but if you’re a software company that’s 10 or 15 years old, you are very likely to have a ton of legacy code, and your software is very likely to not be as good as software that was built today. It is this kind of inverse thing where, older companies will have a lot of revenue, and they have a lot of momentum and they’ll have a lot of brand, there tends to be a pretty good factor to get in there as an upstart and make some traction.
Mike: Just to kind of tackle on or clarify a little bit of what Rob is saying because I don’t want people to misunderstand him based on exactly what he said. But when he said that the new businesses tend to have a better code, it’s not like the ones and zeroes are any better, it’s really just that they have basically, honed in on exactly what it is the customer wants in terms of the minimum stuff that needs to be built versus the businesses that have been around for a long time.
It’s just so much harder for them to make a change even if it would be better for their customers because they have to take into consideration the existing customer base. If they make a large change to the frontend of their product and they suddenly alienate 30,000 customers, it’s really bad for them. That’s just going to make massive problems for them and support headaches. They’re going to choose to not make those changes even though they could and they have the resources to.
Rob: Yeah, that’s right. There’s legacy customer stuff. That’s what you’re talking about if you can’t make a change, and then there’s legacy code stuff. When I think of how much better software development practices have gotten over the past 15 years with extensive unit testing, the frontend integration testing, and the agile development methodologies–the software I was writing and working on 15 years ago was harder to maintain. Maybe that’s not across the board and maybe that’s not for everyone, but that software, we could not ship features nearly as fast because the software didn’t have unit tests and it was more crafty–it was all these things. These days I believe the practices, they’ve gotten better. I think software these days is easier to work on assuming that you have knowledgeable people who are using the right engineering practices and aren’t just hackers throwing stuff at the wall on a weekend or something.
Mike: The next thing you look at is the company leadership and how that is structured. If they’re self-funded, the founders tend to be in those company leadership positions. If it’s angel or VC funded, the founders may be there still in the executive capacity or they may have put into more of a director role and they brought in professional CTOs or CEOs, for example. It depends on how far along they are.
If it’s a established business that’s been around for 10, 15, 20 years then who knows what that looks like but it also gives you an indication of what things are going to change in the future. They just brought in a new CEO or they just got a round of funding, for example, that dramatically changes what the future vision for the company is going to look like.
Those are just, again, just data points that you can look at but it helps you to understand how quickly is this company going to change direction and are they likely to change direction? If the company’s been doing their business exactly the same way for the past five years, chances are good they’re probably going to do that for at least the next year or two but there’s no guarantee.
Rob: You can go to Crunchbase for this. You can signup for Google alerts on the company names. I think that’s a good idea anyways. One thing I’ll caution as we’re talking through this is, I have been in environments where people were way too fixated on what are competitors are doing. “Oh, they just shipped this thing. Oh, they just raised this round of funding.” I was like, “This stuff is good to know but this is not make or break. You should be focusing way more on your customers than on your competitors.” With that said, everything we’re talking about here is still good to know, to have an idea of the landscape, and to revisit it every—I would say in a startup environment—probably every month to three months if you’re in the early stage. But this is not something that everyday you should just be thinking about and trying to look and watch competitors and watch what they do because it just matters so much less. Unless you’re in a neck and neck race with your competitor, it’s just not a good thing to be overly fixated on what other people are doing.
I think another thing to look at is red flags or exceptions. These indicate potential problems or major changes that could be good or bad that a competitor is doing. If you hear about layoffs they’re doing, if there’s a quick change of leadership where the CEO was perhaps, asked to leave–anytime there’s a change of leadership you always wonder what happened; if they raised funding recently, they have new product announcements, all kinds of stuff. This is where you can again, monitor the email list, there’s people talking about any industry. If you’re in marketing automation and then there’s three or four people who are kind of the industry experts that you can be on their list or you can like I said, subscribe to Crunchbase updates or do Google alerts just to hear about what your competitors are up to.
Mike: The last thing you can look at to dissect your business competitors is to pose as a customer and try and find out how they treat their customers. There’s obviously some ethical questions that you have to answer for yourself here in terms of how far you’re going to go. Obviously, you can sign-up for a competitor’s products, you could just get on their mailing list, you could call or email their support and directly ask questions.
Posing as a customer gets a little dicey of course in terms of ethics and how far you want to go with that but each person has their own, I’ll say, line in the sand for that. Personally, I don’t think that I would go too far with that. I might look at their email list. What I don’t know is I would sign-up for a trial if I wasn’t actually interested in it though. But all of these gives you an idea of how they treat their customers and whether or not there are ways that you can position yourself to customers that are unhappy with their product or their service in order to make yourself more attractive to those customers that are leaving.
Rob: To recap, we had eight way to dissect your business competitors.the first was, look at their revenue. Second was target customer type. Third was sales and acquisition channels. Fourth was software versus courses. Fifth was length of time in business. Next was company leadership, then red flags and exceptions. Eight one was posing as a customer.
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Our theme music is an excerpt from We’re Out of Control by MoOt, used under Creative Commons. Subscribe to us on iTunes by searching for Startups and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening. We’ll see you next time.
Rob: What?
Mike: Is that what this episode is?
Rob: Why?
Mike: I don’t know. Because it’s episode 404. Come on! Give me the nerd joke.
Rob: Oh, sorry. I totally missed the prompt.
Mike: Come on man. Alright. Theme music.
Welcome to Startups For The Rest Of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing software products, whether you’ve built your first product or just thinking about it. I’m Mike.
Rob: And I’m the guy that doesn’t know what 404 means.
Mike: And we’re here to share our experiences to help you avoid the same mistakes that we’ve made. How are you doing this week, Rob?
Rob: I’m doing pretty good, actually. Aside from missing that bump set that you just gave me at the top of the intro there, we have wrapped up our move. Sherry and I bought a house in Minneapolis, we decided to stick around for a few years. We’ve been renting for two years. Have I gone on my rant about how buying a home is like not a good financial decision? Have I done that?
Mike: You have not done that but I have seen various people say that.
Rob: Yeah. I won’t do that here. I’ll spare everyone, maybe in an after show at some point I’ll dig into that. But I realized that sometimes you make decisions that are not the best financial but you make it more for your life, your lifestyle, or your family, or really, we wanted more control of exactly where we lived. We wanted to live right around this lake in Minneapolis called Lake Calhoun. There are just very, very few rentals here, we have lived in one for two years. It was kind of a crappy house, it was fine but the landlord didn’t do much upkeep on it, I’ll put it that way.
Really, we just wanted more control. Also, didn’t want to ever be like, “Hey, we sold the house. You guys have to move in 30 days.” you know that type of thing because we know that would have happened at the worst possible time. It wouldn’t happen when I’m totally off and not working. It would happen right in the middle of me starting a new startup or something.
Anyway, it’s all I have to say, we bought a house, we’re just one block away from where we lived before. Got the keys on a Friday, packed or showed up on Sunday, moved or showed up on Monday.
Of all the moves we’ve done, it was by far the most seamless and least stressful. It really helped neither Sherri and I really worked very much last week, and so we’re almost unpacked. We’re also motivated by our packers. They gave us two prices; one was to pack into cardboard boxes where you have all the waste and you have to get rid of it or to pack in these plastic reusable tubs that they take back and you basically just rent it for the move. The fact that you only have them for a few weeks, it was just motivational like, get those things returned and get the whole house unpacked quickly.
Mike: That’s cool. I’ve always had to move myself. I haven’t moved in more than 10 years at this point. It’s been close to 13. I don’t look forward to ever moving again. It’s one of those things where—I know at some point we’ll probably have to—but I just don’t feel like it at the moment.
Rob: It’s not fun. It’s a short-term pain for what could be a long-term gain. In our case, now that we’re in this house that’s larger, closer to the lake, we like it more, it’s newer, just all of these things. It was totally worth it but yeah, coming up to it I was just filled with anxiety, “Oh, god. This is going to be such a terrible experience,” because so many of them have been in the past. We used to move ourselves. When Sherri got the job in Fresno, they paid to move us across the country, and then obviously, Leadpages, they offered for anybody on the Drip team to move here.
Now that we’ve done it a few times and paid someone to do it, it would be hard to go back especially we have three kids. There’s a lot of moving parts in it, I can imagine. Even packing our stuff at this point will take a couple of weeks. It’s not ideal. We could obviously do it if we need to, we’ve done it before, but it really does help to reduce the stress of the move knowing that in one day they’re going to come and it was three guys showed up and in seven hours they’ve packed our whole house. It’s crazy how fast they are.
Mike: Well, because they don’t care because none of the stuff is theirs. It’s easier for them to just throw out stuff in a box because they’re not like, “Oh, I’m going to reminisce about this for a few minutes or talk to so and so, have a conversation about it.” because you’re going to procrastinate to some extent because you don’t want to move because it sucks.
Rob: Totally.
Mike: They’re just going to go in, get the stuff done, get it taken cared of. They also don’t necessarily need to worry as much about like, “Oh, this item here, I want that in the new living room,” versus right now it’s in the dining room, they just throw it in a box.
Rob: Right, they just throw it in the box. To tell you the truth, the other things that made it really less stressful than it used to be—aside from the Minneapolis move—we were in Fresno for seven years, I believe. Something that’s different now is we got in this house and it’s like, “Oh, the doorbell doesn’t work. Well, I’m going to need to go get a doorbell. I need this halogen lamp that burned out in here and I’m certain it’s some specialty halogen lamp so I don’t have that. This towel rack is broken.” there’s just a bunch of stuff.
In general, the house is in great shape but there’s little things, those little things tend to bother me. I don’t have to drive all over town doing that. I jump on Amazon, I order it. I probably spent $300 in the last week on little knick-knacks and parts and things that used to be a 3-hour drive all around town to find all these things. Now, it shows up in 48 hours. It really kind of reduces the time commitment of this move because I’m able to add on an ongoing basis. Then, of course, I would have driven around, I would’ve found the halogen, come home, put it in, and the next day notice something else, so then I would’ve driven around again. It reduces the need to waste time which I think is good.
The other thing—and then I’ll stop talking about the move—is changing addresses is way easier than it used to be. Eight, ten years ago, I used to call everybody. I would have this huge list of our credit card companies and all the stuff, and I would call the 800 numbers, you wait on hold, you change the address. Now, I just went through LastPass and I looked through all of our accounts. We also have a list, there’s a few alumni associations or whatever that I don’t have accounts for but it was so much faster. It probably took me 90 minutes. I was able to do it without talking to anybody on the phone, I was listening to some music, and just hammering through different tabs in Chrome to be able to change them all. I don’t know, I think life’s a little better than it used to be.
Mike: Cool.
Rob: How about you? What’s going on?
Mike: Not a lot. Just kind of keeping track of the MicroConf Europe tickets, they’re going on sale. We’ve released those to FounderCafe members and then we went out to a second round for the previous attendees for MicroConf. I think by the time this episode goes live, the next round of tickets is just going to be available. This episode go live on Tuesday and then the following is when it will go out to the early bird list. If you’re interested in meeting up with us in Croatia and 120-150 other entrepreneurs, go over to microconfeurope.com, sign-up for the mailing list. As long as you do that on Tuesday before the email goes out on Wednesday, you should be able to get into that. We’ll send out the links and you’ll be good to go.
Rob: Sounds good. It’s going to be a good time. What are we talking about today?
Mike: Today, we’re going to be talking about how to dissect your business competitors. I’ve done this—I’ll say somewhat ad hoc—over the years where I’ve been talking to somebody and the conversation would come up about who their competitors are and how big they are and how well they’re doing.
There’s some several rules of thumb that I learned from the VP of Marketing at Pedestal Software back 12-15 years ago. He basically laid out, he’s like, “Oh, well, this is how I go about doing it.” so we just got to talking and he talked about revenue, how you look at the number of employees, and all these different things. I’ve kind of had these things in my head for a while. What I did was I’ve put them down into a list and walked thru how you can go through and analyze how big a competitor is, and how much, I’ll say, strength or resources they have to bring to bear on a particular problem in their space or to turn around and crush you.
If you’re looking at a market and you’re trying to figure out, should I even go in here or not? Is there a valid business here just knowing that there is another business in that space is a good data point but knowing the specifics and being able to drill into those, it’s good to know how it is that they make their money, and how you can do it as well. Because what you don’t want to do is you don’t want to go into a market and decide to do things in a completely different way without any justification. If something is already working well, especially if it’s an entrenched competitor, they’ve been there for a while, and the industry is already used to operating in that way, then you can come in and do kind of the same thing but you have to know what the lay of the land is, how things are currently working in order to be able to make it successful for yourself.
Rob: Why is it important to do this? What are the benefits that you get from learning all these information that we’re going to talk about a competitor?
Mike: This is a way to basically go partly through the validation process. If you already have a product for example, and you want to know like, “Are there other people in an adjacent market that I could serve?” Looking at one of your competitors who already serves that market would be a good way for you to decide whether or not you should go into that. If so, how you would position yourself in the market to them. Obviously, there is low-end, there’s mid-tier, and then there’s higher-end like enterprise level sales, there’s B2B, B2C—all these different things that you can talk about or look at in terms of the business—just knowing where all of the different pieces are is going to help you figure out where to position yourself. It’s partly about market validation but it’s also about being able to position yourself in the market and explain to people why it is that they should buy from you.
Rob: Yep, that makes a lot of sense. I also think it can help you perhaps know the […] economics or the profitability potential of the business. Because if you find out the revenue is $5 million and they have 10 employees, that’s probably a very, very profitable business and easy to run. You can think to yourself, “Oh, I can do it with only 10 employees.” or, “I should keep my headcount down if I’m going to be a similar business model.” Versus if they’re at $5 million and they have 100 or 200 employees it’s like, “It’s a very labor-intensive company. Do I even want to get into this business? Or, “Are they just hiring out ahead of growth?” and you can listen to that.
If they’ve raised funding, you know how much they raised, and you know they’re at x million in revenue and these many employees, you can back-of-the-napkin calculate their burn rate, and you can back-of-the-napkin calculate when they need to start raising another round or if they’re going to run out of funding or that kind of stuff. I think the more of these things that you learn—and we’re going to talk about revenue and target customer type and other things—it just helps you get that mental map of the landscape. You don’t just do this for one competitor, you do it for four or five of your closest competitors, and you put it all up on a whiteboard or in a doc and you start to get this understanding of the landscape and how they think about things. Let’s dive into the first one.
Mike: The first one is trying to figure out how much revenue they make. There’s a couple of back-of-the-envelope calculations you can do for this and it does depend greatly on the industry. For example, with a software type business, most of those types of businesses tend to make somewhere between $150,000 and $200,000, that’s kind of like the, I’ll say, the average range but there are certainly exceptions to that. If you look around, there are companies like Apple, and I think, Balsamiq and several others that have been public about what some of their numbers. But you can get up above $200,000 in revenue per full-time employee. You have to remember that’s revenue, not profit and that’s per full-time employee.
Usually, you can do a back-of-the-envelope calculation to figure out how much money a business is making based on the number of employees they have. If it’s a software company, they probably make somewhere between $150,000 and $200,000 per employee. You say, “Okay, well, just quick math on that, $1.5 to $2 million.” That’s not exact, obviously. There’s a range there and it could also be much lower. They could be making $100,000 per employee or they could be making $250,000 or $300,000 per employee. That also depends a lot on whether or not they’re funded. We’ll talk about some of those things but just a raw calculation, that gets you in the ballpark but, it’s by no means, exact. You have to make sure you bear that in mind. It is not exact at all.
In terms of the industry, it can vary greatly from there. I have a friend who’s in the oil industry and we got to talking about this exact same topic. I kind of gave him that ballpark estimate and he’s like, “You’re off by a factor of 10.” I was like, “Well, why is that?” He’s like, “Because in the oil industry, we sell based on margins and we have to sell a lot more. Our margins are much lower. Basically, you have to multiply by 10 in order to get the revenue.” and then their profit is basically what they support their employees on. It was 9x off.
Rob: Right. Because their profit margins are so slim that they have to make a way more revenue. That’s the thing, we should probably stick to online businesses when talking about this, bringing up the oil example is fine but we should clarify that we’re really talking about startups. Even physical e-commerce is tough because I know someone who runs a $2 million or $3 million e-commerce business but the net margin on that is 10-15%. You can imagine, they couldn’t support 30 employees on that because you just don’t make enough. I think we’re talking more about software companies.
Mike: Yep, I agree. I brought up the oil example just to point out that when you get into physical goods, like with software, your profit margins tend to be 90% or upwards of 90% but with something like selling oil, for example, you sell oil at $2 per gallon, your actual profit on that is only ¢10 or ¢20. That ¢10 or ¢20 is what comes back into your business and you can use that to support your employees. That’s why my back-of-the-envelope calculation was so far off by a magnitude of 10 when I was talking to that guy who’s an executive in the oil company.
Just keep in mind, physical production costs really eat into that, and your revenue will be substantially higher or their revenue will be substantially higher because of that but it doesn’t necessarily translate to profit and […].
Rob: Yeah. This is the formula, the 100k-200k per employee that I use in my head just when I ballpark things. As you said, there can be outliers. You can have some startups will be five people and they’re doing $5 million or $10 million, and they’re super profitable. Then others that have raised funding are the exact opposite. They’re doing 200k in ARR–Annual Recurring Revenue and they have 20 employees because they’ve staffed up. It can be skewed but this is for a—when I think of it—it’s like a bootstrapped and profitable or even funded but kind of well-run and capital efficient company, I think this is a reasonable number. If someone is growing really fast, this number can get skewed in one direction or another. As you said in the outline here, you have early-stage or pre-employees where it’s just founders, it’s pretty much guesswork. Unless, you hear them comment in a podcast, or in a blog post, or they posted it live on Baremetrics or something, it’s just pure guesswork at that point.
Mike: The second thing to look at is their target customer type. To do this, you can look at their pricing and specifically who they are targeting. By who they are targeting, there’s two different classifications. Generally, it’s either B2B or B2C, and within B2B, there’s several different levels; there’s the high-end enterprise, there’s the small-medium business market, and then there’s the professionals, so freelancers, various small agencies, or partnerships–things like that. I would throw prosumers in there as well. Those are people who are professional freelancers but maybe they do it on the side or it’s something that they are interested in but they don’t necessarily gain their full time living from it.
Then B2C, it’s something like a mass market where you’re trying to sell one of every single thing to every person on the planet. Then there’s well-off individuals or trying to sell the families or pro-hobbyists sort of prosumers. Those are the two general classifications; B2B and B2C and then within each of those you have to also be aware of what type of customer they’re selling to. That’s mostly a function of price but again, it depends on what it is they’re selling, whether it’s a software, or digital asset, or a physical product.
Rob: I think pricing is a big indicator here and then just with their marketing–look at their headlines, look at their copy, look at their colors and their design. I was thinking, what’s a mobile phone company that really caters to the youth these days? They’re going to have a different logo. Is Boost Mobile still around or am I totally dating myself?
Mike: I don’t know. I don’t think so. I think they’re part of, I don’t know, the one with the purple logo.
Rob: Yeah, exactly. This is great radio here. Sorry folks. Some brand like that that’s targeting kids in college is going to have a very different language and very different logo than salesforce.com–that’s B2B enterprise, all that stuff. You can get a feel from that if they’re positioning themselves well and then price, of course, is a big deal.
When I was first trying to figure out pricing for Drip and I was really agonizing over it. I went out to all the competitors that I knew about and I put it all in a single doc of what everyone’s pricing was. All the grids and I was just trying to analyze it. It really helped me get a feel for where we should land that as a new startup that’s launching. Of course, pricing is tough, it’s always a lot of guesswork but it gave me a really clear picture of again, the landscape.
What was interesting is that I returned back to that doc every six months or so, and so many of the prices were just dramatically different. The people had different tier levels, some had raised prices, some had lowered prices, some had raised them on the low-end, lowered them on a high-end. It was really interesting to watch that over time. I updated it a few times and did a snapshot over time but it is fascinating if you watch competitors and make it, every 60 days or every 3 or 4 months, go into this group and whether you have a VA do it or do it yourself, then just take another snapshot of their pricing and you can watch how stuff shifts over time in a space.
Mike: The next thing to look at is what their sales and acquisition channels are. There’s a few different categories. Obviously, there’s online which includes either website, their content marketing, advertising, email list, etc, and then there’s offline channels which are much, much more difficult to find and analyze the effectiveness of. The things like trade shows, physical mailings, relationships and partnerships that they’re leveraging, if they have a brick and mortar store, there’s obviously heavy infrastructure cost and logistical cost of just getting products to those.
Again, we’re probably going to lean away from the physical product side of things but you can imagine that with offline channel such as a trade show, how do you know how many customers they’re getting in contact with, or what their cost to acquire those customers. You can guess based on what it costs to attend the trade show. You could go to some of them, like a competitor, let’s say they go to trade show x and you go to trade show x and say, “Hey, can I see your sponsorship rate card?” You look through that, figure out what sponsorship level they went in on and then figure out how many people they probably sent. If you are at the trade show then it makes obviously, that easier because you can just go up to those people and ask them questions. But you can get a sense of what their marketing budget is like based on some of the different things that they do.
Obviously, trade shows are easier to calculate but if they’re doing physical mailings, it’s really hard to get any insight there because you don’t know how they’re getting their list, what they’re paying for it, or the effectiveness of it. All that stuff is going to be, very much siloed inside their company. It’s going to be much harder for you to figure out, not just how much money they’re spending on it, but whether or not it’s effective.
Rob: You know, one way to also get an idea is to use an online tool to look at your competitors’ keywords that they rank for, to look at ads they’ve run or are running. There are tools like Spyfu and ahrefs.com which you can type in a competitor website and it’ll give you a good idea of what they rank for, and what the terms are, and how much traffic potentially. It’s all estimates but it gives you some idea.
Then, just to get an idea of their top-level traffic like, “How many uniques do we think they get?” I used to go to compete.com but that shut down and so now, I’ve really been using rank2traffic.com. There is another one—I can’t think off the top of my head—but what I did is I searched for compete.com competitors or replacements and there’s actually a Quora thread where folks named a bunch of them and I tried 10 of them, and Rank2Traffic and another one was I felt like had at least the best guesses.
Again, these can be off by a factor of two or three in either direction. It is a bummer but at least it gives you some idea. Sometimes you’ll put in a competitor and it’ll just say, “Not enough traffic to list here.” It’s like, “Oh, they’re probably getting less than 5000 uniques.” That’s not a major channel for them most likely.
Mike: The next thing to look at is the type of products they’re offering. We’re going to neglect the physical product side of the equation and focus on digital products. But even within digital products, you’ve got things like software, you’ve got courses, all sorts of things that fall under that digital category. There’s going to be support costs differences for them, and engineering, and research and development costs that are radically different.
If you have a course, for example, the support cost on that is way, way less than they are for a software product. Just because with software products, you have to train and educate people versus a course that is the whole goal of it.
In addition with most software products, you’re going to have to offer some sort of ongoing support. If it’s a SaaS application, that is a monthly ongoing support that you’re offering but with training courses, if there’s a bug or a problem in it, you typically fix it and roll out the new version to everybody and that’s it. You don’t have to continually update it–at least in terms of fixing things inside that. It doesn’t mean you can’t offer a new version of it or an updated version for 2018 versus 2016 but the length of the time that you’re going to be spending doing support and offering any sort of warranties or bug fixes or anything like that is dramatically lower for a course than it is for a SaaS product.
Rob: Another thing that you can look at is the length of time they’ve been in business. Older businesses do tend to be more stable without massive revenue fluctuations, they also tend to be in the software space slower. They’re slower to release features. There’s a lot of opportunity when competing against older businesses that have gotten kind of big and bloated.
Newer businesses can obviously have a lot more revenue swings or faster revenue growth in terms of percentage wise, but they can be harder competitors for you to compete against because a lot of times, if you’re just a team of one, two, three people, your advantage is that you can move quickly and you can take refugees from those older, larger companies. I think there’s a lot of opportunity. It was the playbook of Drip–that we were the young upstart, and we were smaller but we were shipping features so much faster than a lot of our competitors. It was kind of easy pickings against companies that had been around for 10 years and had a bunch of legacy.
That’s the thing with oil companies, or paper manufacturing–kind of typical brick and mortar businesses. If you’re 50 years old or 100 years old, you have a brand name, you can be entrenched in a space but if you’re a software company that’s 10 or 15 years old, you are very likely to have a ton of legacy code, and your software is very likely to not be as good as software that was built today. It is this kind of inverse thing where, older companies will have a lot of revenue, and they have a lot of momentum and they’ll have a lot of brand, there tends to be a pretty good factor to get in there as an upstart and make some traction.
Mike: Just to kind of tackle on or clarify a little bit of what Rob is saying because I don’t want people to misunderstand him based on exactly what he said. But when he said that the new businesses tend to have a better code, it’s not like the ones and zeroes are any better, it’s really just that they have basically, honed in on exactly what it is the customer wants in terms of the minimum stuff that needs to be built versus the businesses that have been around for a long time.
It’s just so much harder for them to make a change even if it would be better for their customers because they have to take into consideration the existing customer base. If they make a large change to the frontend of their product and they suddenly alienate 30,000 customers, it’s really bad for them. That’s just going to make massive problems for them and support headaches. They’re going to choose to not make those changes even though they could and they have the resources to.
Rob: Yeah, that’s right. There’s legacy customer stuff. That’s what you’re talking about if you can’t make a change, and then there’s legacy code stuff. When I think of how much better software development practices have gotten over the past 15 years with extensive unit testing, the frontend integration testing, and the agile development methodologies–the software I was writing and working on 15 years ago was harder to maintain. Maybe that’s not across the board and maybe that’s not for everyone, but that software, we could not ship features nearly as fast because the software didn’t have unit tests and it was more crafty–it was all these things. These days I believe the practices, they’ve gotten better. I think software these days is easier to work on assuming that you have knowledgeable people who are using the right engineering practices and aren’t just hackers throwing stuff at the wall on a weekend or something.
Mike: The next thing you look at is the company leadership and how that is structured. If they’re self-funded, the founders tend to be in those company leadership positions. If it’s angel or VC funded, the founders may be there still in the executive capacity or they may have put into more of a director role and they brought in professional CTOs or CEOs, for example. It depends on how far along they are.
If it’s a established business that’s been around for 10, 15, 20 years then who knows what that looks like but it also gives you an indication of what things are going to change in the future. They just brought in a new CEO or they just got a round of funding, for example, that dramatically changes what the future vision for the company is going to look like.
Those are just, again, just data points that you can look at but it helps you to understand how quickly is this company going to change direction and are they likely to change direction? If the company’s been doing their business exactly the same way for the past five years, chances are good they’re probably going to do that for at least the next year or two but there’s no guarantee.
Rob: You can go to Crunchbase for this. You can signup for Google alerts on the company names. I think that’s a good idea anyways. One thing I’ll caution as we’re talking through this is, I have been in environments where people were way too fixated on what are competitors are doing. “Oh, they just shipped this thing. Oh, they just raised this round of funding.” I was like, “This stuff is good to know but this is not make or break. You should be focusing way more on your customers than on your competitors.” With that said, everything we’re talking about here is still good to know, to have an idea of the landscape, and to revisit it every—I would say in a startup environment—probably every month to three months if you’re in the early stage. But this is not something that everyday you should just be thinking about and trying to look and watch competitors and watch what they do because it just matters so much less. Unless you’re in a neck and neck race with your competitor, it’s just not a good thing to be overly fixated on what other people are doing.
I think another thing to look at is red flags or exceptions. These indicate potential problems or major changes that could be good or bad that a competitor is doing. If you hear about layoffs they’re doing, if there’s a quick change of leadership where the CEO was perhaps, asked to leave–anytime there’s a change of leadership you always wonder what happened; if they raised funding recently, they have new product announcements, all kinds of stuff. This is where you can again, monitor the email list, there’s people talking about any industry. If you’re in marketing automation and then there’s three or four people who are kind of the industry experts that you can be on their list or you can like I said, subscribe to Crunchbase updates or do Google alerts just to hear about what your competitors are up to.
Mike: The last thing you can look at to dissect your business competitors is to pose as a customer and try and find out how they treat their customers. There’s obviously some ethical questions that you have to answer for yourself here in terms of how far you’re going to go. Obviously, you can sign-up for a competitor’s products, you could just get on their mailing list, you could call or email their support and directly ask questions.
Posing as a customer gets a little dicey of course in terms of ethics and how far you want to go with that but each person has their own, I’ll say, line in the sand for that. Personally, I don’t think that I would go too far with that. I might look at their email list. What I don’t know is I would sign-up for a trial if I wasn’t actually interested in it though. But all of these gives you an idea of how they treat their customers and whether or not there are ways that you can position yourself to customers that are unhappy with their product or their service in order to make yourself more attractive to those customers that are leaving.
Rob: To recap, we had eight way to dissect your business competitors.the first was, look at their revenue. Second was target customer type. Third was sales and acquisition channels. Fourth was software versus courses. Fifth was length of time in business. Next was company leadership, then red flags and exceptions. Eight one was posing as a customer.
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Episode 403 | Should You Love What You’re Working On?
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Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike ask the question: should you love what you’re working on? The guys talk about this topic in the idea of balancing interests and opportunity. They also ask themselves the question and how it pertains to their lives and businesses.
Items mentioned in this episode:
Rob: In this episode of Startups For The Rest Of Us, Mike and I talk about whether you should love what you’re working on. This is Startups For The Rest Of Us episode 403.
Welcome to Startups For The Rest Of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing software products, whether you built your first product or just thinking about it. I’m Rob.
Mike: And I’m Mike.
Rob: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. Where this week, sir?
Mike: I started a local D&D meetup group.
Rob: That is so cool.
Mike: A friend of mine and I’ve played with our kids. I’ve got two sons and he has a son and two daughters. One of his daughters played a little bit with us. She was like, “Yeah, this isn’t for me. I hate this. I don’t want to deal with boys.” I think that’s certainly what is was. But the other three, him, and I play. We wanted to start up a group where we’re actually playing with adults because kids can be a little bit difficult to keep on track sometimes.
He knew a couple of people then I started a meetup.com group to try and find at least one more player. There’s five of us now and we’ve met for the first time earlier this week. Started up a game, we expect it to go for a couple of months, we’ll just meet up every week, and see how things go.
Rob: That’s fun. Did you say you just meetup.com?
Mike: Yup.
Rob: Awesome and you’re playing fifth edition?
Mike: Yeah, the latest version. I think two or three other people who we’re playing with haven’t played in 20 or 30 years. Then they went to college, had kids, and got out of bit for a while. Now they’re coming back and so far it’s been good. We only had one session, which was about three hours long, but we spent some time before that at a different time creating characters. It’s good so far.
Rob: Were they marveling at the ascending armor classes and there’s no THAC0. I don’t know if you played second edition, but did they have to read the player’s handbook or you just brought them up to speed verbally?
Mike: Yeah, I caught them up to speed. I was like, “Here’s the differences from when,” because I asked them which versions they played. So up to second edition they have the THAC0 and then in the third edition they switched over to the d20. I just explained those things.
Then one person, he still plays a lot of version 3.5. He’s never played 4 or 5 before. I looked it up and found a place—I think it’s Reddit—where they basically laid out, “Hey, here are the differences between version 3.5 and version 5.
Rob: There’s a lot more similarities than I thought. I know 5 is more stripped down. There’s less feats and there’s a bunch of stuff there. The prestige classes I think are maybe those are only in 4. I never played 3.5 or 4, but I’m pretty familiar with them at this point.
I know there’s always controversy around it, but I played basic, I played expert, then I played first edition. Then I just got familiar with second edition, which is where they introduced THAC0. Pretty sure first edition it was all table-based, is my memory, and then stopped, got into sports, music, and stuff, and then just came back into it as my son got old enough to play.
I remember my nostalgia is for basically probably first edition, maybe basic but the rules are so jenky there that I couldn’t go back to it, but I remember Googling, I’m coming back to D&D. Should I try fifth edition or should I go back to first edition?
There’s all these discussions about it and the general consensus was, especially for bringing new players who’ve never played anything before, bring them to fifth edition. It’s a pretty nice rule set. It’s honed and refined. It’s like a piece of software that’s gotten better. I think there was bloat, perhaps.
People could argue as you got 3.5 and 4. Mostly 4, I think people had some issues with, but then 5 was almost like a partial rewrite or something, or someone refactored a lot of code, added some unit test. It’s a terrible analogy, I don’t want to get into this, but I really get them. When I dove into 5, I was like, “This is a really fun game to play.” It’s so much less about the mechanics of the game, which was my memory of the first edition. All these tables I was looking up and all that stuff. It’s so much less about that. It’s more about getting into the characters, the combat, the adventure, and the fun of it. It was cool. I taught my son I think when he was seven or eight, and he picked up the mechanics pretty quickly.
Mike: I really liked what they did with the fifth edition as well. It’s just so much more streamlined and it’s simpler without being simplistic. That’s probably the best way I would describe it. And you’re right. There’s a lot less reliance on tables and the one thing that I really liked that I’ve read about, which is the difference between 3.5 and 5 is that in older editions, there was a lot of reliance on stacking things to get more powerful.
You’d stack your armor and various other things. In this, you don’t have really have to do that and for the most part it’s just like, “Oh, you have advantage and you get to roll 220 set of die and take the best one.” That’s great except when, as an example I was explaining to these guys like, “Hey, this is what it looks like,” and I rolled 220 and I rolled a one and a two.
Rob: For us, we’re recording a little bit in advance but if all goes well, we have closed on our new house in Minneapolis and frankly, all of our stuff will have been moved because the move is scheduled for just a couple of days after. We’ll be in the process of unpacking boxes and probably hanging things on walls. I’m really looking forward to having that process, the chaos ending because already, I’m sitting at our old house and there’s things off the walls and there’s a few things in boxes.
Everyone is a little bit disjointed. You get that feeling of like, “We’re in process, where was that one thing, I can’t find it,” or it’s even just a visual cue. There’s just some chaos around me and there’s this unsettled feeling I feel like with every family member being in a place that feels like our house but it’s a little different because there’s nothing on the walls as an example. I’m looking forward to feeling better about that.
Mike: Like an Airbnb where everybody moved out and you just walked in.
Rob: Yeah but even worse than that is, it’s our house that’s familiar. Everything’s packed up and stuff. It will be good, but it’s definitely move up for us in terms of the house is bigger and nicer, and we can do things. I’m already looking at what smart home things I’m going to install because we have several Amazon Echos and there’s all the controlling you can do.
Even starting simple stuff like light switches and getting more advanced with security stuff, operating garage door openers, and that stuff. So I’m kind of nerding out on that a little bit. Something I haven’t able to do because all that stuff, I’m not going to invest time in that in a rental, and it really hasn’t come big time into fruition. It’s been a couple of years since I’ve owned a house now, so I’m excited at the potential of geeking out with some of that.
Mike: On my end, the only other thing I have as today, I recently fixed a Javascript bug that would sometimes prevent people from logging into Bluetick. But not all the time and I could never replicate it which sucked.
Rob: Now that sucks.
Mike: It had to do with angular promises with the Javascript and one would trigger and it says, “Oh, go ahead and log in,” then it goes to grab all the data and it doesn’t have the local token saved. It was just a matter of it didn’t fully save it before it had actually tried to reach out and grab all the data that it literally just authorized itself to get.
Anyway, just because there was the race condition, like it worked fine for just about everybody and then there were, I think, it either certain browser combinations, or I couldn’t even nail it down to, say it was just this operating system and this particular situation. If the latency tended to be high enough, then it tended to not work.
Rob: That’s tough, Javascript stuff. Still, a client said Javascript is still so hard. I shouldn’t say so hard. It still has those edge case things where the browsers handle it differently and if can’t reproduce it, how do you fix that stuff? Every once in a while, that’s the thing. Again, if you have 10 users, it’s unlikely that someone happen but when you get 10,000, 30,000 people using your app, bizarre edge cases come up and you just some oftentimes are completely unable to reproduce it. If you can’t reproduce it, you pretty hard to fix it.
Mike: In this case, I went down the path of looking. In Chrome, there’s this ability to say, “Oh, use a different emulator if this was running on a 3G connection or something like that, or even slower.” Even though I still could not replicate it, I’m pretty sure that it had to do with certain types of browser combinations and what other plugins you have loaded. Based on those things, it would either trigger the race condition or it wouldn’t. Sometimes it would work. Actually, the vast, vast majority of the time, it would work fine and then just these little occasions where certain things would be screwed up and it just wouldn’t.
Rob: So cool. Today, we’re going to kind of, I don’t know if it’s a thought experiment as much as it’s a discussion of this topic that come up now and again. I’ll say, not even an inflection point but at a point where I’m thinking about, “Hey, what could happen next for me? What’s going to come next?” I know there are a lot of people are thinking at a given time length, “Hey, what project am I going to work on?” and, “What type of niche should I go after?”
There’s always this balance between balancing your interest in something and the opportunity that it has. I think the question we want to explore today is, do you need to love what it is you’re working on and what that looks like? You can take a business that sells beach towels online, and you could say, “Well, beach towels are awesome and I’m really into them and I collect them and I’m super interested in it.” Or you could say, “Well, I’m not interested in beach towels, but I am interested in ecommerce and ecommerce really excites me.” So you have that interest. Or you could say, “Well, I’m not that interested in ecommerce but I am interested in just running a business, and this is one that I can do in my spare time.” So you have interest there, or it’s kind of a continuum. Or further up, you could say, “I’m not even interested in running a business, but I just want the freedom that it provides.”
One of those four places on the continuum I think is what we’re going to look at today and balancing on one end, there is interest and then on the other end of that spectrum, there’s opportunity. I think potentially if you can get them to overlap, maybe it’s less about two ends of a spectrum and more about, it’s a Venn diagram where you have circles. The circle could be, these are all my interests and that includes role-playing games and it includes stock market investing and it includes Legos and I don’t know, other things that someone might like. Running a business might also be one of those.
An opportunity could be things that overlap with those, like, “Hey, there’s a real good opportunity starting at Lego RPG site that no one’s done and you can make much money at it.” That’s not true because you probably wouldn’t make any money. I know there’s a bunch of opportunities like selling dog food online or starting a business you have no interest in and you got to figure out and evaluate for yourself which of these are you going to go after? How are you going to balance those, I think is a better way to put it.
Mike: You mentioned Venn diagram in there. I think the one misleading thing about using the phrase Venn diagram is most people think of it as this mechanism for overlapping either two or three things, but when you start adding more than three things in, it’s almost like more of a three-dimensional model at that point. It’s still a Venn diagram, but it’s just really much more difficult to visualize because some of those things just don’t overlap at all or they only overlap with everything but it’s also difficult to put them in if it’s actually like a 3D model.
Rob: I think that’s a good point and a Venn diagram or a continuum, a single line, an axis was one thing on one end and one thing on another. These are just really abstractions. It’s ways that we can describe things and at certain points abstractions always break down. I think that is something to keep in mind as we talk this through.
There’s a lot of folks and there’s a lot of conversations that I’ve seen around this idea of should you follow your passion or should you just go after the opportunity. People try to make it binary and they say, “Well, if you just follow your passion, you’ll get there.” Or you purely have to go after opportunity and I believe the conclusion that we’re probably going to get to is that it’s a blend of those. It’s figuring out what you can be passionate or interested in, but also blend out with something that held some opportunity.
To start to think about it, there’s this question that I want to throw out, what drives you? You can answer that in the abstract or you can take a personality test. Have you ever taken the enneagram?
Mike: I don’t think I have, no.
Rob: We’ll link it up in the show notes. You can take it for free online and it’s like the, what is it the Myers-Briggs where psychologists like Sherry says, “You know there’s some value there, but it’s really not scientifically a research.” Perhaps as a psychologist, I would take it with a grain of salt versus a true psychologist-administered test. But there is still some value to these things. I even think StrengthsFinder 2.0 I think is good. It gave me some insight and a little more insight into who I am even if that’s not the most academically rigorous test of anyone.
The reason I bring up the enneagram is you basically take this test online. I think it takes about 20 minutes and then it gives you a couple of numbers, it’s one through nine, and each number corresponds to a personality type. Number three is an example, a lot of folks that I have met in business wind up with this and this is the achiever. There’s always pros and cons and it says the success-oriented pragmatic type, adaptive, excelling, driven, and image-conscious.
I think some startup founders are driven by the achievement. They just want to achieve whether they’re trying to fight this voice in their head. It’s the voice of their father, or the voice of someone who told them they can never succeed, or maybe it’s just a drive they have to make money, maybe it’s just a drive to show everyone or show themselves that they can do it.
But there’s something about just doing it for the achievement’s sake. They don’t necessarily, in my experience, care about the process of getting there, about what they create along the way, or about they could achieve in a business that sells cell phones, or is a GPS startup, or is selling whatever, beach towels online, but if they built an eight-figure business in any of those, they would feel they have achieved something and they’d be happy.
Versus, I believe it’s number six, and I think that’s me. It’s the loyalist. It says the committed, security-oriented type, engaging, responsive, anxious, and suspicious. A big part of the loyalist, when you read through the description is, there’s this sense of creating and needing to create something, put it into the world, to own this creation, to advance it, and to make it interesting.
What was funny is interacting with some folks once Drip was acquired, interacting at leadpages. Several of us took this test and it was pretty obvious there were folks who, it didn’t matter to them what business we were in. They just wanted to go big. Going big for the sake of going big was awesome to them.
For me, it was like, “No, I’m actually here to build stuff.” I’m a banker and I am the guy who writes books, I’m the guy who creates podcast, and create software, and builds interesting things, and hopefully, that’s why I want the money is so that is can go work on these interesting things. It’s to have the freedom to go do interesting things. Not just achieving for the sake of achievement.
Mike: You definitely fit that loyalist. You’re definitely a suspicious and shady-looking guy.
Rob: Hey it is, huh? That’s the thing. When you read any of these, there’s always some negative and it’s like, “Oh, am I really?” And it’s like, “Yeah, I probably am.” I’m probably am all those things. But engaging and responsible certainly fits as well.
The reason I bring the enneagram up is that you can take any number of test, but it’s interesting to spend 20 minutes and get some insight, to read the descriptions and think, “Am I here to achieve?” Because if you are, then your need to love the business or the specific niche, or whatever it is that you’re working on, is probably going to be a lot less than someone who needs to love what it is that they’re working on, and to be enthusiastic about it.
Number seven is an enthusiast. There’s others of these numbers that really point more towards like, “Yeah, you need to love what you do or else you’re going to bail on it.” I think it’s interesting whether you take this or you just think about it to yourself. Certain people know that there’s no chance that they’re not going to be happy working on something that they’re not super interested in everyday.
Mike: I think in general when you take a look at these types of personality tests or things that will help to describe or categorize you, it’s easy to write-off the 20 minutes that it takes to do any one of these and as you said, I think that if it’s not something that it is rigorously given or tested, like if it’s a 15 or 20-minute test, it’s not going to be rigorous.
If you spent an hour answering questions and you’re answering 60, 100, 200 questions or something like that, it’s a little bit more. Those you probably have to take with less of a grain of salt, but regardless which one you take, I think you’re better served by looking at the results of it as in how far you skew in a particular direction, regardless of what direction that actually is.
As you said, every single one of these has pros and cons associated with it. People who exhibit different traits are going to have different interests and they’re going to dislike different things. But when you’re going through those, it’s important to not just take a cursory look at those, like the different personalities or different categories that they could potentially lump you in, and then not even take the test, because taking the test itself is going to tell you how far you skew in one direction or the other.
I can look through these nine or right here for the enneagram and I can probably say, “Oh, well I associate with four or five of them, or even six or seven,” but it doesn’t tell you how strongly you associate with them, and that is even more important than being able to put yourself in one of those categories.
Rob: Yeah, I would agree and I didn’t mean to downplay this from the start. When I say I take it with a grain of salt, I mean, don’t base every life choice on your enneagram result. The enneagram is given to tens of thousands, hundreds of thousands of people. It is research-based and it is like a viable test. But as you said, when it’s only asking so many questions and it’s 20 minutes, there is less rigor there than a test that is. A lot of the psychological battery tests that are given, you’ll sit there for two, three hours for them to get a full picture of stuff. It’s just a nice taste and a nice direction.
I do think I like these things because I always learn something about myself and it’s typically something that’s a little bit of a blind side for me. Typically, I’m like, “Yup. That’s me, that’s me, that’s me,” and then they’ll throw something else in this, it’s like, “Oh, that’s true, but I hadn’t realize that.” It’s one, the anxious or suspicious thing. It’s like, “Yeah, that’s a good point.” I do tend to not trust people until I known them for a while and how is that a plus for me and how is that something that maybe I need to work around.
But I think the interesting thing and a question that’s framed is like, “Are you the type of person who can work on things that they don’t love?” That maybe the question to ask yourself. Certain people just doesn’t know this. I remember Jason Roberts on TechZing used to always say, “I know I’ve got to love it or I’m just not going to do it.” He’s very much a passion player. He would only start ideas that were super exciting to him and he could never go into a niche that was selling beach towels or he would have completely peered out.
Whereas for me, my goal of financial independence was more important to me than needing to love that I was selling the duck boat plans and the bonsai tree ebook, in the early days, the beach towels and stuff. Those are high probability of success things for me based on my tool belt and I was able to build those collectively into six-figure income and replace everything. I bought my own freedom. Then I moved more into things that I enjoyed. That’s when I started doing HitTail, and Drip, and even during that time I was seen doing MicroConf and this podcast. The stuff was part of that.
Again, I hope it’s a spectrum or if it’s a line or whatever, but I always think about this one example of, to optimize for opportunity, you could sell coffins online. To optimize for interest, if you love watching movies, you could review movies online, or if you role-playing games, you could review role-playing games online. Those two are massively in tension. The role playing games and the movie reviews is going to be so hard to make a full-time living at that. Yes, there’s a handful of people who do it, but it’s really, really hard and it’s a ton of work.
Compared to selling something that’s really boring like accounting software or coffins online. I see it partially as a joke, but I remember a venture capitalist using this an example of them wanting founders who are really into what they’re doing. This venture capitalist said, “You know during the dot com boom when everything was going online pets.com, grocery delivery and all that, there were entrepreneurs who were pitching them like a really inefficient market is the coffin market.” It’s a cottage industry, the markup is outrageous, people don’t haggle, it’s just this weird time. The guy was like, “There’s a huge opportunity here and we can make a ton of money and save money for consumers.”
I believe that mattresses are like this, too. Mattresses, the markup is always huge and then Casper has come along and I really think there’s ton of opportunity there. The VC said, “I kept asking the guys, ‘Why do you want to do this coffin startup? A funeral startup?’” They’re like, “Well, because there’s opportunity there.” The VC didn’t fund them because he believes that you need to really be into the whole space, love the space, and this and that. That’s fine. That’s his belief. That’s his thesis of funding people.
But I think when you ask yourself, you can have the continuum. You may not love mattresses or care anything about them, but if you’re really interested in building a big business, running Casper would probably be an interesting slush fund thing for you to do if you’re an achiever. If you just want to achieve, you can build that eight, nine-figure business, and really not care much about the product you sell.
Mike: I can think of any number of businesses that I would think it would be interesting to start and go for but that doesn’t necessarily mean that there’s a business opportunity there as well. I think that’s what always bugged me about the do-what-you-love advice. Just because you love it doesn’t mean it can actually make a business. That advice kind of glosses over the fact there may just not be a business there for it. I don’t know. I think there is a difference between doing it because you love it versus doing it because you want to, also making an income from it.
That goes back to the Venn diagrams that you’re talking about. There has to be a clear intersection of multiple things in order for it to work for you based on whatever your goal is. If you just want to do it to have fun, go for it. You don’t also have to make money. But if the Venn diagram includes making a full-time living from it, then the business opportunity has to support that. If it doesn’t, then it’s not going to work.
Rob: Right and some luck if few get to do both. Gary Vaynerchuk loved wine and he turned that into a business. It does happen. It’s just how many other people try to do the exact same thing and it didn’t work versus if there really is opportunity there that the odds of you, even getting a base hit and I think that’s the thing, it’s like are you willing to have a higher chance of success but perhaps enjoy things a little less along the way because you’re not doing everything that you love. Maybe you’re just going for that single or that double, but if it brings you financial freedom that you can then work on stuff you love later, but you’ve got to do a few years of not terrible drudgery. It’s not like you’re working on 9-5 for someone else, but it’s weighing those two things.
I think that leads me to a question of, “Tell me what do you love about Bluetick? Do you love the idea of warm outbound email? Or is it you love building software and want to find a way to make money from it and sustain yourself full time? Is it you love building businesses?” There’s got to be something in there that drives you day to day but I don’t get the feeling that you woke up two years ago and said, “Oh man, all I want to think all the time is email deliverability and how to hook into the Gmail API.”
Mike: Yeah, I definitely did not think of that and of course I don’t hook into the Gmail API because it doesn’t work very well. I think the thing I keep coming back to is that it actually solves a genuine business problem, first of all, and second, I like the people that I work with. Like the customers that come to me and they’re like, “Oh I have this problem and I need to be able to fix it.”
I’ve taken various personality tests in the past and one of the things that tends to come out at or very close to the top of the list almost every time is that I’m a people person. I care very deeply about a much smaller number of relationships, but people is a main focus for me. If I were to sell a business for $20 million and I was the sole stockholder, for example, I wouldn’t just keep it all. My inclination would be to share that the people who have helped get me there.
There’s certainly people who would take the opposite approach and say, “Well, I took all the risk, I did everything, I own 100% of it so I should get everything.” There’s nothing inherently wrong with that, it’s just not my personality.
There’s that side of it that I like helping other people, which partly why I do the podcast, partly why we’ve run Founder Café together and why we run MicroConf. That’s important to me and running Bluetick, I get to work hand-in-hand with a lot of different people and a lot of different businesses, and yes, it ultimately benefits me financially as well, but at the same time I know that deep down I’m actually solving a problem for them and it does help their business.
Rob: I think that’s an important thing to know. You look around at different examples. Think of Dan and Ian with Tropical MBA. I’m pretty sure they weren’t that excited about cat furniture and valet podiums, but they were excited about the prospect of freedom, about the prospect of starting your own business. Ian’s certainly a maker. He’s the designer of the stuff in the early days, and I think they’re excited just about building businesses and such. That’s that balance of they’re excited about enough things about those spaces and they saw tremendous opportunity there that they’re willing to dive in.
I felt the same way about HitTail and Drip. I have always liked SEO, I’ve done a lot of it, and I’ve always done a lot of email marketing, and use many ESPs. But I’m not as passionate about those things as I am, say, some of the hobbies that I do, such as playing guitar, or playing tabletop games, or even personal financing, and stock investing. Those hobby things are just so much harder to turn to real businesses. I kind of combined that opportunity with SEO and email marketing with the interest that I have in those topics, and then build businesses out of them.
I think that that’s probably the conclusion that I leave folks with. You may not be super excited about being on online classified ads, or about selling beach towels, or whatever. But there are other things that you can do and it’s about knowing yourself. You have Jason Roberts, again, coming back to him or someone like him. There are people out there who are just really need to love what they’re working on.
A lot of those folks become indie game developers or they build software for guitar effects. I used to work with a guy who built that on the side because he was so into the music, and that’s all he wanted to do is be around music and that’s cool. But for him, if ever he achieves financial freedom, it’s going to take decades and it’s just a lot more risk there, and a lot less chance of success because you’re stacking the cards against you in exchange for being able to be really passionate about what it is you’re working on. That’s the trade-off that you will have to make.
I think each of us as individuals has to think through that and think about how much it is you desire to work on something you love versus perhaps having more of a chance of that success.
Mike: I’m wondering how much of the decisions that people who are listening to this podcast make or just entrepreneurs in general, I wonder how much of those decisions are influenced more by what they see as a potential business opportunity versus what their interest are because I talked to a lot of people, like, “Oh, I need an idea for my app. I don’t have any ideas.” That’s a very common thing that people will say and most of the time I think it’s because they don’t want to build something that somebody else has built or build a business that is very much like another business.
But at the same time, those things can be very successful and if you have your own take on it, your own ideas about how to take that to fruition, then you can certainly make it work. But if they just don’t have those ideas or they think that they don’t have those ideas, then they’re not going to move forward with them.
Rob: Right, and if you work on a business you hate every day, then obviously, that’s not a good solution either. Honestly, when I look, I think there’s a lot of approaches. We’ve gone through them here. The approach I took was in the early days my interest was financial freedom. I just kind of slogged it away, a bunch of businesses that I didn’t have a ton of interest in, but I was learning and learning is exciting to me. I think a lot of folks in our audience probably feel the same way. Just the act of learning new things could potentially keep their interest. Then as I built more and more of those up, then I was able to go into things that I was more interested in like, let’s say HitTail and Drip, with SEO and email.
Now, I’m at the point where I have the luxury of more time to invest in something I’m working on and it doesn’t need to be that big hit. I may even sway further into, “I’m only going to do stuff that I really, really enjoy.” Maybe it is. Maybe my next thing is nothing like anything I’ve done in the past and it’s truly like, I mentioned it a little bit, “I’m going to build an authority website in this topic that I just think is super interesting, and see what happens.” Maybe I’ll spend two years on it and I enjoy it because it’s a hobby and it never does anything. So what?
Personally, I would have hated doing that 10 years ago because I would have been hating my day job while I did this and I didn’t want to have that pole. I wanted to achieve that freedom first. I do think that there can be steps along the way of shifting and that it’s not this one-size-fits-all or even this permanent approach for each individual.
Mike: I think that’s all an interesting thought experiment. If you have any thoughts of your own, just feel free to head over to the website at startupsfortherestofus.com. Leave a couple of your thoughts in your comments. With that, we leave you for today. If you have a question for us, you can call it in to our voicemail number at 1-888-801-9690 or you can email it to us at questions@ startupsfortherestofus.com.
Our theme music is an excerpt from We’re Out of Control by MoOt, used under Creative Commons. Subscribe to us on iTunes by searching for Startups and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening. We’ll see you next time.
Welcome to Startups For The Rest Of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing software products, whether you built your first product or just thinking about it. I’m Rob.
Mike: And I’m Mike.
Rob: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. Where this week, sir?
Mike: I started a local D&D meetup group.
Rob: That is so cool.
Mike: A friend of mine and I’ve played with our kids. I’ve got two sons and he has a son and two daughters. One of his daughters played a little bit with us. She was like, “Yeah, this isn’t for me. I hate this. I don’t want to deal with boys.” I think that’s certainly what is was. But the other three, him, and I play. We wanted to start up a group where we’re actually playing with adults because kids can be a little bit difficult to keep on track sometimes.
He knew a couple of people then I started a meetup.com group to try and find at least one more player. There’s five of us now and we’ve met for the first time earlier this week. Started up a game, we expect it to go for a couple of months, we’ll just meet up every week, and see how things go.
Rob: That’s fun. Did you say you just meetup.com?
Mike: Yup.
Rob: Awesome and you’re playing fifth edition?
Mike: Yeah, the latest version. I think two or three other people who we’re playing with haven’t played in 20 or 30 years. Then they went to college, had kids, and got out of bit for a while. Now they’re coming back and so far it’s been good. We only had one session, which was about three hours long, but we spent some time before that at a different time creating characters. It’s good so far.
Rob: Were they marveling at the ascending armor classes and there’s no THAC0. I don’t know if you played second edition, but did they have to read the player’s handbook or you just brought them up to speed verbally?
Mike: Yeah, I caught them up to speed. I was like, “Here’s the differences from when,” because I asked them which versions they played. So up to second edition they have the THAC0 and then in the third edition they switched over to the d20. I just explained those things.
Then one person, he still plays a lot of version 3.5. He’s never played 4 or 5 before. I looked it up and found a place—I think it’s Reddit—where they basically laid out, “Hey, here are the differences between version 3.5 and version 5.
Rob: There’s a lot more similarities than I thought. I know 5 is more stripped down. There’s less feats and there’s a bunch of stuff there. The prestige classes I think are maybe those are only in 4. I never played 3.5 or 4, but I’m pretty familiar with them at this point.
I know there’s always controversy around it, but I played basic, I played expert, then I played first edition. Then I just got familiar with second edition, which is where they introduced THAC0. Pretty sure first edition it was all table-based, is my memory, and then stopped, got into sports, music, and stuff, and then just came back into it as my son got old enough to play.
I remember my nostalgia is for basically probably first edition, maybe basic but the rules are so jenky there that I couldn’t go back to it, but I remember Googling, I’m coming back to D&D. Should I try fifth edition or should I go back to first edition?
There’s all these discussions about it and the general consensus was, especially for bringing new players who’ve never played anything before, bring them to fifth edition. It’s a pretty nice rule set. It’s honed and refined. It’s like a piece of software that’s gotten better. I think there was bloat, perhaps.
People could argue as you got 3.5 and 4. Mostly 4, I think people had some issues with, but then 5 was almost like a partial rewrite or something, or someone refactored a lot of code, added some unit test. It’s a terrible analogy, I don’t want to get into this, but I really get them. When I dove into 5, I was like, “This is a really fun game to play.” It’s so much less about the mechanics of the game, which was my memory of the first edition. All these tables I was looking up and all that stuff. It’s so much less about that. It’s more about getting into the characters, the combat, the adventure, and the fun of it. It was cool. I taught my son I think when he was seven or eight, and he picked up the mechanics pretty quickly.
Mike: I really liked what they did with the fifth edition as well. It’s just so much more streamlined and it’s simpler without being simplistic. That’s probably the best way I would describe it. And you’re right. There’s a lot less reliance on tables and the one thing that I really liked that I’ve read about, which is the difference between 3.5 and 5 is that in older editions, there was a lot of reliance on stacking things to get more powerful.
You’d stack your armor and various other things. In this, you don’t have really have to do that and for the most part it’s just like, “Oh, you have advantage and you get to roll 220 set of die and take the best one.” That’s great except when, as an example I was explaining to these guys like, “Hey, this is what it looks like,” and I rolled 220 and I rolled a one and a two.
Rob: For us, we’re recording a little bit in advance but if all goes well, we have closed on our new house in Minneapolis and frankly, all of our stuff will have been moved because the move is scheduled for just a couple of days after. We’ll be in the process of unpacking boxes and probably hanging things on walls. I’m really looking forward to having that process, the chaos ending because already, I’m sitting at our old house and there’s things off the walls and there’s a few things in boxes.
Everyone is a little bit disjointed. You get that feeling of like, “We’re in process, where was that one thing, I can’t find it,” or it’s even just a visual cue. There’s just some chaos around me and there’s this unsettled feeling I feel like with every family member being in a place that feels like our house but it’s a little different because there’s nothing on the walls as an example. I’m looking forward to feeling better about that.
Mike: Like an Airbnb where everybody moved out and you just walked in.
Rob: Yeah but even worse than that is, it’s our house that’s familiar. Everything’s packed up and stuff. It will be good, but it’s definitely move up for us in terms of the house is bigger and nicer, and we can do things. I’m already looking at what smart home things I’m going to install because we have several Amazon Echos and there’s all the controlling you can do.
Even starting simple stuff like light switches and getting more advanced with security stuff, operating garage door openers, and that stuff. So I’m kind of nerding out on that a little bit. Something I haven’t able to do because all that stuff, I’m not going to invest time in that in a rental, and it really hasn’t come big time into fruition. It’s been a couple of years since I’ve owned a house now, so I’m excited at the potential of geeking out with some of that.
Mike: On my end, the only other thing I have as today, I recently fixed a Javascript bug that would sometimes prevent people from logging into Bluetick. But not all the time and I could never replicate it which sucked.
Rob: Now that sucks.
Mike: It had to do with angular promises with the Javascript and one would trigger and it says, “Oh, go ahead and log in,” then it goes to grab all the data and it doesn’t have the local token saved. It was just a matter of it didn’t fully save it before it had actually tried to reach out and grab all the data that it literally just authorized itself to get.
Anyway, just because there was the race condition, like it worked fine for just about everybody and then there were, I think, it either certain browser combinations, or I couldn’t even nail it down to, say it was just this operating system and this particular situation. If the latency tended to be high enough, then it tended to not work.
Rob: That’s tough, Javascript stuff. Still, a client said Javascript is still so hard. I shouldn’t say so hard. It still has those edge case things where the browsers handle it differently and if can’t reproduce it, how do you fix that stuff? Every once in a while, that’s the thing. Again, if you have 10 users, it’s unlikely that someone happen but when you get 10,000, 30,000 people using your app, bizarre edge cases come up and you just some oftentimes are completely unable to reproduce it. If you can’t reproduce it, you pretty hard to fix it.
Mike: In this case, I went down the path of looking. In Chrome, there’s this ability to say, “Oh, use a different emulator if this was running on a 3G connection or something like that, or even slower.” Even though I still could not replicate it, I’m pretty sure that it had to do with certain types of browser combinations and what other plugins you have loaded. Based on those things, it would either trigger the race condition or it wouldn’t. Sometimes it would work. Actually, the vast, vast majority of the time, it would work fine and then just these little occasions where certain things would be screwed up and it just wouldn’t.
Rob: So cool. Today, we’re going to kind of, I don’t know if it’s a thought experiment as much as it’s a discussion of this topic that come up now and again. I’ll say, not even an inflection point but at a point where I’m thinking about, “Hey, what could happen next for me? What’s going to come next?” I know there are a lot of people are thinking at a given time length, “Hey, what project am I going to work on?” and, “What type of niche should I go after?”
There’s always this balance between balancing your interest in something and the opportunity that it has. I think the question we want to explore today is, do you need to love what it is you’re working on and what that looks like? You can take a business that sells beach towels online, and you could say, “Well, beach towels are awesome and I’m really into them and I collect them and I’m super interested in it.” Or you could say, “Well, I’m not interested in beach towels, but I am interested in ecommerce and ecommerce really excites me.” So you have that interest. Or you could say, “Well, I’m not that interested in ecommerce but I am interested in just running a business, and this is one that I can do in my spare time.” So you have interest there, or it’s kind of a continuum. Or further up, you could say, “I’m not even interested in running a business, but I just want the freedom that it provides.”
One of those four places on the continuum I think is what we’re going to look at today and balancing on one end, there is interest and then on the other end of that spectrum, there’s opportunity. I think potentially if you can get them to overlap, maybe it’s less about two ends of a spectrum and more about, it’s a Venn diagram where you have circles. The circle could be, these are all my interests and that includes role-playing games and it includes stock market investing and it includes Legos and I don’t know, other things that someone might like. Running a business might also be one of those.
An opportunity could be things that overlap with those, like, “Hey, there’s a real good opportunity starting at Lego RPG site that no one’s done and you can make much money at it.” That’s not true because you probably wouldn’t make any money. I know there’s a bunch of opportunities like selling dog food online or starting a business you have no interest in and you got to figure out and evaluate for yourself which of these are you going to go after? How are you going to balance those, I think is a better way to put it.
Mike: You mentioned Venn diagram in there. I think the one misleading thing about using the phrase Venn diagram is most people think of it as this mechanism for overlapping either two or three things, but when you start adding more than three things in, it’s almost like more of a three-dimensional model at that point. It’s still a Venn diagram, but it’s just really much more difficult to visualize because some of those things just don’t overlap at all or they only overlap with everything but it’s also difficult to put them in if it’s actually like a 3D model.
Rob: I think that’s a good point and a Venn diagram or a continuum, a single line, an axis was one thing on one end and one thing on another. These are just really abstractions. It’s ways that we can describe things and at certain points abstractions always break down. I think that is something to keep in mind as we talk this through.
There’s a lot of folks and there’s a lot of conversations that I’ve seen around this idea of should you follow your passion or should you just go after the opportunity. People try to make it binary and they say, “Well, if you just follow your passion, you’ll get there.” Or you purely have to go after opportunity and I believe the conclusion that we’re probably going to get to is that it’s a blend of those. It’s figuring out what you can be passionate or interested in, but also blend out with something that held some opportunity.
To start to think about it, there’s this question that I want to throw out, what drives you? You can answer that in the abstract or you can take a personality test. Have you ever taken the enneagram?
Mike: I don’t think I have, no.
Rob: We’ll link it up in the show notes. You can take it for free online and it’s like the, what is it the Myers-Briggs where psychologists like Sherry says, “You know there’s some value there, but it’s really not scientifically a research.” Perhaps as a psychologist, I would take it with a grain of salt versus a true psychologist-administered test. But there is still some value to these things. I even think StrengthsFinder 2.0 I think is good. It gave me some insight and a little more insight into who I am even if that’s not the most academically rigorous test of anyone.
The reason I bring up the enneagram is you basically take this test online. I think it takes about 20 minutes and then it gives you a couple of numbers, it’s one through nine, and each number corresponds to a personality type. Number three is an example, a lot of folks that I have met in business wind up with this and this is the achiever. There’s always pros and cons and it says the success-oriented pragmatic type, adaptive, excelling, driven, and image-conscious.
I think some startup founders are driven by the achievement. They just want to achieve whether they’re trying to fight this voice in their head. It’s the voice of their father, or the voice of someone who told them they can never succeed, or maybe it’s just a drive they have to make money, maybe it’s just a drive to show everyone or show themselves that they can do it.
But there’s something about just doing it for the achievement’s sake. They don’t necessarily, in my experience, care about the process of getting there, about what they create along the way, or about they could achieve in a business that sells cell phones, or is a GPS startup, or is selling whatever, beach towels online, but if they built an eight-figure business in any of those, they would feel they have achieved something and they’d be happy.
Versus, I believe it’s number six, and I think that’s me. It’s the loyalist. It says the committed, security-oriented type, engaging, responsive, anxious, and suspicious. A big part of the loyalist, when you read through the description is, there’s this sense of creating and needing to create something, put it into the world, to own this creation, to advance it, and to make it interesting.
What was funny is interacting with some folks once Drip was acquired, interacting at leadpages. Several of us took this test and it was pretty obvious there were folks who, it didn’t matter to them what business we were in. They just wanted to go big. Going big for the sake of going big was awesome to them.
For me, it was like, “No, I’m actually here to build stuff.” I’m a banker and I am the guy who writes books, I’m the guy who creates podcast, and create software, and builds interesting things, and hopefully, that’s why I want the money is so that is can go work on these interesting things. It’s to have the freedom to go do interesting things. Not just achieving for the sake of achievement.
Mike: You definitely fit that loyalist. You’re definitely a suspicious and shady-looking guy.
Rob: Hey it is, huh? That’s the thing. When you read any of these, there’s always some negative and it’s like, “Oh, am I really?” And it’s like, “Yeah, I probably am.” I’m probably am all those things. But engaging and responsible certainly fits as well.
The reason I bring the enneagram up is that you can take any number of test, but it’s interesting to spend 20 minutes and get some insight, to read the descriptions and think, “Am I here to achieve?” Because if you are, then your need to love the business or the specific niche, or whatever it is that you’re working on, is probably going to be a lot less than someone who needs to love what it is that they’re working on, and to be enthusiastic about it.
Number seven is an enthusiast. There’s others of these numbers that really point more towards like, “Yeah, you need to love what you do or else you’re going to bail on it.” I think it’s interesting whether you take this or you just think about it to yourself. Certain people know that there’s no chance that they’re not going to be happy working on something that they’re not super interested in everyday.
Mike: I think in general when you take a look at these types of personality tests or things that will help to describe or categorize you, it’s easy to write-off the 20 minutes that it takes to do any one of these and as you said, I think that if it’s not something that it is rigorously given or tested, like if it’s a 15 or 20-minute test, it’s not going to be rigorous.
If you spent an hour answering questions and you’re answering 60, 100, 200 questions or something like that, it’s a little bit more. Those you probably have to take with less of a grain of salt, but regardless which one you take, I think you’re better served by looking at the results of it as in how far you skew in a particular direction, regardless of what direction that actually is.
As you said, every single one of these has pros and cons associated with it. People who exhibit different traits are going to have different interests and they’re going to dislike different things. But when you’re going through those, it’s important to not just take a cursory look at those, like the different personalities or different categories that they could potentially lump you in, and then not even take the test, because taking the test itself is going to tell you how far you skew in one direction or the other.
I can look through these nine or right here for the enneagram and I can probably say, “Oh, well I associate with four or five of them, or even six or seven,” but it doesn’t tell you how strongly you associate with them, and that is even more important than being able to put yourself in one of those categories.
Rob: Yeah, I would agree and I didn’t mean to downplay this from the start. When I say I take it with a grain of salt, I mean, don’t base every life choice on your enneagram result. The enneagram is given to tens of thousands, hundreds of thousands of people. It is research-based and it is like a viable test. But as you said, when it’s only asking so many questions and it’s 20 minutes, there is less rigor there than a test that is. A lot of the psychological battery tests that are given, you’ll sit there for two, three hours for them to get a full picture of stuff. It’s just a nice taste and a nice direction.
I do think I like these things because I always learn something about myself and it’s typically something that’s a little bit of a blind side for me. Typically, I’m like, “Yup. That’s me, that’s me, that’s me,” and then they’ll throw something else in this, it’s like, “Oh, that’s true, but I hadn’t realize that.” It’s one, the anxious or suspicious thing. It’s like, “Yeah, that’s a good point.” I do tend to not trust people until I known them for a while and how is that a plus for me and how is that something that maybe I need to work around.
But I think the interesting thing and a question that’s framed is like, “Are you the type of person who can work on things that they don’t love?” That maybe the question to ask yourself. Certain people just doesn’t know this. I remember Jason Roberts on TechZing used to always say, “I know I’ve got to love it or I’m just not going to do it.” He’s very much a passion player. He would only start ideas that were super exciting to him and he could never go into a niche that was selling beach towels or he would have completely peered out.
Whereas for me, my goal of financial independence was more important to me than needing to love that I was selling the duck boat plans and the bonsai tree ebook, in the early days, the beach towels and stuff. Those are high probability of success things for me based on my tool belt and I was able to build those collectively into six-figure income and replace everything. I bought my own freedom. Then I moved more into things that I enjoyed. That’s when I started doing HitTail, and Drip, and even during that time I was seen doing MicroConf and this podcast. The stuff was part of that.
Again, I hope it’s a spectrum or if it’s a line or whatever, but I always think about this one example of, to optimize for opportunity, you could sell coffins online. To optimize for interest, if you love watching movies, you could review movies online, or if you role-playing games, you could review role-playing games online. Those two are massively in tension. The role playing games and the movie reviews is going to be so hard to make a full-time living at that. Yes, there’s a handful of people who do it, but it’s really, really hard and it’s a ton of work.
Compared to selling something that’s really boring like accounting software or coffins online. I see it partially as a joke, but I remember a venture capitalist using this an example of them wanting founders who are really into what they’re doing. This venture capitalist said, “You know during the dot com boom when everything was going online pets.com, grocery delivery and all that, there were entrepreneurs who were pitching them like a really inefficient market is the coffin market.” It’s a cottage industry, the markup is outrageous, people don’t haggle, it’s just this weird time. The guy was like, “There’s a huge opportunity here and we can make a ton of money and save money for consumers.”
I believe that mattresses are like this, too. Mattresses, the markup is always huge and then Casper has come along and I really think there’s ton of opportunity there. The VC said, “I kept asking the guys, ‘Why do you want to do this coffin startup? A funeral startup?’” They’re like, “Well, because there’s opportunity there.” The VC didn’t fund them because he believes that you need to really be into the whole space, love the space, and this and that. That’s fine. That’s his belief. That’s his thesis of funding people.
But I think when you ask yourself, you can have the continuum. You may not love mattresses or care anything about them, but if you’re really interested in building a big business, running Casper would probably be an interesting slush fund thing for you to do if you’re an achiever. If you just want to achieve, you can build that eight, nine-figure business, and really not care much about the product you sell.
Mike: I can think of any number of businesses that I would think it would be interesting to start and go for but that doesn’t necessarily mean that there’s a business opportunity there as well. I think that’s what always bugged me about the do-what-you-love advice. Just because you love it doesn’t mean it can actually make a business. That advice kind of glosses over the fact there may just not be a business there for it. I don’t know. I think there is a difference between doing it because you love it versus doing it because you want to, also making an income from it.
That goes back to the Venn diagrams that you’re talking about. There has to be a clear intersection of multiple things in order for it to work for you based on whatever your goal is. If you just want to do it to have fun, go for it. You don’t also have to make money. But if the Venn diagram includes making a full-time living from it, then the business opportunity has to support that. If it doesn’t, then it’s not going to work.
Rob: Right and some luck if few get to do both. Gary Vaynerchuk loved wine and he turned that into a business. It does happen. It’s just how many other people try to do the exact same thing and it didn’t work versus if there really is opportunity there that the odds of you, even getting a base hit and I think that’s the thing, it’s like are you willing to have a higher chance of success but perhaps enjoy things a little less along the way because you’re not doing everything that you love. Maybe you’re just going for that single or that double, but if it brings you financial freedom that you can then work on stuff you love later, but you’ve got to do a few years of not terrible drudgery. It’s not like you’re working on 9-5 for someone else, but it’s weighing those two things.
I think that leads me to a question of, “Tell me what do you love about Bluetick? Do you love the idea of warm outbound email? Or is it you love building software and want to find a way to make money from it and sustain yourself full time? Is it you love building businesses?” There’s got to be something in there that drives you day to day but I don’t get the feeling that you woke up two years ago and said, “Oh man, all I want to think all the time is email deliverability and how to hook into the Gmail API.”
Mike: Yeah, I definitely did not think of that and of course I don’t hook into the Gmail API because it doesn’t work very well. I think the thing I keep coming back to is that it actually solves a genuine business problem, first of all, and second, I like the people that I work with. Like the customers that come to me and they’re like, “Oh I have this problem and I need to be able to fix it.”
I’ve taken various personality tests in the past and one of the things that tends to come out at or very close to the top of the list almost every time is that I’m a people person. I care very deeply about a much smaller number of relationships, but people is a main focus for me. If I were to sell a business for $20 million and I was the sole stockholder, for example, I wouldn’t just keep it all. My inclination would be to share that the people who have helped get me there.
There’s certainly people who would take the opposite approach and say, “Well, I took all the risk, I did everything, I own 100% of it so I should get everything.” There’s nothing inherently wrong with that, it’s just not my personality.
There’s that side of it that I like helping other people, which partly why I do the podcast, partly why we’ve run Founder Café together and why we run MicroConf. That’s important to me and running Bluetick, I get to work hand-in-hand with a lot of different people and a lot of different businesses, and yes, it ultimately benefits me financially as well, but at the same time I know that deep down I’m actually solving a problem for them and it does help their business.
Rob: I think that’s an important thing to know. You look around at different examples. Think of Dan and Ian with Tropical MBA. I’m pretty sure they weren’t that excited about cat furniture and valet podiums, but they were excited about the prospect of freedom, about the prospect of starting your own business. Ian’s certainly a maker. He’s the designer of the stuff in the early days, and I think they’re excited just about building businesses and such. That’s that balance of they’re excited about enough things about those spaces and they saw tremendous opportunity there that they’re willing to dive in.
I felt the same way about HitTail and Drip. I have always liked SEO, I’ve done a lot of it, and I’ve always done a lot of email marketing, and use many ESPs. But I’m not as passionate about those things as I am, say, some of the hobbies that I do, such as playing guitar, or playing tabletop games, or even personal financing, and stock investing. Those hobby things are just so much harder to turn to real businesses. I kind of combined that opportunity with SEO and email marketing with the interest that I have in those topics, and then build businesses out of them.
I think that that’s probably the conclusion that I leave folks with. You may not be super excited about being on online classified ads, or about selling beach towels, or whatever. But there are other things that you can do and it’s about knowing yourself. You have Jason Roberts, again, coming back to him or someone like him. There are people out there who are just really need to love what they’re working on.
A lot of those folks become indie game developers or they build software for guitar effects. I used to work with a guy who built that on the side because he was so into the music, and that’s all he wanted to do is be around music and that’s cool. But for him, if ever he achieves financial freedom, it’s going to take decades and it’s just a lot more risk there, and a lot less chance of success because you’re stacking the cards against you in exchange for being able to be really passionate about what it is you’re working on. That’s the trade-off that you will have to make.
I think each of us as individuals has to think through that and think about how much it is you desire to work on something you love versus perhaps having more of a chance of that success.
Mike: I’m wondering how much of the decisions that people who are listening to this podcast make or just entrepreneurs in general, I wonder how much of those decisions are influenced more by what they see as a potential business opportunity versus what their interest are because I talked to a lot of people, like, “Oh, I need an idea for my app. I don’t have any ideas.” That’s a very common thing that people will say and most of the time I think it’s because they don’t want to build something that somebody else has built or build a business that is very much like another business.
But at the same time, those things can be very successful and if you have your own take on it, your own ideas about how to take that to fruition, then you can certainly make it work. But if they just don’t have those ideas or they think that they don’t have those ideas, then they’re not going to move forward with them.
Rob: Right, and if you work on a business you hate every day, then obviously, that’s not a good solution either. Honestly, when I look, I think there’s a lot of approaches. We’ve gone through them here. The approach I took was in the early days my interest was financial freedom. I just kind of slogged it away, a bunch of businesses that I didn’t have a ton of interest in, but I was learning and learning is exciting to me. I think a lot of folks in our audience probably feel the same way. Just the act of learning new things could potentially keep their interest. Then as I built more and more of those up, then I was able to go into things that I was more interested in like, let’s say HitTail and Drip, with SEO and email.
Now, I’m at the point where I have the luxury of more time to invest in something I’m working on and it doesn’t need to be that big hit. I may even sway further into, “I’m only going to do stuff that I really, really enjoy.” Maybe it is. Maybe my next thing is nothing like anything I’ve done in the past and it’s truly like, I mentioned it a little bit, “I’m going to build an authority website in this topic that I just think is super interesting, and see what happens.” Maybe I’ll spend two years on it and I enjoy it because it’s a hobby and it never does anything. So what?
Personally, I would have hated doing that 10 years ago because I would have been hating my day job while I did this and I didn’t want to have that pole. I wanted to achieve that freedom first. I do think that there can be steps along the way of shifting and that it’s not this one-size-fits-all or even this permanent approach for each individual.
Mike: I think that’s all an interesting thought experiment. If you have any thoughts of your own, just feel free to head over to the website at startupsfortherestofus.com. Leave a couple of your thoughts in your comments. With that, we leave you for today. If you have a question for us, you can call it in to our voicemail number at 1-888-801-9690 or you can email it to us at questions@ startupsfortherestofus.com.
Our theme music is an excerpt from We’re Out of Control by MoOt, used under Creative Commons. Subscribe to us on iTunes by searching for Startups and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening. We’ll see you next time.
Episode 402 | Tactics for Minimizing Disruptions to Your Vacation
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Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about some tactics for minimizing disruptions to your vacation. Sometimes, it’s really tough to feel like you can unplug as an entrepreneur, especially if you’re running a SaaS. The guys breakdown some things you should do for your next vacation.
Items mentioned in this episode:
Mike: In this episode of Startups For The Rest Of Us, Rob and I are going to be talking about tactics for minimizing disruptions to your vacation. This is Startups For The Rest Of Us episode 402.
Welcome to Startups For The Rest Of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing software products. Whether you’ve built your first product or you’re just thinking about it. I’m Mike.
Rob: And I’m Rob.
Mike: We’re here to share our experiences to help you avoid the same mistakes we’ve made. How are you doing this week, Rob?
Rob: I’m doing okay. I’m a little tired. We landed back from California. Landed in Minneapolis last night around midnight, hopped a lift with the kids, and got home, and in bed around 1:00 AM. I’m on Pacific time so I had a couple of hour times change this morning trying to get up. It’s a little slow getting going but overall, really enjoyed our time in California.
I had talked about previously that we’re going to spend some time with my family in the Bay Area. Our kids had a music camp in San Francisco and then we went and saw Sherry’s folks up in far north California.
Overall, it was good vacation; some vacation, some kind of work stuff. The camp isn’t exactly vacation because it’s pretty intense music practice for the boys. Each day we have to be present and stuff. It wasn’t like we could just kick back and sip martinis or whatever.
Mike: You don’t get to send them for the day?
Rob: No. That would have been ideal. It’s less at camp. It’s actually called an institute, the Suzuki institute. You go and it’s five or six hours a day of them playing instruments, and the parents have to be involved to a certain extent, so you’re sitting in there with them. That’s where I was like, it’s some vacation and it’s some not-vacation. It’s fun in the afternoons and evenings when we took the boys and did stuff but otherwise, got there and back unscathe, which is good when five people are traveling and we lug a cello with us on the airplane. In true chaotic fashion we were back, like I said, landed last night at midnight and then we close on our new house tomorrow in Minneapolis. We show up and sign papers in the morning.
Mike: Stick around for a while then, huh?
Rob: I know, yeah. That was the decision. We really evaluated it after I left the Drip a couple of months ago. It was a decision point like, “Okay, we’ve been in Minneapolis a little less than two years and we can move anywhere. That always sounds great in theory but when you have no real ties anywhere for work—we have family in California—but there’s no reason for us to live in any particular city. I shouldn’t say no reason. There’s no requirement that we live in any particular city; becomes a very difficult thing to tackle. It’s a paradox of choice, it’s almost too much choice.
We evaluated going overseas, and then we evaluated all these cities on them, basically the west coast, even Austin, Denver, Colorado Springs, and Sherry threw Hawaii or Maui. Actually, all these sound great but then you look at what it’s actually like to live there. You look at the days of sun per year, you look at the cost of living, you look what the traffic is like, and you read on Quora. You say, “What’s it like to live in insert city?” You can start to get a feel for what it might actually be like and certain ones just right off the bat are just removed from the list. There are just deal breakers that come up.
I love the Bay Area, I grew up there, and it’s the tech hub of the world, so to speak. But the cost of living there is outrageous. It always has been but it’s catastrophic, basically, and the traffic, I couldn’t deal with them. I would like to live in parts of LA but the traffic there is–you know, it’s just on and on and on there. There’s just things that knock it off.
It was a long and detailed conversation but eventually we got to the point where we decided that staying here was the best option of all of them. But it was a good exercise to go through, to arrive at a decision, and feel good about it, and then be like, “We’re going to buy a house.” We figured that this is a 10-year decision. We have kids that are basically 7, 8, and 10. In 10 years, they’ll pretty much all be gone from the house. At that point we will very likely either keep the house and get a second one somewhere sunny or we’ll sell the house and completely relocate.
Mike: I would have completely lost the pool on any bets that might have been placed about where you’re going to live after your time at Drip is over. There’s no way I would have picked you sticking around in Minneapolis, like there is no chance.
Rob: I think a lot of people wouldn’t have thought that and told us that, and frankly, I probably would have lost the pool as well. I would have imagined we would probably move back somewhere in California but there, at a certain point, quality of life and other things factor in. We lived in a lot of places. We visited a ton and we’ve lived in a lot.
Every once in awhile, you find a place where it’s like, “Wow, this is a world class city with world class amenities, but without so many of the problems of other cities that we’ve lived in,” including location, cost of living, crime, good schools, you just go on a list of all the things, access to airport, delta hub, all the stuff. As we looked at all the other cities, it was just so hard to even think about giving up each of the things that we have here. I wouldn’t have called it from the start, either. I think Sherry might have. She knew it was a pretty cool city here. I had no idea before we moved here.
That is the story. We close tomorrow and then we basically move over the weekend. The nice part is the house, it’s only a block away so it’s an easy move. I can move my own guitars and expensive stuff without worrying about movers trucking a dent truck.
Mike: Yeah, I think that would have been the deciding factor for me, it was that I wouldn’t have had to move my stuff. That’s why I would have just stayed there.
Rob: Totally. No, I know. I’ll admit that we used to play factor but at this point, we’ve done it enough that’s it’s like, “You know what, it’s a temporary pain. If I want to make it a 10-year decision, I’m going to make the right 10-year decision. Even if stuff gets broken or even if I have to pay more money to have someone move it. Let’s make the right decision for long term.” How about you? What’s going on?
Mike: I have some potentially good news here. The contract is finally signed for MicroConf Europe. That took forever. I saw it in an announcement a couple of weeks ago and I talked about it on the podcast. We hadn’t had signed paperwork in place yet and the problem that we ran into is we actually had to switch hotels in the meantime. It really sucked to have to start this process completely over which is why things stall for so long. We do have the signed paperwork, was sent over this morning, everything should be good to go. MicroConf Europe will be in Dubrovnik, Croatia this year and it will be from the 21st to the 23rd. That’s Sunday, Monday, Tuesday of October.
Rob: Looking forward to it. It’s going to be fun. Buy your tickets now. Oh wait, tickets aren’t even on sale yet. When do tickets go on sale?
Mike: Within the next week or two. I’m probably going to be sending an announcement over the next couple of days and then give people a little bit of time just to make sure that they can check their plans or whatever. I don’t want to drop it on people say, “Hey, here’s the date. By the way, here’s the link to buy tickets.” So give people at least a little heads-up.
Rob: Cool, that’s exciting. Glad to have that locked in. Looking forward to seeing folks there in a few months.
Mike: You had asked for an update on the local meetup that I did?
Rob: That’s right.
Mike: I think there were five of us who showed up? There were a dozen people or so that I invited. Some of them just couldn’t make it because either the day of the week or it was just a little bit too far based on the location. I try to picked something that was central to everybody but obviously, it’s going to be farther for some people than others. For some of them, it will end up being a two-hour drive and it wasn’t going to happen.
But like I said, five or six of us got together and it was a good time. Everybody was just chatting about what was going on in their business, how they were doing things, and what sort of markets they were going after. I think two of them were there who had previously purchased my book and then the other two had come in. They were both at MicroConf. It was nice to see a little mix of those guys and both of the guys who bought my book, I think were also in FounderCafe as well.
Rob: Oh, cool. That’s always fun, man. Glad to hear it went well. What’s going on today?
Mike: Today, we’re going to be talking about tactics for minimizing disruptions to your vacation. The idea for this topic came up because there was a thread inside FounderCafe that was posted for somebody who was asking, “How does everybody else take vacation because I’m worried about things like DDoS attacks or servers going down and this and that.” I thought what we do is we spend an episode looking at different ways that you can mitigate the risks to any of the things that could go on that could just end up disrupting your vacation and make it more stressful to go on vacation than to actually be on vacation.
Rob: That makes sense. I think this is obviously a concern of a lot of founders and I think in the early days it’s hard to even know how to approach it. I do hear this question now and again. This is from a FounderCafe thread that someone posted in and there was some pretty end-up discussion about it. I think we’ve talked about this before in like a Q&A episode, probably 100-200 episodes ago and I think this warrants rethinking and refreshing everyone’s mind about how to pull this off every so often.
Mike: To dive right in, we’ve broken this up into several different areas of what your business is. I think the first place to start with is the place where you probably get a lot of headaches that come out of it which is support request from either your existing customers or from prospective customers. Because you don’t want those things to go unanswered for too long and you just want to make sure that you’re responsive to people so that they don’t say, “Hey, what’s going on? Why is this business that I’ve trusted for so long with my data and my application, why are they not responding to me?”
Ideally, what you would do is you outsource and then empower your support people to do things for you. The problem is that not everybody is in the position where they even have support people and that’s, I think, is the most common situation. If you’re one person and you got your business running, it’s a SaaS application or something like that, how do you respond to those support request while you’re on vacation? You don’t want to be on a ferris wheel or something like that or just about to get on a roller-coaster and suddenly, you check your email and there’s these support requests that seem like they’re emergencies, and you got to deal with them.
Ideally, you outsource that stuff, but at the same time, you can also just do some time boxing here. If you block off a little bit of time in the morning and then again in the evening to handle some of those support cases, you can prioritize them. If it’s something that’s pressing or an emergency of some kind—obviously, there’s varying degrees of that—but if it’s something where it’s a feature request or some data that needs to be added, you can stall for time a little bit, say, “Oh, I can get to that tomorrow or the day after, or give me a couple of days. That’s probably the most common phrase that I use if I’m on vacations. “Give me a couple of days and I’ll get to that.” And then if it stretches from a couple of days to four or five, it’s not usually a big deal especially if it’s early on in your vacation.
Rob: The first piece of advice that I give a lot of folks once they get a business to the point where it’s making any kind of money is outsource your support. This is relevant to vacationing but it’s more so relevant to the other 45 weeks of the year. That depends on how much vacation you take. This is one of the biggest stumbling blocks I see is, founders hanging onto frontline support for too long. It’s always the, “Well, it’s only half hour a day or it’s an hour a day and no one can do it because my product’s really technical.”
It’s the same objections every time and every time once that exact person—I’ve seen this over and over and over—finds the right support person, doesn’t mean you just can hire anybody off the street, you may need to hire someone with a little bit of specialization, you may need to hire someone with prior WordPress knowledge, you may need to hire someone who, I don’t know, is an audio engineer on the side, and then knows audio stuff on the side if you have audio plugins. There are ways to troubleshoot this.
Entrepreneurs don’t say can’t as much as other people, and there are always objections and there are always hurdles, but once I see founders outsourcing this, it’s always the same realization at the end of, “Oh my gosh, I’ve should’ve done that six months sooner. I’ve should’ve done that a year ago.” If you get nothing else from this episode, if you’re still doing support, find someone to do it and then that, of course, will carry over into times like this when you go on vacation. It will be so much easier for you to do it.
Mike: The next one isn’t so much as a full-blown section. It’s just a word of advice and caution, which is learn from wisdom of having done this exact same thing. Do not push new code within a week or two of going on vacation. Just do not do it. It almost doesn’t matter what the code is because I’ve seen code that I push live a couple of weeks before going on vacation. This happened this past year with Big Snow Tiny Conf where I pushed it out, everything looked fine, waited a week, everything was still good, went on vacation, and the very first day of vacation something came up. It wasn’t actually that code. It was code that was even further back from that and the situation did not come up where that bug ended up surfacing to the point where something bad happened and I had to deal with it. The longer you wait between the time you go on vacation and the time where you’ve pushed that new code, the more likely you are identifying any problems with it and be able to fix them.
Rob: You mean I shouldn’t push new code and then hop on a 12-hour plane flight with no internet?
Mike: If you have no customers it’s probably not a big deal. You can get away with it with certain apps. If they’re not logging in very often, if it’s something where it sends them a weekly report or it’s batched, that stuff’s not as big a deal. But if it’s something they’re logging into and they rely on it for their business, depending on how critical it is in their business, it can be a really big deal and you don’t want to screw with other people’s business.
Rob: That’s the thing. If you have a team that is able to monitor and fix things, then you can, I’ll say, break this rule or bend this rule. You can push code a couple of days before you head off for vacation.
We had an informal rule at Drip almost from the start where we would not push code after—it got earlier and earlier in the day—but I would say, it was around 2:00 PM, so we’d really try to push stuff right around lunch or right after lunch. We had several hours to really see them in production. That was after it was fully tested, heavily unit tested, and all that stuff. Then we really tried not to push stuff on Friday. If we’re going to push it on Friday, we would push it in the morning like it was a 10:00 AM stop.
It always varies. If it’s s typo fix or it’s one little Javascript thing on one screen that could potentially break some minor feature, we’re obviously more loose with it. But if it was some major thing about rerouting the email sending through this different pipeline or if it was modifications to the scheduling, email scheduler, like really big, big deals that could really impact someone’s business. Those things we took with a lot of caution.
It wasn’t again, it wasn’t just about vacation but it was just about having sanity check on. If you have a team that can fix it, you have a little more leeway. But especially if you’re a single founder operating on your own, you need to be very cognizant of not breaking your app.
Mike: With BlueTick, most of the activity and usage is during the week and on the weekends it really drops down quite a bit. Like any major changes, I’m typically pushing them on a weekend because it’s going to impact a much lower number of people. During the week, it’s a bigger deal. I can push something over the weekend and monitor it.
As long as I’m not seeing anything major go wrong with like the smaller number of emails are being sent, it’s not as big a deal. But otherwise, other major changes will go live 8:00, 10:00 o’clock at night, and then I just watch it a couple of hours to make sure that nothing major is going on and check it first thing in the morning to make sure nothing else happened. But everyone’s app is different, so you have to take that into account.
The next category to look at is sales and presales. If you are doing demos of any kind—typically you have some sort of a way for people to schedule those—the first thing you should do is just block off your calendar so that people can’t book sales demos with you while you’re on vacation. There’s times where that’s absolutely necessary or where you may need to do a demo for somebody.
I actually have on my calendar, there are certain unlisted links that you can use that will essentially ignore everything and it doesn’t matter. I use those specifically for situations where I really want to talk to somebody or it’s a high-profile customer, I think that it’s going to be a good fit or I’ve been working on for a long time—those I want to give a little bit more priority to. I’m more lenient with those especially in terms of the time of day and things like that. But you don’t want to just let anybody sign up for your sales demos if you’re not going to be around because then you’re still subjecting yourself to the mercy of whoever is putting themselves on your calendar.
Another thing is using an out-of-office responder. Now, I think this is a judgment call. I’ve gone on vacations without putting those in there just because I didn’t want to having sending out messages that says, “Hey, I’m on vacation,” but at the same time, you may want to do that so that it does set expectations. It depends on how much email you get and what types of people you’re getting that email from.
The next thing you can do to help minimize some of the disruptions to your vacation is to hire somebody who is technical to be on-call. This could probably be a lot less expensive than you might think because you’re not actually paying them if they’re not working. You may say, “Hey look, I’ll give you a couple of hundred dollars to be on-call and if there’s issues I’ll send them your way.”
If you’re going to do something like this, obviously you want it to be somebody you can trust. Either a friend, a colleague, a mastermind group member. Those are all great people to turn to. Or if you have a DBA who’s been helping you manage your database, those are all people who are probably going to be at least somewhat familiar with you and the technologies you use. But you can provide them with at least minimal documentation and training on how things are architected, and what would need to be done or what things impact other things in the environment that they may need to look at if there is a problem. Obviously, you need to give them credentials to be able to login and get access to stuff.
Another thing you can look at is having any sort of a hosted infrastructure can be really helpful in this. If you’re using AWS, a lot of those things are generally taken cared of for you. But if you have your own virtual machines, maybe hosted on Rackspace or something like that, those types of companies do have their own support people where you can say, “Hey, let me turn this over to them,” and then they may require an on-going support contract but that might also be something you look at for a much longer period of time and on an ongoing basis.
Rob: This one’s tough. I think if there’s network connectivity issues or if there’s server issues, and you’re on AWS—some of them assume most people are probably on some type of PaaS, Platform as a Service, like AWS or Azure—then you can hand that over to them. But so much of this stuff winds up being application code. That’s a thing that’s changing constantly. That’s a thing that is vulnerable.
I think getting someone up to speed just for a two-week vacation is going to be really, really tough, even if you provide docs and all that stuff. You know how it is. It is such a jungle when you haven’t been working on an app for at least a couple of months and have some exposure. I can imagine if you had a junior developer who you’d ramp up a couple of months. He or she could handle 20% or 30% of the stuff that came up and then escalate to you as needed.
But try to get someone up to speed, just drop them into an app and be like, “Alright, if these things go wrong, try to do this and try to troubleshoot that,” I think this is a really tough approach. I haven’t heard of anyone doing this, I guess, successfully that hasn’t already have that developer doing it on an ongoing basis, whether it’s a contractor who’s worked on the code from now and again.
I like your idea of the DBA. The Drip DBA who worked with us for years and is still the DBA there. He’s a contractor but he would have been able to dip into the application code a little bit because he had enough knowledge of the app just digging around in there.
Mike: I think there’s a difference between having somebody who is technical enough, is the sysadmin, at the sysadmin level versus somebody who, like, “Hey, I need you to go look into this bug,” stuff like that. I’m thinking probably be pushed off to the side for the most part, especially if you’ve done the due diligence to say, “Okay, we’re not going to push any new application code for a week or two.”
Those things should have ironed themselves out for the most part, but then when you get into things like network connectivity issues or the database isn’t responding, things like that, most technical people, I think, should be able to handle that stuff. If you have somebody who’s a DBA or a systems engineer, they can look at that stuff and start troubleshooting them. They’re not so much looking at the application itself. They’re looking at how do all these moving parts touch each other and why are they not working well together. It’s being able to at least identify that type of stuff.
That leads us into the next section which is using third-party monitoring services. Most of us, I think, have our own logging mechanisms of some kind that are either built into the application or are taking those logs and putting them off onto a third-party service. But there’s lots of other third-party monitoring tools that you can use like Pingdom and uptime.com. Rob, you had a […] in here I’d never used or heard of that one, but—
Rob: That’s Laura Roeders’ new startup.
Mike: Ah, okay. Cool. There’s also PagerDuty and Uptime Robot. There’s another service that I use called Datadog, which allows you to essentially constantly monitor what’s going on your servers and get detailed information about performance metrics of the system’s various aspects of it, whether it’s the database, or the application, or just different processes that are running. I use just that because there’s lots of different things that need to be monitored but conjunction of all these things is that, you can use those to figure out what needs to be escalated. If there’s certain things that cross a certain threshold for you to actually pay attention to it, then those are the things that you would need to escalate to either the technical person that you have, or a support person, or even maybe ends up going to you at some point.
Rob: Our next tactic is to turn off your phone and email during the day. Basically, automate any major escalations to SMS and ignore everything else so, ignore your email. Essentially ignore your support queues based on what we’re saying above is to try to get to the point where you can vacation, enjoy, and be present with yourself, or with your family, or whoever you’re on vacation with, and not feel the need to be checking inboxes all day, and not feel like something’s going to slip through and you’re going to miss it, or not to get a ping, a notification on your phone every time an email arrives.
Because of that, it’s catastrophic for enjoying your vacation. I think it’s a big thing. I’m someone who does not get notifications when emails arrive anyways. I think that’s a pretty bad idea for your productivity but if you do that when you’re not vacationing, then you need to turn that off when you are.
Mike: I turn pretty much all notifications on my phone off. The only one that would end up coming up and surfacing for the most part is certain things coming from the server logs, they pop-up on my phone, and then text messages. That’s basically it. Obviously, phone calls will come through but other than that, nothing is pushed to me in an interruptive way.
The last thing to take a look at is do some technical preparation, create a checklist, and use that checklist to look for potential upcoming issues. On this check list you would want to put things like, “Are my SSL certificates going to expire anytime soon? Does the system have enough space? Does it look like it might run out sometime in the near future? What is the CPU usage look like? Do I need to do any sort of upgrades, or give it additional disk space, or plan for more resource capacity in the meantime that would help me get through that and help mitigate any potential problems that would result from, maybe you get an influx of traffic, you get a bunch of sign-ups and your server gets bogged down?” If you upgrade the infrastructure a little bit, then that would help take care of it.
The other thing you have to look at is things that are completely beyond your control. For example, a DDoS attack. What happens if your application or your website suffers a DDoS attack? There’s other things out there, there’s services like Cloudflare that can help you out with that. You can also build redundancy into the application or into the website itself. But again, these are types of things that could come up but they’re also typically lower risk, unless you have a large enough footprint. Early on, these aren’t the things that you probably going to have to worry about too much but even in the case of a DDoS attack, your customers are probably going to be pretty understanding. It’s not like you did something wrong.
Rob: Yeah and these are things that you want to do anyways. This is stuff that helps if you have it during your vacation but any of these things can happen at any time. I’ve had SSL certs expire on me. I think it’s only been once and it was when I acquired an app, and of course, the contact email for the SSL cert expiring went to the old owner, like their personal email, so I didn’t get any emails. Suddenly, boom on a Sunday afternoon—it was HitTail—the Sunday afternoon, the site isn’t SSL anymore, isn’t secure, and Google Chrome has a conniption when that happen.
I remember calling GoDaddy on the phone, Sunday afternoon at 3:00, I’m thinking, “There’s just no chance. This is going to be a 24 hours or something and man, […] help me right away.” I’m assuming this happens to a lot of people because I think it was within 30 minutes they issued a new cert and I was able to get it.
That would be terrible to happen on your vacation. Like you said, you’re out on, what was the example that you used earlier?
Mike: Like on a roller coaster or like on a Ferris wheel.
Rob: Yeah, or I’m thinking we were snorkeling a few weeks ago in Florida, or you’re out on some safari, or you’re doing something where either you have almost no cell service or you just don’t have the headspace or connectivity to handle this well. It’ll be a stressor and kind of ruin that part of your vacation.
These are the kinds of things to have that check list that you’re probably thinking about on an ongoing basis but really revisit before you head off the grid.
Mike: One thing I found a little bit helpful for things like expiring SSL certificates or even domain name renewals is I actually add them into my calendar and create it as a recurring task that needs to be addressed at some point. That way, I actually use Teamwork for that piece of it but all of them are in there, so that I know that even if I don’t get a notification from whoever that is, I still see it as a task that needs to be taken cared of. If I renew for two years, it’s not a big deal. I can just mark them off. But at least that way, I have my own internal notification that serves as something of a backup.
Rob: That’s a nice way to do it.
Mike: Helps you avoid lost domain names, too, because I’ve had that happen which is why I have that system in place now.
Rob: Totally. Email is mostly reliable and that non-mostly part, the part that is outside of them, the most mostly circle can be pretty bad for domain names, SSL certs, and all that. I think that about wraps it up for today.
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Welcome to Startups For The Rest Of Us, the podcast that helps developers, designers, and entrepreneurs be awesome at building, launching, and growing software products. Whether you’ve built your first product or you’re just thinking about it. I’m Mike.
Rob: And I’m Rob.
Mike: We’re here to share our experiences to help you avoid the same mistakes we’ve made. How are you doing this week, Rob?
Rob: I’m doing okay. I’m a little tired. We landed back from California. Landed in Minneapolis last night around midnight, hopped a lift with the kids, and got home, and in bed around 1:00 AM. I’m on Pacific time so I had a couple of hour times change this morning trying to get up. It’s a little slow getting going but overall, really enjoyed our time in California.
I had talked about previously that we’re going to spend some time with my family in the Bay Area. Our kids had a music camp in San Francisco and then we went and saw Sherry’s folks up in far north California.
Overall, it was good vacation; some vacation, some kind of work stuff. The camp isn’t exactly vacation because it’s pretty intense music practice for the boys. Each day we have to be present and stuff. It wasn’t like we could just kick back and sip martinis or whatever.
Mike: You don’t get to send them for the day?
Rob: No. That would have been ideal. It’s less at camp. It’s actually called an institute, the Suzuki institute. You go and it’s five or six hours a day of them playing instruments, and the parents have to be involved to a certain extent, so you’re sitting in there with them. That’s where I was like, it’s some vacation and it’s some not-vacation. It’s fun in the afternoons and evenings when we took the boys and did stuff but otherwise, got there and back unscathe, which is good when five people are traveling and we lug a cello with us on the airplane. In true chaotic fashion we were back, like I said, landed last night at midnight and then we close on our new house tomorrow in Minneapolis. We show up and sign papers in the morning.
Mike: Stick around for a while then, huh?
Rob: I know, yeah. That was the decision. We really evaluated it after I left the Drip a couple of months ago. It was a decision point like, “Okay, we’ve been in Minneapolis a little less than two years and we can move anywhere. That always sounds great in theory but when you have no real ties anywhere for work—we have family in California—but there’s no reason for us to live in any particular city. I shouldn’t say no reason. There’s no requirement that we live in any particular city; becomes a very difficult thing to tackle. It’s a paradox of choice, it’s almost too much choice.
We evaluated going overseas, and then we evaluated all these cities on them, basically the west coast, even Austin, Denver, Colorado Springs, and Sherry threw Hawaii or Maui. Actually, all these sound great but then you look at what it’s actually like to live there. You look at the days of sun per year, you look at the cost of living, you look what the traffic is like, and you read on Quora. You say, “What’s it like to live in insert city?” You can start to get a feel for what it might actually be like and certain ones just right off the bat are just removed from the list. There are just deal breakers that come up.
I love the Bay Area, I grew up there, and it’s the tech hub of the world, so to speak. But the cost of living there is outrageous. It always has been but it’s catastrophic, basically, and the traffic, I couldn’t deal with them. I would like to live in parts of LA but the traffic there is–you know, it’s just on and on and on there. There’s just things that knock it off.
It was a long and detailed conversation but eventually we got to the point where we decided that staying here was the best option of all of them. But it was a good exercise to go through, to arrive at a decision, and feel good about it, and then be like, “We’re going to buy a house.” We figured that this is a 10-year decision. We have kids that are basically 7, 8, and 10. In 10 years, they’ll pretty much all be gone from the house. At that point we will very likely either keep the house and get a second one somewhere sunny or we’ll sell the house and completely relocate.
Mike: I would have completely lost the pool on any bets that might have been placed about where you’re going to live after your time at Drip is over. There’s no way I would have picked you sticking around in Minneapolis, like there is no chance.
Rob: I think a lot of people wouldn’t have thought that and told us that, and frankly, I probably would have lost the pool as well. I would have imagined we would probably move back somewhere in California but there, at a certain point, quality of life and other things factor in. We lived in a lot of places. We visited a ton and we’ve lived in a lot.
Every once in awhile, you find a place where it’s like, “Wow, this is a world class city with world class amenities, but without so many of the problems of other cities that we’ve lived in,” including location, cost of living, crime, good schools, you just go on a list of all the things, access to airport, delta hub, all the stuff. As we looked at all the other cities, it was just so hard to even think about giving up each of the things that we have here. I wouldn’t have called it from the start, either. I think Sherry might have. She knew it was a pretty cool city here. I had no idea before we moved here.
That is the story. We close tomorrow and then we basically move over the weekend. The nice part is the house, it’s only a block away so it’s an easy move. I can move my own guitars and expensive stuff without worrying about movers trucking a dent truck.
Mike: Yeah, I think that would have been the deciding factor for me, it was that I wouldn’t have had to move my stuff. That’s why I would have just stayed there.
Rob: Totally. No, I know. I’ll admit that we used to play factor but at this point, we’ve done it enough that’s it’s like, “You know what, it’s a temporary pain. If I want to make it a 10-year decision, I’m going to make the right 10-year decision. Even if stuff gets broken or even if I have to pay more money to have someone move it. Let’s make the right decision for long term.” How about you? What’s going on?
Mike: I have some potentially good news here. The contract is finally signed for MicroConf Europe. That took forever. I saw it in an announcement a couple of weeks ago and I talked about it on the podcast. We hadn’t had signed paperwork in place yet and the problem that we ran into is we actually had to switch hotels in the meantime. It really sucked to have to start this process completely over which is why things stall for so long. We do have the signed paperwork, was sent over this morning, everything should be good to go. MicroConf Europe will be in Dubrovnik, Croatia this year and it will be from the 21st to the 23rd. That’s Sunday, Monday, Tuesday of October.
Rob: Looking forward to it. It’s going to be fun. Buy your tickets now. Oh wait, tickets aren’t even on sale yet. When do tickets go on sale?
Mike: Within the next week or two. I’m probably going to be sending an announcement over the next couple of days and then give people a little bit of time just to make sure that they can check their plans or whatever. I don’t want to drop it on people say, “Hey, here’s the date. By the way, here’s the link to buy tickets.” So give people at least a little heads-up.
Rob: Cool, that’s exciting. Glad to have that locked in. Looking forward to seeing folks there in a few months.
Mike: You had asked for an update on the local meetup that I did?
Rob: That’s right.
Mike: I think there were five of us who showed up? There were a dozen people or so that I invited. Some of them just couldn’t make it because either the day of the week or it was just a little bit too far based on the location. I try to picked something that was central to everybody but obviously, it’s going to be farther for some people than others. For some of them, it will end up being a two-hour drive and it wasn’t going to happen.
But like I said, five or six of us got together and it was a good time. Everybody was just chatting about what was going on in their business, how they were doing things, and what sort of markets they were going after. I think two of them were there who had previously purchased my book and then the other two had come in. They were both at MicroConf. It was nice to see a little mix of those guys and both of the guys who bought my book, I think were also in FounderCafe as well.
Rob: Oh, cool. That’s always fun, man. Glad to hear it went well. What’s going on today?
Mike: Today, we’re going to be talking about tactics for minimizing disruptions to your vacation. The idea for this topic came up because there was a thread inside FounderCafe that was posted for somebody who was asking, “How does everybody else take vacation because I’m worried about things like DDoS attacks or servers going down and this and that.” I thought what we do is we spend an episode looking at different ways that you can mitigate the risks to any of the things that could go on that could just end up disrupting your vacation and make it more stressful to go on vacation than to actually be on vacation.
Rob: That makes sense. I think this is obviously a concern of a lot of founders and I think in the early days it’s hard to even know how to approach it. I do hear this question now and again. This is from a FounderCafe thread that someone posted in and there was some pretty end-up discussion about it. I think we’ve talked about this before in like a Q&A episode, probably 100-200 episodes ago and I think this warrants rethinking and refreshing everyone’s mind about how to pull this off every so often.
Mike: To dive right in, we’ve broken this up into several different areas of what your business is. I think the first place to start with is the place where you probably get a lot of headaches that come out of it which is support request from either your existing customers or from prospective customers. Because you don’t want those things to go unanswered for too long and you just want to make sure that you’re responsive to people so that they don’t say, “Hey, what’s going on? Why is this business that I’ve trusted for so long with my data and my application, why are they not responding to me?”
Ideally, what you would do is you outsource and then empower your support people to do things for you. The problem is that not everybody is in the position where they even have support people and that’s, I think, is the most common situation. If you’re one person and you got your business running, it’s a SaaS application or something like that, how do you respond to those support request while you’re on vacation? You don’t want to be on a ferris wheel or something like that or just about to get on a roller-coaster and suddenly, you check your email and there’s these support requests that seem like they’re emergencies, and you got to deal with them.
Ideally, you outsource that stuff, but at the same time, you can also just do some time boxing here. If you block off a little bit of time in the morning and then again in the evening to handle some of those support cases, you can prioritize them. If it’s something that’s pressing or an emergency of some kind—obviously, there’s varying degrees of that—but if it’s something where it’s a feature request or some data that needs to be added, you can stall for time a little bit, say, “Oh, I can get to that tomorrow or the day after, or give me a couple of days. That’s probably the most common phrase that I use if I’m on vacations. “Give me a couple of days and I’ll get to that.” And then if it stretches from a couple of days to four or five, it’s not usually a big deal especially if it’s early on in your vacation.
Rob: The first piece of advice that I give a lot of folks once they get a business to the point where it’s making any kind of money is outsource your support. This is relevant to vacationing but it’s more so relevant to the other 45 weeks of the year. That depends on how much vacation you take. This is one of the biggest stumbling blocks I see is, founders hanging onto frontline support for too long. It’s always the, “Well, it’s only half hour a day or it’s an hour a day and no one can do it because my product’s really technical.”
It’s the same objections every time and every time once that exact person—I’ve seen this over and over and over—finds the right support person, doesn’t mean you just can hire anybody off the street, you may need to hire someone with a little bit of specialization, you may need to hire someone with prior WordPress knowledge, you may need to hire someone who, I don’t know, is an audio engineer on the side, and then knows audio stuff on the side if you have audio plugins. There are ways to troubleshoot this.
Entrepreneurs don’t say can’t as much as other people, and there are always objections and there are always hurdles, but once I see founders outsourcing this, it’s always the same realization at the end of, “Oh my gosh, I’ve should’ve done that six months sooner. I’ve should’ve done that a year ago.” If you get nothing else from this episode, if you’re still doing support, find someone to do it and then that, of course, will carry over into times like this when you go on vacation. It will be so much easier for you to do it.
Mike: The next one isn’t so much as a full-blown section. It’s just a word of advice and caution, which is learn from wisdom of having done this exact same thing. Do not push new code within a week or two of going on vacation. Just do not do it. It almost doesn’t matter what the code is because I’ve seen code that I push live a couple of weeks before going on vacation. This happened this past year with Big Snow Tiny Conf where I pushed it out, everything looked fine, waited a week, everything was still good, went on vacation, and the very first day of vacation something came up. It wasn’t actually that code. It was code that was even further back from that and the situation did not come up where that bug ended up surfacing to the point where something bad happened and I had to deal with it. The longer you wait between the time you go on vacation and the time where you’ve pushed that new code, the more likely you are identifying any problems with it and be able to fix them.
Rob: You mean I shouldn’t push new code and then hop on a 12-hour plane flight with no internet?
Mike: If you have no customers it’s probably not a big deal. You can get away with it with certain apps. If they’re not logging in very often, if it’s something where it sends them a weekly report or it’s batched, that stuff’s not as big a deal. But if it’s something they’re logging into and they rely on it for their business, depending on how critical it is in their business, it can be a really big deal and you don’t want to screw with other people’s business.
Rob: That’s the thing. If you have a team that is able to monitor and fix things, then you can, I’ll say, break this rule or bend this rule. You can push code a couple of days before you head off for vacation.
We had an informal rule at Drip almost from the start where we would not push code after—it got earlier and earlier in the day—but I would say, it was around 2:00 PM, so we’d really try to push stuff right around lunch or right after lunch. We had several hours to really see them in production. That was after it was fully tested, heavily unit tested, and all that stuff. Then we really tried not to push stuff on Friday. If we’re going to push it on Friday, we would push it in the morning like it was a 10:00 AM stop.
It always varies. If it’s s typo fix or it’s one little Javascript thing on one screen that could potentially break some minor feature, we’re obviously more loose with it. But if it was some major thing about rerouting the email sending through this different pipeline or if it was modifications to the scheduling, email scheduler, like really big, big deals that could really impact someone’s business. Those things we took with a lot of caution.
It wasn’t again, it wasn’t just about vacation but it was just about having sanity check on. If you have a team that can fix it, you have a little more leeway. But especially if you’re a single founder operating on your own, you need to be very cognizant of not breaking your app.
Mike: With BlueTick, most of the activity and usage is during the week and on the weekends it really drops down quite a bit. Like any major changes, I’m typically pushing them on a weekend because it’s going to impact a much lower number of people. During the week, it’s a bigger deal. I can push something over the weekend and monitor it.
As long as I’m not seeing anything major go wrong with like the smaller number of emails are being sent, it’s not as big a deal. But otherwise, other major changes will go live 8:00, 10:00 o’clock at night, and then I just watch it a couple of hours to make sure that nothing major is going on and check it first thing in the morning to make sure nothing else happened. But everyone’s app is different, so you have to take that into account.
The next category to look at is sales and presales. If you are doing demos of any kind—typically you have some sort of a way for people to schedule those—the first thing you should do is just block off your calendar so that people can’t book sales demos with you while you’re on vacation. There’s times where that’s absolutely necessary or where you may need to do a demo for somebody.
I actually have on my calendar, there are certain unlisted links that you can use that will essentially ignore everything and it doesn’t matter. I use those specifically for situations where I really want to talk to somebody or it’s a high-profile customer, I think that it’s going to be a good fit or I’ve been working on for a long time—those I want to give a little bit more priority to. I’m more lenient with those especially in terms of the time of day and things like that. But you don’t want to just let anybody sign up for your sales demos if you’re not going to be around because then you’re still subjecting yourself to the mercy of whoever is putting themselves on your calendar.
Another thing is using an out-of-office responder. Now, I think this is a judgment call. I’ve gone on vacations without putting those in there just because I didn’t want to having sending out messages that says, “Hey, I’m on vacation,” but at the same time, you may want to do that so that it does set expectations. It depends on how much email you get and what types of people you’re getting that email from.
The next thing you can do to help minimize some of the disruptions to your vacation is to hire somebody who is technical to be on-call. This could probably be a lot less expensive than you might think because you’re not actually paying them if they’re not working. You may say, “Hey look, I’ll give you a couple of hundred dollars to be on-call and if there’s issues I’ll send them your way.”
If you’re going to do something like this, obviously you want it to be somebody you can trust. Either a friend, a colleague, a mastermind group member. Those are all great people to turn to. Or if you have a DBA who’s been helping you manage your database, those are all people who are probably going to be at least somewhat familiar with you and the technologies you use. But you can provide them with at least minimal documentation and training on how things are architected, and what would need to be done or what things impact other things in the environment that they may need to look at if there is a problem. Obviously, you need to give them credentials to be able to login and get access to stuff.
Another thing you can look at is having any sort of a hosted infrastructure can be really helpful in this. If you’re using AWS, a lot of those things are generally taken cared of for you. But if you have your own virtual machines, maybe hosted on Rackspace or something like that, those types of companies do have their own support people where you can say, “Hey, let me turn this over to them,” and then they may require an on-going support contract but that might also be something you look at for a much longer period of time and on an ongoing basis.
Rob: This one’s tough. I think if there’s network connectivity issues or if there’s server issues, and you’re on AWS—some of them assume most people are probably on some type of PaaS, Platform as a Service, like AWS or Azure—then you can hand that over to them. But so much of this stuff winds up being application code. That’s a thing that’s changing constantly. That’s a thing that is vulnerable.
I think getting someone up to speed just for a two-week vacation is going to be really, really tough, even if you provide docs and all that stuff. You know how it is. It is such a jungle when you haven’t been working on an app for at least a couple of months and have some exposure. I can imagine if you had a junior developer who you’d ramp up a couple of months. He or she could handle 20% or 30% of the stuff that came up and then escalate to you as needed.
But try to get someone up to speed, just drop them into an app and be like, “Alright, if these things go wrong, try to do this and try to troubleshoot that,” I think this is a really tough approach. I haven’t heard of anyone doing this, I guess, successfully that hasn’t already have that developer doing it on an ongoing basis, whether it’s a contractor who’s worked on the code from now and again.
I like your idea of the DBA. The Drip DBA who worked with us for years and is still the DBA there. He’s a contractor but he would have been able to dip into the application code a little bit because he had enough knowledge of the app just digging around in there.
Mike: I think there’s a difference between having somebody who is technical enough, is the sysadmin, at the sysadmin level versus somebody who, like, “Hey, I need you to go look into this bug,” stuff like that. I’m thinking probably be pushed off to the side for the most part, especially if you’ve done the due diligence to say, “Okay, we’re not going to push any new application code for a week or two.”
Those things should have ironed themselves out for the most part, but then when you get into things like network connectivity issues or the database isn’t responding, things like that, most technical people, I think, should be able to handle that stuff. If you have somebody who’s a DBA or a systems engineer, they can look at that stuff and start troubleshooting them. They’re not so much looking at the application itself. They’re looking at how do all these moving parts touch each other and why are they not working well together. It’s being able to at least identify that type of stuff.
That leads us into the next section which is using third-party monitoring services. Most of us, I think, have our own logging mechanisms of some kind that are either built into the application or are taking those logs and putting them off onto a third-party service. But there’s lots of other third-party monitoring tools that you can use like Pingdom and uptime.com. Rob, you had a […] in here I’d never used or heard of that one, but—
Rob: That’s Laura Roeders’ new startup.
Mike: Ah, okay. Cool. There’s also PagerDuty and Uptime Robot. There’s another service that I use called Datadog, which allows you to essentially constantly monitor what’s going on your servers and get detailed information about performance metrics of the system’s various aspects of it, whether it’s the database, or the application, or just different processes that are running. I use just that because there’s lots of different things that need to be monitored but conjunction of all these things is that, you can use those to figure out what needs to be escalated. If there’s certain things that cross a certain threshold for you to actually pay attention to it, then those are the things that you would need to escalate to either the technical person that you have, or a support person, or even maybe ends up going to you at some point.
Rob: Our next tactic is to turn off your phone and email during the day. Basically, automate any major escalations to SMS and ignore everything else so, ignore your email. Essentially ignore your support queues based on what we’re saying above is to try to get to the point where you can vacation, enjoy, and be present with yourself, or with your family, or whoever you’re on vacation with, and not feel the need to be checking inboxes all day, and not feel like something’s going to slip through and you’re going to miss it, or not to get a ping, a notification on your phone every time an email arrives.
Because of that, it’s catastrophic for enjoying your vacation. I think it’s a big thing. I’m someone who does not get notifications when emails arrive anyways. I think that’s a pretty bad idea for your productivity but if you do that when you’re not vacationing, then you need to turn that off when you are.
Mike: I turn pretty much all notifications on my phone off. The only one that would end up coming up and surfacing for the most part is certain things coming from the server logs, they pop-up on my phone, and then text messages. That’s basically it. Obviously, phone calls will come through but other than that, nothing is pushed to me in an interruptive way.
The last thing to take a look at is do some technical preparation, create a checklist, and use that checklist to look for potential upcoming issues. On this check list you would want to put things like, “Are my SSL certificates going to expire anytime soon? Does the system have enough space? Does it look like it might run out sometime in the near future? What is the CPU usage look like? Do I need to do any sort of upgrades, or give it additional disk space, or plan for more resource capacity in the meantime that would help me get through that and help mitigate any potential problems that would result from, maybe you get an influx of traffic, you get a bunch of sign-ups and your server gets bogged down?” If you upgrade the infrastructure a little bit, then that would help take care of it.
The other thing you have to look at is things that are completely beyond your control. For example, a DDoS attack. What happens if your application or your website suffers a DDoS attack? There’s other things out there, there’s services like Cloudflare that can help you out with that. You can also build redundancy into the application or into the website itself. But again, these are types of things that could come up but they’re also typically lower risk, unless you have a large enough footprint. Early on, these aren’t the things that you probably going to have to worry about too much but even in the case of a DDoS attack, your customers are probably going to be pretty understanding. It’s not like you did something wrong.
Rob: Yeah and these are things that you want to do anyways. This is stuff that helps if you have it during your vacation but any of these things can happen at any time. I’ve had SSL certs expire on me. I think it’s only been once and it was when I acquired an app, and of course, the contact email for the SSL cert expiring went to the old owner, like their personal email, so I didn’t get any emails. Suddenly, boom on a Sunday afternoon—it was HitTail—the Sunday afternoon, the site isn’t SSL anymore, isn’t secure, and Google Chrome has a conniption when that happen.
I remember calling GoDaddy on the phone, Sunday afternoon at 3:00, I’m thinking, “There’s just no chance. This is going to be a 24 hours or something and man, […] help me right away.” I’m assuming this happens to a lot of people because I think it was within 30 minutes they issued a new cert and I was able to get it.
That would be terrible to happen on your vacation. Like you said, you’re out on, what was the example that you used earlier?
Mike: Like on a roller coaster or like on a Ferris wheel.
Rob: Yeah, or I’m thinking we were snorkeling a few weeks ago in Florida, or you’re out on some safari, or you’re doing something where either you have almost no cell service or you just don’t have the headspace or connectivity to handle this well. It’ll be a stressor and kind of ruin that part of your vacation.
These are the kinds of things to have that check list that you’re probably thinking about on an ongoing basis but really revisit before you head off the grid.
Mike: One thing I found a little bit helpful for things like expiring SSL certificates or even domain name renewals is I actually add them into my calendar and create it as a recurring task that needs to be addressed at some point. That way, I actually use Teamwork for that piece of it but all of them are in there, so that I know that even if I don’t get a notification from whoever that is, I still see it as a task that needs to be taken cared of. If I renew for two years, it’s not a big deal. I can just mark them off. But at least that way, I have my own internal notification that serves as something of a backup.
Rob: That’s a nice way to do it.
Mike: Helps you avoid lost domain names, too, because I’ve had that happen which is why I have that system in place now.
Rob: Totally. Email is mostly reliable and that non-mostly part, the part that is outside of them, the most mostly circle can be pretty bad for domain names, SSL certs, and all that. I think that about wraps it up for today.
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Episode 401 | Why You Shouldn’t Listen to Your Customers (And What You Should Do Instead)
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Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about why you shouldn’t listen to your customers. Not all requests are created equal. The guys breakdown customer feature requests into three categories and give tips on how to get the most out of them.
Items mentioned in this episode:
Rob: In this episode of Startups For the Rest of Us, Mike and I talk about why you shouldn’t listen to your customers and what you should do instead. This is Startups For the Rest of Us episode 401.
Welcome to Startups For the Rest of Us. The podcast that helps developers, designers, and entrepreneurs be awesome in building, launching, and growing software products whether you built your product or just thinking about it. I’m Rob.
Mike: And I’m Mike.
Rob: We’re here to share our experiences to help people with the same mistakes we made. To where this week sir?
Mike: Well, I submitted the Bluetick Zapier integration to Zapier, to see about promoting it through their public availability process. I’ve already heard back from them. I’ve got a list of things they want to see changed to conform to the standards that they kind of set for everybody to maintain consistency between Zap. I got to go back, and look at those, and make some changes and then publish it but things did not seem to be too terrible.
Rob: Nice, that’s super cool man. Once that goes live, it’s nice to be able to refer customers to Zapier when they’re trying to be something in your app that you haven’t built yet—when you don’t have an integration. That was always the useful piece for us.
Mike: Yeah. Well, the thing is like the Zapier integration is already there, it’s just invite only and there’s a link inside the app where they can click on that link and go over there. The difference is it will be public so that when people are searching inside Zapier to see where there is a Bluetick Zap, they’ll be able to see it but I’ll have them to login in Bluetick first. At that point, they can add it into their account but I guess you can’t ready do anything without an API key anyways.
Rob: I remembered when Zapier promoted HitTail early on we got a bump and then Drip, I remember it was—I think it was more or less, but it definitely in the early days when you’re really scraping and clawing for every customer. I think that you get included in the email newsletter, tweeted out, I think, and every bit helps at that point. Even if you only get a couple new customers from someone hearing about it, it can move the needle for you in the early days.
Mike: Yes. I’m hoping to see that at least through the initial process in the next couple of weeks or so. I don’t know how long it has to be in their beta for before it ends up being live. I think that they said that—when I was looking through the specs—they said, “You should have at least one person using each Zap and you need to have at least 20 active Zaps,” or something like that. They’ve revised their stats page to see if you can actually see more about who’s using it, how many people are using the different Zaps that you’ve published or made available. I’m up to like 400 active or something like that, and only need 20.
Rob: Oh, yeah. That’s a lot more than we went live with it. That’s cool. segment.com will be another one. You’ll probably want to do it at some point—integrate with them. That’s another big hub to get not only the promotion but it’s just nice because people are going to want to create reports or do things with the data that you’re just not going to have the time to build and referring about to Segment, it can help there.
Mike: Yeah. Ultimately, I’ll look into that one as well. The other thing I’m in the middle of right now is kind of specking out with the public APIs going to look like. Everything in there is all used internally inside the app and then I have a specific endpoint that’s used solely for Zapier and then next step is to really kind of take that and say, “Okay, when are we going to make it public?” because there’s a couple of customers who have wanted to use a public API but I told them to kind of hold off and just use Zapier. I had a call this morning with somebody about what the specifics things they needed from a public API from us are. There’s at least one other customer that I want to talk to who I know they do a lot of extensive development work and are using Bluetick as the backend CRM for their entire company. They got several mailboxes attached and they want to be able to use that functionality inside there. I definitely want to have a conversation with them first before I start making anything publicly available.
Rob: That makes sense. For me, I am in California when this episode airs. We’re heading there for about two weeks. We’re going to see different groups of family in different areas and my sons are going to a cello and violin camp—Suzuki String Camp in San Francisco. It should be fun. It’s where I’m from. It’s nice to get back there once or twice a year to kind of see the family and all that.
Mike: Cool. Hopefully you won’t be selling the company while you’re out there.
Rob: I know. That’s the old story right? That I was signing the final docs at the cello camp a couple years ago.
Mike: Getting dirty looks.
Rob: Indeed. Dirty looks from the instructor.
I titled this episode Why You Shouldn’t Listen to Your Customers and What You Should Do Instead. Realistically, it’s about deciding which feature request to build and which not to—not even feature request, just deciding what to build in general. There’s always the popular meme of like launch soon and then your customers will tell you what to build.
I’ve seen struggles with that. Number one, often times your customers don’t know really what they’re trying to do or they’ll tell you to build things that you shouldn’t build but you should do it a different way. Or they’re just going to tell you to build your competitor. They’re going to say, “Hey, I’ve used Infusionsoft and it has these features and you don’t have them. Can you just build this, this, that, and this?” We have these all the time in the early days.
Remember, early Drip user wanted a mobile app. He wanted kind of like an iOS and an android app. He wanted these very specific reports that made sense in Mailchimp but wouldn’t have made sense for Drip to have. He’s not a software person, his idea was just to have this be Mailchimp but with a cleaner interface and that wasn’t what we wanted to build.
It’s really easy when you’re getting multiple feature request per day. I left Drip a couple of months ago, I think we get 150-200 feature requests per month. It’s a substantial line and at a certain point you have to figure out how you’re going to evaluate what to build and what not to build.
I see these like there’s three types of feature request. The first type is—I humorously named this, the crackpots—but it’s kind of odd ball request that you know that there’s no chance you’re going to build, that kind of come out of left field. Some examples of those are, people requiring you or asking you for feature that would require you to build an entirely new product. For example, “Why can’t I use your email service provider to publish blog posts on my WordPress site, or to record my podcast and publish them, or to do all of my social media marketing?” Some people would ask us to, “You do email, I want you to do Facebook, Instagram, Twitter, and do these integrations.” It’s not that we would never build those but people were asking these when we didn’t even have very basic features. In the first year or two, there were folks who were asking for these. It’s just like, “Yeah, I know. There’s no chance we’re going to build that.”
The other one is like asking you to clone your competitors. Like, “It’d be great if you could add a shopping cart, and CRM, and lead scoring.” Basically be Infusionsoft. I was like, “Nope, that’s not our goal.” Or finally, features that are the opposite of your product strengths. I remember someone saying like, “I like that your UI is so streamlined but can you add all these options to fit my rare and unique used case?” They didn’t used those phrases but that’s the kind of stuff that could come across.
Crackpot may not be the best name for them but they’re really the ones that are obvious to you that you shouldn’t build them.
Mike: I think the really nice thing about the crackpot request is that they’re usually very easy to decide what to do about it. You can just say, “No, we don’t do that.” Or, “Here’s something you can sign up for over here and they do that but we don’t.” It’s just very easy to identify them and say—you have to be polite about it—but just say, “No, that’s not something we’re going to do.” Or, “It’s on our roadmap to look at but it’s going to be probably at least six months to a year. It’s not a good fit for you especially if you need it that right now.” That’s the one nice thing or the saving grace about these types of requests because they’re easy to dismiss.
Rob: Yeah, that makes sense. The three types are the crackpot, the no-brainers—which you should build—and the in-betweens. Unfortunately, the crackpot ones are maybe, I’m guessing like 10% of feature request. It’s really a small amount but you’re right, having that certainty is a good thing.
Then, the no-brainers which are the ones where it’s almost like, “Why didn’t I think of that?” If it’s not already on your feature list but you realized, “Man, that’s a really good idea!” I remember Josh Earl, he runs Sublime Text Tips. He also works with John Sonmez at Simple Programmer. He reached out to us in some of the early days of Drip and asked if there’s a way to go back and retroactively add a tag to readers based on things they clicked on the past. It was like, “That was a really good idea.” It wasn’t a huge amount of work at that time. To me, that was like a no-brainer one that both me and Derrick it was like, “Why wouldn’t just we build it?” and we did. I think we are the only tool that does it as far as I know. If you don’t have the kind of the trigger logic and our competitors at the time they click, you cannot go around retroactively tag people. I’ve used this feature all the time. It’s one of those things where if I were to have stop using Drip, I would sorely miss because I will frequently want to go back and do it.
The crackpots are good because they’re definite nos. The no-brainers are good because they’re definite yeses. It makes it a lot easier but I would guess that in total, probably less than a third of your feature request will fit into one category or the other.
Mike: Yeah, for Bluetick, I can’t recall something off the top my head where it has been just a completely crackpot feature request. Most of them have been pretty close to what should be built or what is in kind of on the roadmap but I don’t remember the last time I had something came up that was just out of my field and we’re never going to build.
Rob: Yeah, that makes sense. Then, the third type is the in-betweens. They’re the ones that you actually have to make judgments calls. That’s really what, I think, the bulk of today’s episode is about. It’s about deciding which features to build when customers request them. There’s this whole other path like you’re going to build features that no one requested. If you’re not, then you’re really not innovating. You’re not pushing your product past other competitors. I’m not saying you have to do this but I believe—Derrick and I always had a pretty strong vision for Drip and we were definitely building things that no one was requesting. But, if people are requesting features, I have three questions that we used to ask ourselves. I think that, as a listener to the show, it’ll be helpful.
The first question is ask yourself, what is the used case for this feature request? In layman’s terms, what problem are you trying to solve? I always try to take a step back and people would say, “Hey, can you add a checkbox on this page to modify the setting?” And I would sit, think, and say, “Why do you want to do that?” and almost, in probably 80% of the cases, they didn’t actually want a checkbox there. There was some other party app that wasn’t doing what they wanted and they could go on and use a liquid tab for it. Or, we could add a report that would actually help everyone and that would require them to not need that checkbox.
Often times, there was an alternative way to accomplish this already in Drip or the optimal way to achieve it for everyone to get value—like all the customers to get value—was different than what the person has suggested. Because remember, for the most part your customers are not software people. They don’t know UX, they don’t know apps, they don’t know how to think about what to build to keep a product simple. If you just listen to your customers, you can build a monstrosity.
Mike: One thing that I find very helpful is when you get a support request or a feature request like that, ask them what it is they’re trying to do. That way you’re not guessing what it is that they’re trying to do. Your example, the checkbox, you’re trying to read between the lines to see what it is that they want or what they’re trying to achieve. Sometimes, it’s just not even related to anything that you have or it’s very situational specific inside their business. I find it blatantly asking, what is it that you’re trying to achieve or what problem are you trying to solve—that is really helpful.
Rob: The second question that I used to bring up all the time when someone requested and we start evaluating is like, will more than 5% of our user-base use this feature? More than 10%? More than 20%? As a founder, you have a pretty good feel for your customer-base especially in the early days. It’s just asking yourself, will a lot of people get a value out of it?
The number is our return, maybe your market as well. If at least 15% of people use it then it’s good. Or maybe it’s such a marketable feature that even if only 5% of your users use it but it’s an aspirational or a checkbox feature something like split testing in email marketing apps. We found out that a lot of people requested it and when we built it into campaigns, almost no one uses it. It’s like 1% adoption. But, being able to say that we can split test in campaigns and have it on the marketing side and talk about it during sales calls, it is something that’s just important. Honestly, the Visual Email Builder—I think it’s in beta in Drip now, went live after I left—I bet a lot of people won’t use it. But it is a checkbox item that when, especially larger customers, want to sign up and they’re going to sign a one year contract, they want to make sure you have this, this, that, and this because your competitors have it. At that point, sometimes you have to make a choice of like, “Well, only a fifth of the customers are going to use this thing but it’s going to get us a lot more business.”
Mike: I think a lot of times you’ll see people going if they’re evaluating different products, they’ll compare them to each other and try to say, “Okay, what features does this have and which features does that have?” And something they may not even necessarily use, the fact that it exist and they could use it if they wanted to, is a good selling point. But I have mixed feelings on that just because sometimes people will use it just to make a decision versus wanting to use it.
This is kind of where my hatred of this process comes in but I will see people deciding to implement those features. The vendors will implement that feature and the feature itself just completely sucks but the only reason they built it was so that they can create like that checkbox on their website to say, “Hey, we have this feature.”
Rob: That used to kill me, actually. We had a few competitors build really crappy versions of split testing that were actually harmful. They were not statistically significant. I was face palming because it’s like what they say, they can say they a have split testing but it was a [shit 00:14:27] implementation of it. It’s actually going to be a detrimental to their customers. I could never bring myself to do that in a product like to build something crappy. As a result, stuff for us probably took longer to build than some competitors.
There’s one other trick we used a few times as well and it was in the early days only. It was a larger customer who’s revenue would move the needle. We did build a couple of features that we basically hid in the UI except for a handful of people. Literally, like less than 1% of Drip customers would be able to see this feature and it was a feature that really we didn’t want to build. We didn’t believed it should be in a product but the revenue at that time was just something we couldn’t pass up. We didn’t do it a lot but one of the bigger reasons we didn’t want the feature in it is because it would add more checkboxes and dropdowns—just negatively impact the UX, in essence. Most people weren’t going to use it anyways and so that was a choice to just kind of—we had a feature flag and we don’t want to go into a few accounts. There’s still are a few features in Drip to this day that really only appear for a small subset of customers.
Mike: I think I have access to a couple of these features.
Rob: I bet you do.
Mike: That’s interesting. I did the same thing with Bluetick where there are certain features that you can’t even use inside the app but I have like a backend toolbox application. It allows me to either toggle them on or off or do different things inside of somebody’s account where it achieves what they want but is not something that they could actually do inside the app.
Sometimes, I’ll use that to either test it out in kind of production. For example, one of them was a Bcc field where people like, “When I send emails out, I want to Bcc this other email address.” For a long time that was, you could do it inside the app but there is no way in the UI for the user to see, that it was actually happening. They had to contact me through support and I would actually put it into a field in the database that would make it work. Now, it’s actually ruled out and everybody can use it. I use this kind of mechanism for sort of testing it out with live data to some extent.
Rob: Yeah, that’s really good way to do it. We did that. With any feature roll out that we thought was a risk at all, we would totally feature it temporarily and then slowly enable it for more and more people. Then, in this case, where I’m talking about actually building a feature and never rolling it out to everyone, that was something again, we did that in the early days when we needed to when we’re being scrappy.
I meant to say this at the beginning of the episode but this is actually, this outline is from an unpublished blog post of mine. If I ever get around to finishing that blog post, you may see this on my blog as well. I have additional examples. I can obviously go into more, more things in a 2000-word blog post than we can cover in 25 minutes here. I’ve also considered doing a talk about this. Derrick Reimer, my Drip co-founder did an attendee talk a couple of years ago in Drip on this topic. We have similar takes because we worked together on it. But I feel like we can definitely, potentially be a full 30 or 40-minute talk.
With that in mind, the third question that we used to ask ourselves a lot when we get feature request is, “Does this fit with my vision of what the product should be?” Going back to an earlier example, since Drip was a competitor especially in the early days, it was compared a lot to Infusionsoft. We would get a lot of request to add shopping cart and landing pages and affiliate management—really, things that we didn’t want to build on the product because we didn’t view Drip as, we want to integrate with best in class solutions rather than try to be everything to everyone. We felt like the bloated software just wasn’t, we couldn’t see an example of it in a space where adding all these features has helped anyone. It always makes it a crappy experience.
The fact is when you’re bootstrapping, there’s an opportunity cost. Every hour you spend building features, that’s an hour that you don’t spend becoming the best at what you’re doing. That was where we decided to focus on integration. What’s nice is the integrations were platforms that people were already using like Unbounce, and Shopify, and Stripe, and Gumroad, Leadpages, and PayPal and on and on. We had 35 integrations within probably the first year of being live. It was a nice lift for us in terms of actually getting new customers because all those integrations are—they’re promotional avenues if you can get folks to promote you. But they just make the product more sticky.
This whole ties in the question coming back to it is, “Does this fit my vision of what the product should be?” We always had a pretty strong vision. We want to be a best in class email marketing or marketing automation tool. Therefore, a lot of the request that came through is like, “Huh, yeah, that doesn’t fit with where we want to take the product. We’re just going to have to say no.”
Mike: The part about this, knowing what vision you have for the product is one of those things where it’s a little bit more abstract. You kind of have to step back from the product itself, away from the features and away from the dirty details of how things are implemented and say, “What is the type of person that you want to use this? What is it that you want to empower them to be able to achieve?” Because otherwise, you may have this vision for your product but people come in with feature request and I say, “Oh, this is why I want to do x.”
If it’s one of those in-between things, it could change or alter that vision a little bit and shift it in one direction or another. Sometimes those shifts in direction will isolate or exclude certain types of people as well. It’s something to be a little careful of because your vision can change over time based on the feedback and the feature request you’re getting in. You can easily end up going down the road where you’re tracking the wrong types of people—you’re tracking more of them—but it’s the wrong type of people. They’re having a bad experience because they’re not using your tool correctly or in the way you envisioned and you’re not catering to them anyways. It’s a very slippery slope you can end up on if you’re not very careful about how you’re making those decisions.
Rob: Yeah, that’s a good point. Your vision will likely change over time. In the early days of Drip, my vision was completely different than what Drip became. That was okay but you can hear it was a painful process to make that decision and kind of switch the vision. You can hear it and if you go to startupstoriespodcast.com, there is a 90-minute audio Derrick and I recorder over, I think about nine months. I edited 10 hours of audio down to 90 minutes and you can hear the agonies we’re going through of like, “What should we be building? What actually are we building?” early on. It was one thing then it became essentially an ESP with automation. Decision process is what makes startups hard. We were just trying to find product market fit and therefore our vision had to follow something that was valuable to people.
In the early days, it wasn’t valuable enough. People were willing to pay us but they were not willing to pay us the $49 a month that I want to beat the minimum price point. We had to follow that. Then, once you get past that though, once you start scaling up and growing and you have product market fit, I think it becomes so, so much easier to know what you have, what you’re building, what you should build. It really does get easier. It’s that first year or 18 months that’s really hard to figure out when you don’t have a large customer base and you don’t just have that gut feeling of what you should build based on all your experience.
Mike: Yeah, I totally agree with that. If you’re in a position where you don’t have, I’ll say, a critical mass of users yet, then take a lot of this advice with a grain of salt. Definitely take the feature request with the grain of salt because the decisions that you make now are going to change things in the future and draw or repel certain types of users. That will influence, ultimately, how the product is received in the market and what other features you end up developing.
Rob: I think the thing to remember is you’re always going to get way, way more feature request than you can possibly build. Even when you have 10 users, people are going to be requesting things. As a bootstrapper, time is your most valuable resource. You’re just never going to be able to build anything you want. If you could build everything you want, I don’t know. I questioned if the product would get bloated too fast. It might actually be a benefit that you are time-constrained because I think in the early days, you’re going to want to build anything everyone requests. If you’re able to do that, I think you can potentially build a really crappy, bloated, product.
Mike: Yeah. Definitely the danger in building this many feature is you like is the fact that it makes the interface much more difficult to work with. You have to do a lot more design work with where different things are in the app. A lot of times, as you add features, you have to restructure or re-architect either the different parts of the application itself or the UX which forces underlying changes as well. You’re basically bolting things on after the fact. I think that’s why a lot of people, specially newer developers, tend to say, “Oh, I’d like to rewrite this app from scratch because now we know what we want to build based on the features that we have.” But it’s really tough to do that unless you’re in a situation where you can completely rebuild the app.
I think that David, DHH from Basecamp has talked about this a couple of times where they’ve rebuilt Basecamp from the ground up. As much as I disagree with that decision, I would disagree with it for me and in our situation that kind of makes sense because they can essentially abandon the previous version and say, “Everyone who’s using this, you’re still going to get to use it but anyone new is going to sign up and they’re going to use this newer version and they get to work on new stuff.” But not everyone is in the position where you can basically halt all development on your current app and still be making millions of dollars a year from your current customer bases.
Rob: Yeah. That’s rewriting app—that would be a whole nother episode. I think Basecamp is such an anomaly and such an edge case that very, very few companies will achieve using them as an example is tough just for that reason, because they got in so early and grew so fast. But you’re right. Rewriting an app. I’ve seen several startups do that and I always cringe pretty hard when they talk about doing that because it’s not going to solve all your problems the way you think it will. It’s going to keep you just frozen for six months while you try to rebuild everything.
Mike: Yeah. I think the fallacy there is that you understand how the different pieces fit together so you can reengineer all the stuff to solve your current problems but even after you’ve done that, let’s say, that you can do that in a hour and everything’s completely restructured. Yes, it only cost you an hour but you’re still going to end up getting more feature request that you’re still going to have to bolt on to the application afterwards. At that point, you’re retroactively architecting new features into the architecture and how the UI and UX is all laid out. It just will not solve every single problem that you have. There’s certain problems you’re just going to have to live with.
I think that about wraps it up for today. If you have a question for us, you can call in into our voice mail number at 1-888-801-9690 or you can email it to us at questions@startupsfortherestofus.com.
Our theme music is an excerpt from We’re Outta Control, it’s by MoOt used under Creative Commons. Subscribe to us in iTunes by searching for Startups For the Rest of Us and startupsfortherestofus.com for the full transcript in each episode. Thanks for listening. We’ll see you next time.
Welcome to Startups For the Rest of Us. The podcast that helps developers, designers, and entrepreneurs be awesome in building, launching, and growing software products whether you built your product or just thinking about it. I’m Rob.
Mike: And I’m Mike.
Rob: We’re here to share our experiences to help people with the same mistakes we made. To where this week sir?
Mike: Well, I submitted the Bluetick Zapier integration to Zapier, to see about promoting it through their public availability process. I’ve already heard back from them. I’ve got a list of things they want to see changed to conform to the standards that they kind of set for everybody to maintain consistency between Zap. I got to go back, and look at those, and make some changes and then publish it but things did not seem to be too terrible.
Rob: Nice, that’s super cool man. Once that goes live, it’s nice to be able to refer customers to Zapier when they’re trying to be something in your app that you haven’t built yet—when you don’t have an integration. That was always the useful piece for us.
Mike: Yeah. Well, the thing is like the Zapier integration is already there, it’s just invite only and there’s a link inside the app where they can click on that link and go over there. The difference is it will be public so that when people are searching inside Zapier to see where there is a Bluetick Zap, they’ll be able to see it but I’ll have them to login in Bluetick first. At that point, they can add it into their account but I guess you can’t ready do anything without an API key anyways.
Rob: I remembered when Zapier promoted HitTail early on we got a bump and then Drip, I remember it was—I think it was more or less, but it definitely in the early days when you’re really scraping and clawing for every customer. I think that you get included in the email newsletter, tweeted out, I think, and every bit helps at that point. Even if you only get a couple new customers from someone hearing about it, it can move the needle for you in the early days.
Mike: Yes. I’m hoping to see that at least through the initial process in the next couple of weeks or so. I don’t know how long it has to be in their beta for before it ends up being live. I think that they said that—when I was looking through the specs—they said, “You should have at least one person using each Zap and you need to have at least 20 active Zaps,” or something like that. They’ve revised their stats page to see if you can actually see more about who’s using it, how many people are using the different Zaps that you’ve published or made available. I’m up to like 400 active or something like that, and only need 20.
Rob: Oh, yeah. That’s a lot more than we went live with it. That’s cool. segment.com will be another one. You’ll probably want to do it at some point—integrate with them. That’s another big hub to get not only the promotion but it’s just nice because people are going to want to create reports or do things with the data that you’re just not going to have the time to build and referring about to Segment, it can help there.
Mike: Yeah. Ultimately, I’ll look into that one as well. The other thing I’m in the middle of right now is kind of specking out with the public APIs going to look like. Everything in there is all used internally inside the app and then I have a specific endpoint that’s used solely for Zapier and then next step is to really kind of take that and say, “Okay, when are we going to make it public?” because there’s a couple of customers who have wanted to use a public API but I told them to kind of hold off and just use Zapier. I had a call this morning with somebody about what the specifics things they needed from a public API from us are. There’s at least one other customer that I want to talk to who I know they do a lot of extensive development work and are using Bluetick as the backend CRM for their entire company. They got several mailboxes attached and they want to be able to use that functionality inside there. I definitely want to have a conversation with them first before I start making anything publicly available.
Rob: That makes sense. For me, I am in California when this episode airs. We’re heading there for about two weeks. We’re going to see different groups of family in different areas and my sons are going to a cello and violin camp—Suzuki String Camp in San Francisco. It should be fun. It’s where I’m from. It’s nice to get back there once or twice a year to kind of see the family and all that.
Mike: Cool. Hopefully you won’t be selling the company while you’re out there.
Rob: I know. That’s the old story right? That I was signing the final docs at the cello camp a couple years ago.
Mike: Getting dirty looks.
Rob: Indeed. Dirty looks from the instructor.
I titled this episode Why You Shouldn’t Listen to Your Customers and What You Should Do Instead. Realistically, it’s about deciding which feature request to build and which not to—not even feature request, just deciding what to build in general. There’s always the popular meme of like launch soon and then your customers will tell you what to build.
I’ve seen struggles with that. Number one, often times your customers don’t know really what they’re trying to do or they’ll tell you to build things that you shouldn’t build but you should do it a different way. Or they’re just going to tell you to build your competitor. They’re going to say, “Hey, I’ve used Infusionsoft and it has these features and you don’t have them. Can you just build this, this, that, and this?” We have these all the time in the early days.
Remember, early Drip user wanted a mobile app. He wanted kind of like an iOS and an android app. He wanted these very specific reports that made sense in Mailchimp but wouldn’t have made sense for Drip to have. He’s not a software person, his idea was just to have this be Mailchimp but with a cleaner interface and that wasn’t what we wanted to build.
It’s really easy when you’re getting multiple feature request per day. I left Drip a couple of months ago, I think we get 150-200 feature requests per month. It’s a substantial line and at a certain point you have to figure out how you’re going to evaluate what to build and what not to build.
I see these like there’s three types of feature request. The first type is—I humorously named this, the crackpots—but it’s kind of odd ball request that you know that there’s no chance you’re going to build, that kind of come out of left field. Some examples of those are, people requiring you or asking you for feature that would require you to build an entirely new product. For example, “Why can’t I use your email service provider to publish blog posts on my WordPress site, or to record my podcast and publish them, or to do all of my social media marketing?” Some people would ask us to, “You do email, I want you to do Facebook, Instagram, Twitter, and do these integrations.” It’s not that we would never build those but people were asking these when we didn’t even have very basic features. In the first year or two, there were folks who were asking for these. It’s just like, “Yeah, I know. There’s no chance we’re going to build that.”
The other one is like asking you to clone your competitors. Like, “It’d be great if you could add a shopping cart, and CRM, and lead scoring.” Basically be Infusionsoft. I was like, “Nope, that’s not our goal.” Or finally, features that are the opposite of your product strengths. I remember someone saying like, “I like that your UI is so streamlined but can you add all these options to fit my rare and unique used case?” They didn’t used those phrases but that’s the kind of stuff that could come across.
Crackpot may not be the best name for them but they’re really the ones that are obvious to you that you shouldn’t build them.
Mike: I think the really nice thing about the crackpot request is that they’re usually very easy to decide what to do about it. You can just say, “No, we don’t do that.” Or, “Here’s something you can sign up for over here and they do that but we don’t.” It’s just very easy to identify them and say—you have to be polite about it—but just say, “No, that’s not something we’re going to do.” Or, “It’s on our roadmap to look at but it’s going to be probably at least six months to a year. It’s not a good fit for you especially if you need it that right now.” That’s the one nice thing or the saving grace about these types of requests because they’re easy to dismiss.
Rob: Yeah, that makes sense. The three types are the crackpot, the no-brainers—which you should build—and the in-betweens. Unfortunately, the crackpot ones are maybe, I’m guessing like 10% of feature request. It’s really a small amount but you’re right, having that certainty is a good thing.
Then, the no-brainers which are the ones where it’s almost like, “Why didn’t I think of that?” If it’s not already on your feature list but you realized, “Man, that’s a really good idea!” I remember Josh Earl, he runs Sublime Text Tips. He also works with John Sonmez at Simple Programmer. He reached out to us in some of the early days of Drip and asked if there’s a way to go back and retroactively add a tag to readers based on things they clicked on the past. It was like, “That was a really good idea.” It wasn’t a huge amount of work at that time. To me, that was like a no-brainer one that both me and Derrick it was like, “Why wouldn’t just we build it?” and we did. I think we are the only tool that does it as far as I know. If you don’t have the kind of the trigger logic and our competitors at the time they click, you cannot go around retroactively tag people. I’ve used this feature all the time. It’s one of those things where if I were to have stop using Drip, I would sorely miss because I will frequently want to go back and do it.
The crackpots are good because they’re definite nos. The no-brainers are good because they’re definite yeses. It makes it a lot easier but I would guess that in total, probably less than a third of your feature request will fit into one category or the other.
Mike: Yeah, for Bluetick, I can’t recall something off the top my head where it has been just a completely crackpot feature request. Most of them have been pretty close to what should be built or what is in kind of on the roadmap but I don’t remember the last time I had something came up that was just out of my field and we’re never going to build.
Rob: Yeah, that makes sense. Then, the third type is the in-betweens. They’re the ones that you actually have to make judgments calls. That’s really what, I think, the bulk of today’s episode is about. It’s about deciding which features to build when customers request them. There’s this whole other path like you’re going to build features that no one requested. If you’re not, then you’re really not innovating. You’re not pushing your product past other competitors. I’m not saying you have to do this but I believe—Derrick and I always had a pretty strong vision for Drip and we were definitely building things that no one was requesting. But, if people are requesting features, I have three questions that we used to ask ourselves. I think that, as a listener to the show, it’ll be helpful.
The first question is ask yourself, what is the used case for this feature request? In layman’s terms, what problem are you trying to solve? I always try to take a step back and people would say, “Hey, can you add a checkbox on this page to modify the setting?” And I would sit, think, and say, “Why do you want to do that?” and almost, in probably 80% of the cases, they didn’t actually want a checkbox there. There was some other party app that wasn’t doing what they wanted and they could go on and use a liquid tab for it. Or, we could add a report that would actually help everyone and that would require them to not need that checkbox.
Often times, there was an alternative way to accomplish this already in Drip or the optimal way to achieve it for everyone to get value—like all the customers to get value—was different than what the person has suggested. Because remember, for the most part your customers are not software people. They don’t know UX, they don’t know apps, they don’t know how to think about what to build to keep a product simple. If you just listen to your customers, you can build a monstrosity.
Mike: One thing that I find very helpful is when you get a support request or a feature request like that, ask them what it is they’re trying to do. That way you’re not guessing what it is that they’re trying to do. Your example, the checkbox, you’re trying to read between the lines to see what it is that they want or what they’re trying to achieve. Sometimes, it’s just not even related to anything that you have or it’s very situational specific inside their business. I find it blatantly asking, what is it that you’re trying to achieve or what problem are you trying to solve—that is really helpful.
Rob: The second question that I used to bring up all the time when someone requested and we start evaluating is like, will more than 5% of our user-base use this feature? More than 10%? More than 20%? As a founder, you have a pretty good feel for your customer-base especially in the early days. It’s just asking yourself, will a lot of people get a value out of it?
The number is our return, maybe your market as well. If at least 15% of people use it then it’s good. Or maybe it’s such a marketable feature that even if only 5% of your users use it but it’s an aspirational or a checkbox feature something like split testing in email marketing apps. We found out that a lot of people requested it and when we built it into campaigns, almost no one uses it. It’s like 1% adoption. But, being able to say that we can split test in campaigns and have it on the marketing side and talk about it during sales calls, it is something that’s just important. Honestly, the Visual Email Builder—I think it’s in beta in Drip now, went live after I left—I bet a lot of people won’t use it. But it is a checkbox item that when, especially larger customers, want to sign up and they’re going to sign a one year contract, they want to make sure you have this, this, that, and this because your competitors have it. At that point, sometimes you have to make a choice of like, “Well, only a fifth of the customers are going to use this thing but it’s going to get us a lot more business.”
Mike: I think a lot of times you’ll see people going if they’re evaluating different products, they’ll compare them to each other and try to say, “Okay, what features does this have and which features does that have?” And something they may not even necessarily use, the fact that it exist and they could use it if they wanted to, is a good selling point. But I have mixed feelings on that just because sometimes people will use it just to make a decision versus wanting to use it.
This is kind of where my hatred of this process comes in but I will see people deciding to implement those features. The vendors will implement that feature and the feature itself just completely sucks but the only reason they built it was so that they can create like that checkbox on their website to say, “Hey, we have this feature.”
Rob: That used to kill me, actually. We had a few competitors build really crappy versions of split testing that were actually harmful. They were not statistically significant. I was face palming because it’s like what they say, they can say they a have split testing but it was a [shit 00:14:27] implementation of it. It’s actually going to be a detrimental to their customers. I could never bring myself to do that in a product like to build something crappy. As a result, stuff for us probably took longer to build than some competitors.
There’s one other trick we used a few times as well and it was in the early days only. It was a larger customer who’s revenue would move the needle. We did build a couple of features that we basically hid in the UI except for a handful of people. Literally, like less than 1% of Drip customers would be able to see this feature and it was a feature that really we didn’t want to build. We didn’t believed it should be in a product but the revenue at that time was just something we couldn’t pass up. We didn’t do it a lot but one of the bigger reasons we didn’t want the feature in it is because it would add more checkboxes and dropdowns—just negatively impact the UX, in essence. Most people weren’t going to use it anyways and so that was a choice to just kind of—we had a feature flag and we don’t want to go into a few accounts. There’s still are a few features in Drip to this day that really only appear for a small subset of customers.
Mike: I think I have access to a couple of these features.
Rob: I bet you do.
Mike: That’s interesting. I did the same thing with Bluetick where there are certain features that you can’t even use inside the app but I have like a backend toolbox application. It allows me to either toggle them on or off or do different things inside of somebody’s account where it achieves what they want but is not something that they could actually do inside the app.
Sometimes, I’ll use that to either test it out in kind of production. For example, one of them was a Bcc field where people like, “When I send emails out, I want to Bcc this other email address.” For a long time that was, you could do it inside the app but there is no way in the UI for the user to see, that it was actually happening. They had to contact me through support and I would actually put it into a field in the database that would make it work. Now, it’s actually ruled out and everybody can use it. I use this kind of mechanism for sort of testing it out with live data to some extent.
Rob: Yeah, that’s really good way to do it. We did that. With any feature roll out that we thought was a risk at all, we would totally feature it temporarily and then slowly enable it for more and more people. Then, in this case, where I’m talking about actually building a feature and never rolling it out to everyone, that was something again, we did that in the early days when we needed to when we’re being scrappy.
I meant to say this at the beginning of the episode but this is actually, this outline is from an unpublished blog post of mine. If I ever get around to finishing that blog post, you may see this on my blog as well. I have additional examples. I can obviously go into more, more things in a 2000-word blog post than we can cover in 25 minutes here. I’ve also considered doing a talk about this. Derrick Reimer, my Drip co-founder did an attendee talk a couple of years ago in Drip on this topic. We have similar takes because we worked together on it. But I feel like we can definitely, potentially be a full 30 or 40-minute talk.
With that in mind, the third question that we used to ask ourselves a lot when we get feature request is, “Does this fit with my vision of what the product should be?” Going back to an earlier example, since Drip was a competitor especially in the early days, it was compared a lot to Infusionsoft. We would get a lot of request to add shopping cart and landing pages and affiliate management—really, things that we didn’t want to build on the product because we didn’t view Drip as, we want to integrate with best in class solutions rather than try to be everything to everyone. We felt like the bloated software just wasn’t, we couldn’t see an example of it in a space where adding all these features has helped anyone. It always makes it a crappy experience.
The fact is when you’re bootstrapping, there’s an opportunity cost. Every hour you spend building features, that’s an hour that you don’t spend becoming the best at what you’re doing. That was where we decided to focus on integration. What’s nice is the integrations were platforms that people were already using like Unbounce, and Shopify, and Stripe, and Gumroad, Leadpages, and PayPal and on and on. We had 35 integrations within probably the first year of being live. It was a nice lift for us in terms of actually getting new customers because all those integrations are—they’re promotional avenues if you can get folks to promote you. But they just make the product more sticky.
This whole ties in the question coming back to it is, “Does this fit my vision of what the product should be?” We always had a pretty strong vision. We want to be a best in class email marketing or marketing automation tool. Therefore, a lot of the request that came through is like, “Huh, yeah, that doesn’t fit with where we want to take the product. We’re just going to have to say no.”
Mike: The part about this, knowing what vision you have for the product is one of those things where it’s a little bit more abstract. You kind of have to step back from the product itself, away from the features and away from the dirty details of how things are implemented and say, “What is the type of person that you want to use this? What is it that you want to empower them to be able to achieve?” Because otherwise, you may have this vision for your product but people come in with feature request and I say, “Oh, this is why I want to do x.”
If it’s one of those in-between things, it could change or alter that vision a little bit and shift it in one direction or another. Sometimes those shifts in direction will isolate or exclude certain types of people as well. It’s something to be a little careful of because your vision can change over time based on the feedback and the feature request you’re getting in. You can easily end up going down the road where you’re tracking the wrong types of people—you’re tracking more of them—but it’s the wrong type of people. They’re having a bad experience because they’re not using your tool correctly or in the way you envisioned and you’re not catering to them anyways. It’s a very slippery slope you can end up on if you’re not very careful about how you’re making those decisions.
Rob: Yeah, that’s a good point. Your vision will likely change over time. In the early days of Drip, my vision was completely different than what Drip became. That was okay but you can hear it was a painful process to make that decision and kind of switch the vision. You can hear it and if you go to startupstoriespodcast.com, there is a 90-minute audio Derrick and I recorder over, I think about nine months. I edited 10 hours of audio down to 90 minutes and you can hear the agonies we’re going through of like, “What should we be building? What actually are we building?” early on. It was one thing then it became essentially an ESP with automation. Decision process is what makes startups hard. We were just trying to find product market fit and therefore our vision had to follow something that was valuable to people.
In the early days, it wasn’t valuable enough. People were willing to pay us but they were not willing to pay us the $49 a month that I want to beat the minimum price point. We had to follow that. Then, once you get past that though, once you start scaling up and growing and you have product market fit, I think it becomes so, so much easier to know what you have, what you’re building, what you should build. It really does get easier. It’s that first year or 18 months that’s really hard to figure out when you don’t have a large customer base and you don’t just have that gut feeling of what you should build based on all your experience.
Mike: Yeah, I totally agree with that. If you’re in a position where you don’t have, I’ll say, a critical mass of users yet, then take a lot of this advice with a grain of salt. Definitely take the feature request with the grain of salt because the decisions that you make now are going to change things in the future and draw or repel certain types of users. That will influence, ultimately, how the product is received in the market and what other features you end up developing.
Rob: I think the thing to remember is you’re always going to get way, way more feature request than you can possibly build. Even when you have 10 users, people are going to be requesting things. As a bootstrapper, time is your most valuable resource. You’re just never going to be able to build anything you want. If you could build everything you want, I don’t know. I questioned if the product would get bloated too fast. It might actually be a benefit that you are time-constrained because I think in the early days, you’re going to want to build anything everyone requests. If you’re able to do that, I think you can potentially build a really crappy, bloated, product.
Mike: Yeah. Definitely the danger in building this many feature is you like is the fact that it makes the interface much more difficult to work with. You have to do a lot more design work with where different things are in the app. A lot of times, as you add features, you have to restructure or re-architect either the different parts of the application itself or the UX which forces underlying changes as well. You’re basically bolting things on after the fact. I think that’s why a lot of people, specially newer developers, tend to say, “Oh, I’d like to rewrite this app from scratch because now we know what we want to build based on the features that we have.” But it’s really tough to do that unless you’re in a situation where you can completely rebuild the app.
I think that David, DHH from Basecamp has talked about this a couple of times where they’ve rebuilt Basecamp from the ground up. As much as I disagree with that decision, I would disagree with it for me and in our situation that kind of makes sense because they can essentially abandon the previous version and say, “Everyone who’s using this, you’re still going to get to use it but anyone new is going to sign up and they’re going to use this newer version and they get to work on new stuff.” But not everyone is in the position where you can basically halt all development on your current app and still be making millions of dollars a year from your current customer bases.
Rob: Yeah. That’s rewriting app—that would be a whole nother episode. I think Basecamp is such an anomaly and such an edge case that very, very few companies will achieve using them as an example is tough just for that reason, because they got in so early and grew so fast. But you’re right. Rewriting an app. I’ve seen several startups do that and I always cringe pretty hard when they talk about doing that because it’s not going to solve all your problems the way you think it will. It’s going to keep you just frozen for six months while you try to rebuild everything.
Mike: Yeah. I think the fallacy there is that you understand how the different pieces fit together so you can reengineer all the stuff to solve your current problems but even after you’ve done that, let’s say, that you can do that in a hour and everything’s completely restructured. Yes, it only cost you an hour but you’re still going to end up getting more feature request that you’re still going to have to bolt on to the application afterwards. At that point, you’re retroactively architecting new features into the architecture and how the UI and UX is all laid out. It just will not solve every single problem that you have. There’s certain problems you’re just going to have to live with.
I think that about wraps it up for today. If you have a question for us, you can call in into our voice mail number at 1-888-801-9690 or you can email it to us at questions@startupsfortherestofus.com.
Our theme music is an excerpt from We’re Outta Control, it’s by MoOt used under Creative Commons. Subscribe to us in iTunes by searching for Startups For the Rest of Us and startupsfortherestofus.com for the full transcript in each episode. Thanks for listening. We’ll see you next time.
Episode 400 | The Importance of Consistency
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Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about the importance of consistency. They reminisce about how the podcast has evolved over the years and the benefits of putting an episode out week after week.
Items mentioned in this episode:
- FounderCafe
- BoardGame Tables
- MicroConf
- Inc.com Article
- Uexpress.com Article
- differenceconsulting.com Article
Rob: In this episode of Startups for the Rest of us, Mike and I do, like we do every week, completely make it up as we go along in this Episode 400 so it’s quite a milestone. Today, we’re going to be talking about the importance of consistency. This is Startups for the Rest of Us, Episode 400.
Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at building, launching, and in growing software products, whether you’ve built your first product; you’re just thinking about it.
Rob: I’m Rob.
Mike: And I’m Mike.
Rob: And we’re here to share our experience to help you avoid the same mistakes we made. 400 Episodes, Sir. Congratulations.
Mike: Thank you. I did it all by myself.
Rob: I know you did. How does it feel?
Mike: I don’t know. I feel very run down today but I don’t think that it has anything to do with Episode 400. I think it has to do with the fact that yesterday was the Fourth of July here so we had a bunch of people over and my kids are away for the week. They’re at Sleepaway Camp. We had a bunch of people over and we’re just like grilling and swimming in the pool, which was 92 degrees or something like that, and we haven’t even kept it covered for several days; it’s just hot as heck.
Rob: Yeah, and you stood out, man. You were hanging out. You drank too much so then you’re hung over and tired today.
Mike: I’m just tired. I’m not hung over. That’s the funny part. I don’t know if it’s funny, but I’m not hung over; I’m just tired. I didn’t sleep very well, I don’t think.
Rob: Yeah, and I feel a little bit the same way you do. We had friends over as well. I’m also kind of tired from the heat and just from whatever else. I think the 400 Episode thing makes me feel, if anything, old. It’s like we’ve been doing this for eight years, I believe. Is that right? Wasn’t it 2010?
Mike: Yes, 2010.
Rob: It was somewhere between February and April of 2010. I could look at the archived pages post, but it’s a long time to do this. We’ve had millions and millions of downloads. I was just looking at the statistics, millions of downloads, tens of thousands of listeners per episode. We’ve built something. We’ve built something pretty special, I think, that resonates with people. We’ll talk more about our favorite episodes and we’d have some listeners who wrote in, and I thought that was really nice. I think it’s a testament that we basically were able to show MicroConf out of the podcast. I don’t know that we could have grown it to what it is without this show. It’s like the entire conference. These days, MicroConf is its own name but, back in the day, we really sold tickets. It was kind of like my email list, your email list and people listening to Startups for the Rest of Us.
Mike: Yeah, and I think that just having that podcast episode that dropped every single Tuesday almost without fail makes people feel that they’re part of something. Then, when you come to MicroConf, you’re meeting the same types of people who were listening to the podcast. As you said, things have grown and people who come to MicroConf don’t necessarily always listen to the podcast. It’s taken a life of its own but, in the early days like that, that was really what drove that audience, I’ll say.
Rob: Yeah, for sure. How about you? What else is going on this week?
Mike: I have a meet-up that I put together this evening. I’m meeting a bunch of people who are either FounderCafe members or attended MicroConf or both this evening over in Worcester. That should be fun. We’re going to head over to British Beer Works or something like that and meet up around six o’clock and just have a couple of drinks, have dinner and just talk business.
Rob: That’s super cool. Did you just initiate that out of nowhere?
Mike: It wasn’t completely out of nowhere. When we set up the slack group for MicroConf, there were a bunch of people in there who were like, “Hey, who’s in the Greater Boston area?” and a few different people chimed in. I think that there was even a private channel that was created for people who are in the Greater Boston area, and then a couple of people mentioned to get in together. What I did was I just went through and looked to see who had come to MicroConf who was in the Boston area and I just emailed them. I have a running list of people that I know who live in the area and I just went through them, emailed them all and said, “Hey, here’s the time, date and place. Who wants to get together?” About half a dozen people or so chimed in and said, “Yeah, absolutely. Let’s go.”
Rob: That’s super cool. That’ll be a nice-sized group, too. I like that size.
Mike: Yeah. We’ll see how it goes.
Rob: Cool. Once you’ve done it, I’m interested to hear how it was on the show.
Mike: Yeah. That’s something we’ve actually talked a little bit about in the past in the background between you and me, just figuring out if that’s something that we wanted to facilitate in different places. I don’t know if there’s a good technical way to manage that, to be honest.
Rob: Yeah, the TropiColombia guys due their juntos, but they do have local meet-ups. It’s definitely possible but it’s always been the question of, “Do we have the bandwidth?” or, “If we don’t do it and we hire someone to do it, how do we make it pay for itself?” basically, right?
Mike: Right.
Rob: We’ve talked about not wanting to run an events business, like we don’t want to be in the events business and yet we throw three events a year already with the three MicroConfs. I think if we did the juntos or something like that, local meet-ups, basically, it would definitely span out itself. I think if we had the aspiration, we could totally pull it off. It’s just not you nor I have ever really wanted to gear up and not work on our software products in order to do that.
Mike: Yeah, I think that’s the biggest issue, is just having the bandwidth to be able to do it and, as you said, without charging for it and hiring somebody to help manage and facilitate all that. It’d be really hard for us to pull it off.
Rob: Yeah. Last weekend, I went to a three-day mastermind retreat, is what I’ call it, and it was the Rhodium Community. You know Rhodium Weekend? Have you heard of it? Chris Yates runs Rhodium, and I have a lot of respect much like I often tell people that MicroConf is the younger sibling of BoS. It’s less expensive, it’s more focused in slightly earlier-stage companies, very few have funding and BoS is a different story. It’s still very much about building real software companies and not with venture-back stuff even though some of them do take venture funding, but I have a lot of respect for BoS.
I also have a lot of respect for Rhodium Weekend. It’s a 100-person event held in Vegas every year. It’s run by Chris Yates, and it is more about buying and selling websites. There’s a lot of talk about internet marketing, but what I found is, like MicroConf, it’s very ethical. Since Chris has built the audience, he’s been very picky about who he lets in and so it’s not the sleazy internet marketing. You can go to a lot of really shitty internet marketing conferences. People are pitching from the stage and that’s not what Rhodium is.
Every year, there’s a Rhodium conference and then he has this mastermind that he runs that Sherrie [ph], my wife is a part of, and it’s a monthly call with about 14 people, and they do hot-seat format. They do all kinds of stuff. Once a year, that small group of 14, goes to a house and stays there for three days and they do a hot-seat format. Sherrie [ph] was unable to make it and there was a seed open so they invited me because I know Chris and I actually knew a few people in the group as well.
For me, I had to really think about whether or not I wanted to do it because of that format. I know you’ve done this with Big Snow Tiny Conf. I’ve never done that. I’ve done really small things with four or five people and then I obviously do MicroConf, but that in-between felt very uncomfortable for me going into it, especially knowing only three people there in advance. I really debated whether to go or not and, in retrospect, it was awesome, like it was really, really good as I kind of knew in the back of mind it would be.
I felt a little introverted and everybody else knows each other really well because they’re on these calls and they hang out, but it was a big deal. It was game-changing for me in terms of my thought process of, “I think I want to do that again.” It makes me really want to do one of the Big Snow Tiny Confsnow that I have more scheduling flexibility. I don’t ski but I’ll drink hot chocolate and read comic books or something while you guys ski or snowboard. I think I want to do it.
The cool thing about it is it really opened my eyes to the value that you can get from a group of that size, and that was my doubt. There were certainly some struggles with it, too. With 15 people, I think in my opinion, it’s just a little bit too big. I would love for it to be 8 to 10, and that would be a perfect size. With all of that said, I can imagine that it might be even more valuable to have everyone having the same type of business or at least similar because they were all over the board.
There were people who literally just build and buy content websites that they monetize with affiliate links and AdSense. There were e-commerce. There were e-commerce drop shippers. There were people who manufactured their own products. There were two or three SaaS. There were some people who just do a lot of SEO and they just build sites and sell them. There’s a real wide variation of who’s done what, and I think that was super helpful but I also imagined, if everyone was SaaS, that there could potentially be more value to it.
Mike: Yeah, and it goes both ways, though, because if you have people who are doing things in different types of businesses, then you get a different perspective than you would if everybody is doing the same type of thing. If everyone was doing SaaS, you don’t get the perspective of, “We’re e-commerce and this is how we do affiliates.” They may view them very differently and you can get really good, solid takeaways from those that you can put together and put forth on your business that are going to work for you. You would not get that if everyone is always talking to the same types of people, I’ll say.
Rob: Yeah, I totally agree. It’s a good point and that absolutely was true. I was surprised how much I had to offer someone doing drop shipping commerce. It was more than I thought. Some hot-seats would start like, “Boy, I’m not sure I have anything to add here,” and then I would have insights. It’s like, “Yeah, that was similar to my experience with Drip.” There’s enough overlap with these businesses–maybe at 60% similarity–because there’s always going to be marketing, and there’s SEO, and there’s affiliate programs or whatever that’s similar. I don’t know. Maybe having everyone working on the same type of thing would take away from that, the variety of thought or whatever.
Mike: Yeah, I definitely think that that’s probably the case. It depends on, specifically, what you’re looking for. You could easily have a group that is all the same types of people than a different group that is very different, and it depends what you’re trying to get out of the group. I think that that’s more the issue than anything else because at Big Snow Tiny Conf, Chad DeShon runs boardgametables.com and he’s got some fantastic ideas but because he’s B2C and he’s selling physical products, he’s not the type of person that I would probably end up in a group with but he’s got fantastic ideas. I’ve seen some of the stuff he’s done and it’s just amazing, and then there’s other ones who are doing more e-commerce-type businesses and we get some great ideas from them people, too.
Rob: Yeah, that makes sense.
Mike: I don’t know. It depends on what you’re looking for.
Rob: For me, where I’m at right now where I don’t really want to start another SaaS app, it was super helpful because I was able to talk to people about what it’s like running an e-commerce shop, not that I’m going to necessarily run one but I at least was able to talk for an hour to someone who’s been running e-commerce, manufacturing their own stuff for 10 years. It’s like, “Wow, those are the headaches of it. I don’t think I want to do that.”
Then, another guy who’s built two authority content sites from scratch, not just these little content sites that have AdSense or whatever but really built something substantial that he sold for I’m presuming six-figure exits–and I don’t know how much they were–but he had a whole process and a whole realm of knowledge that I have just not been exposed to. That was helpful for me to be like, “Yeah, maybe an authority content site is the next thing for me.” It just got me thinking along different lines, which is helpful because I am, at this point, direction-less in the sense of what I am going to do next.
Mike: Yeah, that makes sense. I’m curious to know what was it that you went into, thinking that you were going to get out of it because, obviously, you’ve had some hesitations going into it. I think most of just were the fact that the people in the group probably knew each other. Did you make the mistake of asking if everyone knew who you were?
Rob: Of course not. I never do that. You’ve done that, haven’t you?
Mike: Yes.
Rob: Did you do that at Big Snow Tiny Conf and you’re like, “No, I didn’t mean that. I didn’t mean it that way.”
Mike: Yes, that was my first year because everybody has been talking to each other and I showed up late. I was three hours later than everybody else and it seemed like everyone knew each other. They knew who I was but I wasn’t sure and I just said, “Does anyone here not know who I am?” and as the words left, I’m like, “No!”
Rob: “I mis-phrased that. That’s not what I meant!”
Mike: Everyone laughed. It’s been a running joke for three or four years now.
Rob: That’s funny. Now, Chris had told me that that the folks never knew of me or knew who I was. I don’t know if that’s through being married to Sherrie [ph] because she’s in the group or it’s just that our circles crossed enough. It was nice. There were a few people who just knew me as Sherrie’s [ph] husband and then, when it came up that I was the co-founder at Drip, they were like, “I love Drip.” That was actually cool. I think almost everyone in the group used Drip or uses Drip so that was a touch-point for some folks, which is nice.
Mike: It’s funny that you mentioned overlapping circles because my wife has been spinning up her business and getting into different things with Facebook ad campaigns and this and that. There are certain things that are recommended to her or certain types of products so our circles are starting to overlap in more ways here and there. It’s just funny hearing some of the tools that she’s starting to use, like I either know who that person is or I’ve heard of the tool before and have thoughts and opinions on it.
Rob: That’s funny. You asked me what I thought I was going to get out of it. I thought that being in a room with a dozen successful founders, people who have launched businesses, grown businesses and several who have exited some multiple times, I just thought that there would be interesting conversations and that I would learn something. I went in very deliberately. Within the first day, I knew everybody and so at dinner, I was like, “You know what? I’m really interested in what this guy has to say about content sites, authority sites that have a personality.”
Right now, it’s just kind of article factories, but actually having a point of view in everything. I sat next to him and he asked me a bunch of questions about what I was going to do next and he said, during his process of exiting and then doing his next thing, he made some mistakes so he made some recommendations for that and then I grilled him for quite a while about, “If you’re doing it from scratch, what would it look like if you’d acquire one?” I wanted to pick people’s brains and get an idea of what it’s really like to run all these different types of businesses. I think that’s really what I went in doing.
I came away with not only that knowledge but I was also inspired. I think that, over the past several months, I’m not that motivated to start something new because it’s so much work. As we know and as we talk about on the show and as we’ve lived, it can be really stressful. At this point, I don’t know why I’d put myself through that again, and that’s the struggle, but I also want to do interesting things. I want to work on things that I’m excited about so part of has been helped purely a lot with ZenFounder stuff and gearing up some of that marketing.
In addition to that, I do think that I need a project to just be working on and so I’m trying to strike that balance of having something that’s interesting but not so stressful that I don’t have to work on all the time but I can when I want to. That’s where a SaaS app becomes a really tough sell because it’s just so needy. It’s like having a new baby versus some of these other business models that are a lot easier to have in a mode where you can swoop in, do a bunch of work and then leave it for a while.
Before SaaS, those are the businesses I had and my life was definitely more calm back then. It’s good. That’s what I got out of it, was being opposed to other business models and ways. If I look back at my experience, I’ve always wanted financial freedom and the freedom to work on interesting things and work on what I want. I tried to get that early on with investing in stocks and then I tried to do it via real estate and then I did it via entrepreneurship. Even in the early days, it was not all software. I acquired some e-books, I did had an e-commerce site, I had this whole variety of things and then I got into SaaS. I’ve been through that but it’s like I’ve never been married to a single business model or a single way to make money or have been dogmatic about it. Should we dive into the importance of consistency?
Mike: Sure, why don’t we?
Rob: Hey, it’s the 400th episode, man. We kind of get to do what we want to do today, I think. That’s how I feel about this.
Mike: Technically, we used to do that every time.
Rob: That’s a good technicality. We did get some high-fives and some compliments from a couple of folks. Austin Peak [ph] wrote in and he said, “I just want to thank you. I’ve been listening to your podcast for years and you guys helped inspire me. I can remember the second you changed my life and opened me up to even more business podcasts. It was Episode 240. I was folding laundry in my bedroom. I stopped what I was doing and I wrote down every other podcast you mentioned and it helped change my life.”
That’s kind of cool. Now and again, we get these, “You’ve changed my life,” or, “You really opened my eyes to something that I didn’t see before.” I think you and I take for granted that we just hop on the mic every week, we ship the podcast 20 to 30 minutes, typically, but we really have had a striking impact on a lot of people both through FounderCafe and Micropreneur Academy, MicroConf and the podcast. In fact, I want to roll an audio clip here from Fatcat Apps’ own David Hehenburger.
A3: Hey, Rob and Mike. This is David Hehenburger. I’ve been listening to your podcast since the early days and it’s had a huge impact on me. The biggest thing was when I first listened to the podcast, I was stuck in a consulting business that I wasn’t really trying that much. By listening to your podcast and following your Rob’s advice of stair-stepping, I was able to get out of consulting, launch a number of successful work-less plugins and now, over the last of year, also launched a successful SaaS app. This podcast has just had a huge impact on me. Thanks so much for everything, guys.
Rob: Mike, I don’t think we toot our own horns very much and I think that’s probably a good quality. We come across as authentic on the podcast because we are just who we are, but I think the 400th episode is the time when we can celebrate what we’ve done, what we’ve built and the impact that we’ve had on people. I was perusing our very ancient website, startupsfortherestofus.com. We need a facelift on that thing soon, but there’s a Success Stories tab and we stopped updating this a while ago.
Basically, we did a call at one point for people who had listened to the podcast and launched a product that allowed them to leave their day job. There’s about 20 names on it and, again, we added names for a couple of months and then stopped. I know that there are more people impacted, but Kevin Taylor from Beam Calcs, Duncan Murtagh from Vetter, Tom Fakes from FHRNews, Phil Derksen from WP Simple Pay, David Hehenburger who just sent the voicemail in, Jerome Samuels, Brecht Palombo from Distressed Pro–a lot of folks don’t know that he was an early member of the Micropreneur Academy and said that he implemented a bunch of stuff that we’d mentioned in there–Jordan Sherer from Widefido, Nate Grahek from StickyAlbums–StickyAlbums, as far as I know, is a seven-figure business. He’s very succesful in the photography space and eh had just been a long-time listener, Richard Chen from phpGrid and there are others.
I think it’s cool to do that. I think, for me, a lot of times, it doesn’t feel real. What’s your take on it? How does all that resonate with you?
Mike: I agree with you. I think I’m in the same camp where I don’t think about it often. Occasionally, we will get somebody who writes into us a set of questions at startupsfortherestofus.com and says, “Hey, I just wanted to let you know we did this and would you mind putting our link up under the success stories?” We obviously don’t go and update it a lot but there are occasions where people will write in and say something, saying, “Hey, you changed my life,” or, “We implemented this,” or, “We launched this new app that got me out of a job that sucked.”
We will do that on occasion but I don’t think about it too much, I guess. Maybe I should but I do know that, obviously, I see the stats and stuff. It’s hard, in many ways, to associate an email address or a blip on the screen from some metric someplace with actual people, I’ll say, because there’s that level of abstraction. I actually teach people this when I’m talking to them about Bluetick because in every email address there, there’s a person behind it. You have to treat it that way. I think it’s very easy to lose sight of that especially when you’re looking at all these different marketing tools that measure this or analyze that. It’s like every single one of those has typically keyed off a person.
Rob: Yeah, and I think we made a good move in launching MicroConf. I remember the reason we did it and it was because Micropreneur Academy had a community it was building and we wanted to meet people in person. The fact that we now know, in person, face-to-face, by name, so many podcast listeners, I think, is a unique thing because if we didn’t have MicroConf, how would we have met all these people? Maybe at BoS or maybe at other conferences, but that has helped me understand who are audience is more.
I think it’s also helped shape some of the content that we produce and how we talk on the show. There are days when I will outline a podcast while we’re on the show and I’m saying something almost specifically to one person based on either one conversation I had with them or just the persona of, “Yes, this person with these WordPress plugins, this episode’s for you. These are all my thoughts that I would tell you if I had the time to do an individual call with you but, instead, I’m just going to record this podcast.” I think that’s been helpful to have real people on the other side of the earbuds because a lot of podcasts don’t have that.
Think about if you had 20,000 listeners and you didn’t have a conference. How would you possibly know the people who are listening?
Mike: Yeah, you have absolutely no idea. I do the same thing to some extent as well on occasion in an episode and there was somebody who emailed me earlier in the week or earlier in the month and said, “Hey, what are your thoughts on this?” and, a lot of times, I’ll reiterate them through the course of a podcast episode because you can be a lot more expansive on a podcast episode than you can in an email. I have tried to cut down on the length of the emails that I write these days but it’s easier to talk about it and just do a podcast episode on it than it is to drill into all the little details and edge cases in an email versus somebody asking for advice about a specific thing. Speaking of which, we should also put out a call and say, “If anyone has questions that they want answered for the podcast, this would be a good time to send those in because we’re running low on questions,” I believe. Is that correct?
Rob: That’s correct, yep. If you can, you can call into our voicemail or send us an .mp3 file or even just drop us an email because we are almost out of them so we would get your question quite soon.
Mike: We’re accepting emails now?
Rob: Accepting emails and accepting five-star reviews on iTunes. I’m kidding. I wanted to run through just a couple of favored and most popular episodes but it’s hard to know what resonates with different people. I remember Episode 47 was Movies for Nerds and it was a bunch of startup tales, and I remember that being a big deal for a while. I think it had our highest listenership of our first 50 episodes for quite some time. Then, a favorite is always the podcast for startup founders. Episode 104, 240 and 395 are basically that episode. It’s podcasts and we’ve updated that several times. Then, Episode 255, Moving on from AuditShark, seems to have gotten a spike in listenership on that one and some extra-popularity which I think is interesting. You can still get that one in the podcast feed. I think the feed goes back to Episode 254. Are there any others that you remember offhand or do they all start to blend together at some point?
Mike: I think they blend a lot, to be honest. It’s hard for me to go back and say because I was there for the entire conversation so it’s hard for me to point to any particular one where it’s like, “That really stuck out to me,” or, “I listened to that half a dozen times,” because I was involved in the discussions. There’s not many that really pop out. It’s like, “This is interesting,” although I have heard people who have commented on the Moving on from AuditShark and how difficult that was, especially leading up to that whole decision.
Rob: That makes sense. I have gone back periodically and I’ll just go back and randomly pick 10 episodes. I might go back a year or even a year and a half. I’ll go back to that early podcast feed or as far back as it goes, which I think goes back 150 episodes so I guess that would be almost three years. I’ll listen to 5 or 10 in a row and it’s kind of fun to walk down memory lane. Typically, you’re either working on AuditShark or just moving on. I’m working on Drip or, even before that, HitTail.
It’s interesting for me to see what I agree with that we say and what I disagree with. I think things change that quickly, that there are opinions that one or both of us had that I’m like, “You know what? I don’t think that holds true anymore,” or there’s things that we say that I’m like, “Wow, that’s really insightful. That’s a pretty smart thing. “It’s not patting myself on the back; it’s just like, yeah, Mike and I had a really solid answer to that listener’s questions or a solid take on pre-launch email marketing or that kind of stuff. It’s fun to do that. I don’t do that much but, when I do, there’s definitely some good content on the show, I think.
Mike: One of the things I wonder about is, a long time ago, we’ve made the decision to put the transcripts of all the episodes out there partly for SEO reasons but also just so that it made it easier for us to go back and search through if we’ve found something. I think that we’re still very happy that we made that decision even though it cost money for every single one of those transcriptions, but what I find interesting about what you just said is that when our opinions on something change, there’s still that record of what our opinions were at the time. I wonder if there’s any confusion that could potentially be drawn out of that by people who search for something and then say, “This is what Mike’s and Rob’s opinions were on this back in 2014 or something like that,” and maybe that leads them down the wrong path. I wonder if that’s a nonsensical concern but I’m thinking about that too much.
Rob: I don’t know. People have definitely asked for an updated take on certain topics. I guess it’s hard to know or impossible to know.
Mike: Yeah, you wouldn’t know unless somebody said, “Hey, I followed this advice,” and then you’re like, “Yeah, now that you asked me again, I’m thinking about that and I would do something different now versus then.” That’s part of the value of having that transcript or being able to say, “This is from four years ago or five years ago.” People can also take that in context and say, “It’s from X years ago. Does that still hold true?”
Rob: Yeah, that’s true. I think you’re leading us to the topic of today’s episode, which is probably just going to be a short conversation at this point because I feel like this has been good. Just reminiscing and talking about things, I think, is fun to do. We don’t do that very much and so it’s interesting to think about. We titled this one The Importance of Consistency and I think the consistency of showing up every week has been perhaps one of our biggest weapons or one of our biggest strengths in building the podcast.
I know, early on, we did every week and then we ran at a content about 20 episodes in and then we started going every other week and realized that the listenership was not growing at all. Then, we made it a commitment and we also made it easier. We make it so that we show up, we record and then our editor does everything from there. I think that was a game-changing issue for us, getting someone who we can essentially pay to really get the show produced. That’s the only reason.
I think the two reasons we’ve been so consistent–I know from my perspective–is, number one, because it’s not a ton of work for me. Even in the busiest and most stressful days of growing Drip, selling Drip and all of that stuff, I knew that I could show up on the mic for about 45 minutes and you and I could record and that it would be there. It’s very, very rare that you or I miss an episode because we’re too busy. I know if that ever happens. It’s always because there’s a vacation or we have a scheduling snafu or something.I can’t remember a time where you were like, “You know what? I’m just swamped this week. I can’t record.” It just doesn’t happen. We’ve prioritized it and it’s on both of our calendars. That’s the other thing. If this was a solo podcast, there would be so many weeks where I wouldn’t show up, but the fact that I know that you’re going to be there means I can’t leave you hanging.
Mike: I think that has to do more with accountability and having yourself accountable to somebody else. It’s like a gym partner. If you’re going to the gym by yourself, it’s a lot easier to fall off the wagon than if you know that your buddy is going to meet you there and you’re going to lift weights every Tuesday or four to five days a week at 7:00 AM. Somebody else is depending on you to be there.
Rob: Yeah, that makes sense. As you pulled a couple of references, there’s an inked.com article, differenceconsulting.com and [0:30:13.5] Express. We’ll link them up in the show notes but these are talking about consistency and the power of it.
Mike: Yep, and I think the first one is that, for me at least, consistency builds predictability. For other people, it’s essentially eliminating the unknown. We drop this podcast early in the morning every single Tuesday almost without fail except when there’s a technical glitch. When that happens, there are people who will email us and say, “Hey, I don’t see the episode out there. What’s going on?” Everyone knows it’s going to be there and if there’s something that comes up where we’re going to need to record an episode in advance, we make it happen. We always have a contingency plan. We plan ahead and make sure that that’s going to happen because we know that if we don’t, we’re going to get emails, tweets and things like that like, “Hey, where is the podcast episode?” That happens when there’s a glitch, but we don’t miss the episodes.
Rob: That’s right. Even in the weeks of MicroConf which are super busy and taxing for us, we record ahead, in essence. We get an episode or two ahead. I was thinking there was one episode that was about 40 episodes ago so probably around 360-ish where you went on vacation or something happened last-minute and I was trying to get a guest and I couldn’t.
Mike: It was Episode 360, the one where Rob takes over the show.
Rob: Something happened where my guest fell through and I couldn’t get anybody online. It’s just a solo episode and I comment in the episode like, “I’m doing this because we need to ship something and I’m just going to talk to the mic.” I answered a bunch of listener questions that day and it was actually fun. I wouldn’t want to do it every week but it’s that kind of thing of just making sure that we get something into your earbuds every Tuesday morning.
Mike: Interesting that you said you’re going to talk to the mic.
Rob: I know. Consistency has done a lot for us. It builds trust. It’s predictable so it eliminates unknown for folks, and I think these articles were saying it shows dedication. It shows that we’re committed to something. I think subscribing to a podcast and sticking with it is a commitment. It’s a bummer when I subscribe to podcasts and I get invested and then they just pod-fade and they disappear. It’s like, “Man, this sucked.” I think the fact that we do have this many episodes can be a show of dedication and allows people to trust us more that we’re going to keep shipping.
Mike: Right, and the other thing I think is interesting is that, early on, what our main goal with the podcast was, really, to help promote FounderCafe but I think that that changed over time because we really don’t promote FounderCafe too much on the podcast. In fact, I’ve heard from people, “You should.” People tell us, “You should promote FounderFace a lot more on the show because, then, you get more people into it and you get more conversations and there’s the whole network of facts that can go into that.”
If you are interested, go over to foundercafe.com. There’s an application that you can fill out. It’s $100.00 per quarter and it’s a set of forums that you can join to interact with and ask questions of and get information from people about whatever it is that you’re working on, whether it’s a new marketing campaign or you have a question about how to use a particular product or what other products people would recommend for a certain situation. Definitely go in there and check it out. The application process is really just to help filter people out that are not a good fit. There are people where we’ve essentially turned them away because in the application, we ask what they want to get out of it and, if they’re not going to get out of it, what they would expect, then we’re just going to say, “Hey, look. This is not a good fit for you.”
Rob: Yep. It’s an online community of seasoned entrepreneurs just like you, and we do a really good job with the application process in making sure that we get folks in there who are going to help each other succeed in essence foundercafe.com.
Mike: I think the other interesting thing about the podcast and how we’ve been so consistent over time is that, as I said, we changed what the main reason that we’re doing it early on was but, since then, one of the things that comes to mind is back when we first started the podcast, there really weren’t any other podcasts that were like ours or was catering to our audience. It’s interesting that there are a lot of other podcasts that have popped up that are, in a similar vein, startup founders, working from home, boot-strapped or self-funded and building something and just talking about it. I think it’s really interesting to have seen those but early on–and, again, not to toot our horn here–we’re trailblazing. At this point, we’re no longer trailblazing. We’re like the old horse on the track.
Rob: That’s true. Sometimes, I wonder if someone comes along and says, “You have 400 episodes? That’s either really cool and shows you’re consistent or it’s overwhelming.” They’re like, “Well, I don’t want to get into this show. There’s already 400 episodes. I can’t possibly catch up.”
Mike: I was going to say potentially demotivating to certain people because they’re like, “I would start a podcast but these guys have got hundreds of episodes. Who would listen to me if these guys are going that strong or going for that long?”
Rob: Yeah, I wonder if it cuts both ways. I was thinking more from a listener perspective, someone who decides to subscribe or not. 400 episodes could honestly discourage them because they just can’t catch up. It’s like, “Well, I’ve already missed all that.” It’s like coming into a show or hearing about it when it’s five seasons and it’s like, “Why? I don’t think I really want to watch all that.”
Mike: Yeah, I’m not sure. That can happen with TV shows and stuff like that like The Sopranos. I’m never going to go and watch that. It’s just not going to happen.
Rob: I know. I’ve heard it’s so good but there’s too many episodes. There isn’t too much good TV out these days.
Mike: I think that’s a little bit different from what this podcast offers just because in this podcast, every episode is different and you can take it as a standalone thing versus something like a TV show where if you’re not really involved from the beginning, it can be hard to get in there. I think General Hospital has 14,000 episodes or something like that. It’s some ridiculous thing. They’ve been going since the ’60s or ’70s and they just drop a new one every week. I think Sesame Street has some ridiculous number as well.
Rob: You can drop into them. I think our podcast is more like Law & Order because it’s episodic. It’s like a single episode, start to finish, you can get value out of it or you can follow the story over the years. That’s what I’ve heard from people who liked the podcast, is they say they came for the content, originally, and the tips and the tactics and then they stick around to hear what we’re up to, in essence.
Mike: I guess it can go either way, then. What do you get out of the podcast these days?
Rob: That’s a good question. I don’t know that I’ve asked myself that question in a few years. I think, early on, it was definitely because there was no other content like it and I felt like it should exist in the world. I wanted there to be people talking about this stuff much for the same reason that we had Micropreneur Academy and FounderCafe and MicroConf because we wanted them to exist in a world and we wanted to be part of those communities.
That’s what the podcast was in the early days as well to promote what’s now FounderCafe. Then, over the years, I think, it’s certainly helped with Drip because just having the audience as an early seed, an early customer group, was helpful. These days, I don’t know. I don’t know that I can point directly to something right now that I’m gaining from being on the podcast but I do enjoy it, if that makes sense. I don’t know that I gain anything by playing Dungeons and Dragons with my 11-year-old but it’s fun. I have gotten things out of it in the past. It’s worthwhile, certainly, to show up and do the show because it has yielded so many things, I think, for both of us.
Mike: I think I would call a random benefit generator, like you don’t know what the benefits are. It’s hard to point to any specific thing like, “By doing this podcast, I’m going to get 75 new people added to my product and I’m going to make these certain relationships.” I think it’s just hard to predict those in advance or, even at the time and, say, “Down the road, I’m going to get these benefits out of it.” There’s definitely examples you can point to in the past, but I think that there’s a lot of things that you just get this random set of benefits moving forward that’s hard to nail down and say, “This is what I get out of it.”
Rob: Yeah, that makes sense. Someone said a portion of the value you put into the world, you get a small portion of that back, and I think that’s a really apt and insightful thought, and that has been true in my experience. I think that, by putting the podcast out, there’s value created in the world and they put in the hard work. The founders who listen to this, they put in the hard work. If we had some type of influence or motivation or we provide something for them, I think there’s a lot of value created in the world and a little bit of that does wind up coming back to us, whether it’s the ability to sell at a conference, whether it’s business opportunities or whether it’s if you or I needed to raise funding to do a small, bootstrap kind of angel round.
I think that the podcast has made that so much more possible for us, and we’ve had other avenues as well. Obviously, I still have an email list from my blog. I have the book list. There are other things that we do but the podcast is probably the thing that you and I have done. Certainly, for me, it’s the thing I’ve done with the most consistency because of what we said earlier. We’ve made it pretty streamlined and it’s enjoyable and because of the commitment to do it. Imagine if we missed a week.
Mike: I think the internet would freak out for a little while.
Rob: It would feel really weird to me to not have an episode or if we decided that today was the last show. At 400, we’re just going to be done. That would really be odd to not be putting something into the world. I think that’s the thing, is blogging is so time-consuming and as much as I loved doing it, just once the business has gotten in the way and I needed to focus, I had to stop blogging. I made that decision to do it, but I still want to be able to put thoughts into the world because I am experiencing new things and I feel like I still have things to teach and share with people, and the podcast is such a good way to do that because of the low time commitment.
Mike: I also think that it’s a better medium for doing it than a blog post where somebody might hit upon a blog post and they may or may not read it. If somebody subscribes to your podcast, it becomes a much more intimate experience where they feel invested in the story and the people who are doing the podcast, and I don’t think a blog can raise that level of connection between the reader and the author versus something with a podcast, like you’re in their ear. Your actual value is in their ear.
Rob: It’s definitely much more engaging, and I think we learned that early on. I talked to a few podcasters who are also bloggers and, in our early days, I remember my blogging audience was 10 times the size of the podcast audience but I felt like the podcast audience was so, so much more engaged and so much more willing to interact with us. Now that the podcast audience has grown to what it is, there’s just a lot of value in having people listening in through the earbuds, as you said.
Mike: I guess we should at least give one tip for consistency, though, because we’ve talked about the importance of it but we haven’t actually talked too much about any sort of tips for maintaining consistency. We talked a little bit about having an accountability partner or something along those lines. I think we briefly talked about what the goals are, the benefits of doing something for a while. Do you have a tip that you can share for consistency?
Rob: You just couldn’t let it go, huh? You had to go with the patented Starters for the Rest of Us formula of providing some kind of tip or tactic in every episode.
Mike: You want to give that tip on the next episode? That’ll be the cliffhanger for Episode 400?
Rob: I have a couple of tips and it’s what I’ve just said. If you want to be consistent, have that accountability partner where you have to show up, make it easy or reduce all the friction you can. If you want to be consistent about going to the gym, have all your gym clothes already in the car so you don’t have to look for them in the morning. Just make it easy, and that’s what we’ve done with the podcast, is hiring an editor and making the process so we just let this get put into Dropbox and then it magically shows up in my feed five days later with the transcript and all that. I think those would be my two biggest ones, is remove friction and try to have someone else busting your chops if you don’t show up.
Mike: I think those are good ones to leave off with. If you have a question for us, you can call into our voicemail number at 1-888-801-9690 or you can email it to us at questions@startupsfortherestofus.com. The theme music is excerpt from We’re Outta Control by MoOt used under creative commons. Subscribe to us in iTunes by searching for Startups and visit startupsfortherestofus.com for the full transcript of each episode. Thanks for listening. We’ll see you next time and thanks for sticking with us for our 400 episodes.
Rob: Nice work, man. High-five on 400 episodes. I’m pretty proud that we’ve done this.
Mike: Me, too.
Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at building, launching, and in growing software products, whether you’ve built your first product; you’re just thinking about it.
Rob: I’m Rob.
Mike: And I’m Mike.
Rob: And we’re here to share our experience to help you avoid the same mistakes we made. 400 Episodes, Sir. Congratulations.
Mike: Thank you. I did it all by myself.
Rob: I know you did. How does it feel?
Mike: I don’t know. I feel very run down today but I don’t think that it has anything to do with Episode 400. I think it has to do with the fact that yesterday was the Fourth of July here so we had a bunch of people over and my kids are away for the week. They’re at Sleepaway Camp. We had a bunch of people over and we’re just like grilling and swimming in the pool, which was 92 degrees or something like that, and we haven’t even kept it covered for several days; it’s just hot as heck.
Rob: Yeah, and you stood out, man. You were hanging out. You drank too much so then you’re hung over and tired today.
Mike: I’m just tired. I’m not hung over. That’s the funny part. I don’t know if it’s funny, but I’m not hung over; I’m just tired. I didn’t sleep very well, I don’t think.
Rob: Yeah, and I feel a little bit the same way you do. We had friends over as well. I’m also kind of tired from the heat and just from whatever else. I think the 400 Episode thing makes me feel, if anything, old. It’s like we’ve been doing this for eight years, I believe. Is that right? Wasn’t it 2010?
Mike: Yes, 2010.
Rob: It was somewhere between February and April of 2010. I could look at the archived pages post, but it’s a long time to do this. We’ve had millions and millions of downloads. I was just looking at the statistics, millions of downloads, tens of thousands of listeners per episode. We’ve built something. We’ve built something pretty special, I think, that resonates with people. We’ll talk more about our favorite episodes and we’d have some listeners who wrote in, and I thought that was really nice. I think it’s a testament that we basically were able to show MicroConf out of the podcast. I don’t know that we could have grown it to what it is without this show. It’s like the entire conference. These days, MicroConf is its own name but, back in the day, we really sold tickets. It was kind of like my email list, your email list and people listening to Startups for the Rest of Us.
Mike: Yeah, and I think that just having that podcast episode that dropped every single Tuesday almost without fail makes people feel that they’re part of something. Then, when you come to MicroConf, you’re meeting the same types of people who were listening to the podcast. As you said, things have grown and people who come to MicroConf don’t necessarily always listen to the podcast. It’s taken a life of its own but, in the early days like that, that was really what drove that audience, I’ll say.
Rob: Yeah, for sure. How about you? What else is going on this week?
Mike: I have a meet-up that I put together this evening. I’m meeting a bunch of people who are either FounderCafe members or attended MicroConf or both this evening over in Worcester. That should be fun. We’re going to head over to British Beer Works or something like that and meet up around six o’clock and just have a couple of drinks, have dinner and just talk business.
Rob: That’s super cool. Did you just initiate that out of nowhere?
Mike: It wasn’t completely out of nowhere. When we set up the slack group for MicroConf, there were a bunch of people in there who were like, “Hey, who’s in the Greater Boston area?” and a few different people chimed in. I think that there was even a private channel that was created for people who are in the Greater Boston area, and then a couple of people mentioned to get in together. What I did was I just went through and looked to see who had come to MicroConf who was in the Boston area and I just emailed them. I have a running list of people that I know who live in the area and I just went through them, emailed them all and said, “Hey, here’s the time, date and place. Who wants to get together?” About half a dozen people or so chimed in and said, “Yeah, absolutely. Let’s go.”
Rob: That’s super cool. That’ll be a nice-sized group, too. I like that size.
Mike: Yeah. We’ll see how it goes.
Rob: Cool. Once you’ve done it, I’m interested to hear how it was on the show.
Mike: Yeah. That’s something we’ve actually talked a little bit about in the past in the background between you and me, just figuring out if that’s something that we wanted to facilitate in different places. I don’t know if there’s a good technical way to manage that, to be honest.
Rob: Yeah, the TropiColombia guys due their juntos, but they do have local meet-ups. It’s definitely possible but it’s always been the question of, “Do we have the bandwidth?” or, “If we don’t do it and we hire someone to do it, how do we make it pay for itself?” basically, right?
Mike: Right.
Rob: We’ve talked about not wanting to run an events business, like we don’t want to be in the events business and yet we throw three events a year already with the three MicroConfs. I think if we did the juntos or something like that, local meet-ups, basically, it would definitely span out itself. I think if we had the aspiration, we could totally pull it off. It’s just not you nor I have ever really wanted to gear up and not work on our software products in order to do that.
Mike: Yeah, I think that’s the biggest issue, is just having the bandwidth to be able to do it and, as you said, without charging for it and hiring somebody to help manage and facilitate all that. It’d be really hard for us to pull it off.
Rob: Yeah. Last weekend, I went to a three-day mastermind retreat, is what I’ call it, and it was the Rhodium Community. You know Rhodium Weekend? Have you heard of it? Chris Yates runs Rhodium, and I have a lot of respect much like I often tell people that MicroConf is the younger sibling of BoS. It’s less expensive, it’s more focused in slightly earlier-stage companies, very few have funding and BoS is a different story. It’s still very much about building real software companies and not with venture-back stuff even though some of them do take venture funding, but I have a lot of respect for BoS.
I also have a lot of respect for Rhodium Weekend. It’s a 100-person event held in Vegas every year. It’s run by Chris Yates, and it is more about buying and selling websites. There’s a lot of talk about internet marketing, but what I found is, like MicroConf, it’s very ethical. Since Chris has built the audience, he’s been very picky about who he lets in and so it’s not the sleazy internet marketing. You can go to a lot of really shitty internet marketing conferences. People are pitching from the stage and that’s not what Rhodium is.
Every year, there’s a Rhodium conference and then he has this mastermind that he runs that Sherrie [ph], my wife is a part of, and it’s a monthly call with about 14 people, and they do hot-seat format. They do all kinds of stuff. Once a year, that small group of 14, goes to a house and stays there for three days and they do a hot-seat format. Sherrie [ph] was unable to make it and there was a seed open so they invited me because I know Chris and I actually knew a few people in the group as well.
For me, I had to really think about whether or not I wanted to do it because of that format. I know you’ve done this with Big Snow Tiny Conf. I’ve never done that. I’ve done really small things with four or five people and then I obviously do MicroConf, but that in-between felt very uncomfortable for me going into it, especially knowing only three people there in advance. I really debated whether to go or not and, in retrospect, it was awesome, like it was really, really good as I kind of knew in the back of mind it would be.
I felt a little introverted and everybody else knows each other really well because they’re on these calls and they hang out, but it was a big deal. It was game-changing for me in terms of my thought process of, “I think I want to do that again.” It makes me really want to do one of the Big Snow Tiny Confsnow that I have more scheduling flexibility. I don’t ski but I’ll drink hot chocolate and read comic books or something while you guys ski or snowboard. I think I want to do it.
The cool thing about it is it really opened my eyes to the value that you can get from a group of that size, and that was my doubt. There were certainly some struggles with it, too. With 15 people, I think in my opinion, it’s just a little bit too big. I would love for it to be 8 to 10, and that would be a perfect size. With all of that said, I can imagine that it might be even more valuable to have everyone having the same type of business or at least similar because they were all over the board.
There were people who literally just build and buy content websites that they monetize with affiliate links and AdSense. There were e-commerce. There were e-commerce drop shippers. There were people who manufactured their own products. There were two or three SaaS. There were some people who just do a lot of SEO and they just build sites and sell them. There’s a real wide variation of who’s done what, and I think that was super helpful but I also imagined, if everyone was SaaS, that there could potentially be more value to it.
Mike: Yeah, and it goes both ways, though, because if you have people who are doing things in different types of businesses, then you get a different perspective than you would if everybody is doing the same type of thing. If everyone was doing SaaS, you don’t get the perspective of, “We’re e-commerce and this is how we do affiliates.” They may view them very differently and you can get really good, solid takeaways from those that you can put together and put forth on your business that are going to work for you. You would not get that if everyone is always talking to the same types of people, I’ll say.
Rob: Yeah, I totally agree. It’s a good point and that absolutely was true. I was surprised how much I had to offer someone doing drop shipping commerce. It was more than I thought. Some hot-seats would start like, “Boy, I’m not sure I have anything to add here,” and then I would have insights. It’s like, “Yeah, that was similar to my experience with Drip.” There’s enough overlap with these businesses–maybe at 60% similarity–because there’s always going to be marketing, and there’s SEO, and there’s affiliate programs or whatever that’s similar. I don’t know. Maybe having everyone working on the same type of thing would take away from that, the variety of thought or whatever.
Mike: Yeah, I definitely think that that’s probably the case. It depends on, specifically, what you’re looking for. You could easily have a group that is all the same types of people than a different group that is very different, and it depends what you’re trying to get out of the group. I think that that’s more the issue than anything else because at Big Snow Tiny Conf, Chad DeShon runs boardgametables.com and he’s got some fantastic ideas but because he’s B2C and he’s selling physical products, he’s not the type of person that I would probably end up in a group with but he’s got fantastic ideas. I’ve seen some of the stuff he’s done and it’s just amazing, and then there’s other ones who are doing more e-commerce-type businesses and we get some great ideas from them people, too.
Rob: Yeah, that makes sense.
Mike: I don’t know. It depends on what you’re looking for.
Rob: For me, where I’m at right now where I don’t really want to start another SaaS app, it was super helpful because I was able to talk to people about what it’s like running an e-commerce shop, not that I’m going to necessarily run one but I at least was able to talk for an hour to someone who’s been running e-commerce, manufacturing their own stuff for 10 years. It’s like, “Wow, those are the headaches of it. I don’t think I want to do that.”
Then, another guy who’s built two authority content sites from scratch, not just these little content sites that have AdSense or whatever but really built something substantial that he sold for I’m presuming six-figure exits–and I don’t know how much they were–but he had a whole process and a whole realm of knowledge that I have just not been exposed to. That was helpful for me to be like, “Yeah, maybe an authority content site is the next thing for me.” It just got me thinking along different lines, which is helpful because I am, at this point, direction-less in the sense of what I am going to do next.
Mike: Yeah, that makes sense. I’m curious to know what was it that you went into, thinking that you were going to get out of it because, obviously, you’ve had some hesitations going into it. I think most of just were the fact that the people in the group probably knew each other. Did you make the mistake of asking if everyone knew who you were?
Rob: Of course not. I never do that. You’ve done that, haven’t you?
Mike: Yes.
Rob: Did you do that at Big Snow Tiny Conf and you’re like, “No, I didn’t mean that. I didn’t mean it that way.”
Mike: Yes, that was my first year because everybody has been talking to each other and I showed up late. I was three hours later than everybody else and it seemed like everyone knew each other. They knew who I was but I wasn’t sure and I just said, “Does anyone here not know who I am?” and as the words left, I’m like, “No!”
Rob: “I mis-phrased that. That’s not what I meant!”
Mike: Everyone laughed. It’s been a running joke for three or four years now.
Rob: That’s funny. Now, Chris had told me that that the folks never knew of me or knew who I was. I don’t know if that’s through being married to Sherrie [ph] because she’s in the group or it’s just that our circles crossed enough. It was nice. There were a few people who just knew me as Sherrie’s [ph] husband and then, when it came up that I was the co-founder at Drip, they were like, “I love Drip.” That was actually cool. I think almost everyone in the group used Drip or uses Drip so that was a touch-point for some folks, which is nice.
Mike: It’s funny that you mentioned overlapping circles because my wife has been spinning up her business and getting into different things with Facebook ad campaigns and this and that. There are certain things that are recommended to her or certain types of products so our circles are starting to overlap in more ways here and there. It’s just funny hearing some of the tools that she’s starting to use, like I either know who that person is or I’ve heard of the tool before and have thoughts and opinions on it.
Rob: That’s funny. You asked me what I thought I was going to get out of it. I thought that being in a room with a dozen successful founders, people who have launched businesses, grown businesses and several who have exited some multiple times, I just thought that there would be interesting conversations and that I would learn something. I went in very deliberately. Within the first day, I knew everybody and so at dinner, I was like, “You know what? I’m really interested in what this guy has to say about content sites, authority sites that have a personality.”
Right now, it’s just kind of article factories, but actually having a point of view in everything. I sat next to him and he asked me a bunch of questions about what I was going to do next and he said, during his process of exiting and then doing his next thing, he made some mistakes so he made some recommendations for that and then I grilled him for quite a while about, “If you’re doing it from scratch, what would it look like if you’d acquire one?” I wanted to pick people’s brains and get an idea of what it’s really like to run all these different types of businesses. I think that’s really what I went in doing.
I came away with not only that knowledge but I was also inspired. I think that, over the past several months, I’m not that motivated to start something new because it’s so much work. As we know and as we talk about on the show and as we’ve lived, it can be really stressful. At this point, I don’t know why I’d put myself through that again, and that’s the struggle, but I also want to do interesting things. I want to work on things that I’m excited about so part of has been helped purely a lot with ZenFounder stuff and gearing up some of that marketing.
In addition to that, I do think that I need a project to just be working on and so I’m trying to strike that balance of having something that’s interesting but not so stressful that I don’t have to work on all the time but I can when I want to. That’s where a SaaS app becomes a really tough sell because it’s just so needy. It’s like having a new baby versus some of these other business models that are a lot easier to have in a mode where you can swoop in, do a bunch of work and then leave it for a while.
Before SaaS, those are the businesses I had and my life was definitely more calm back then. It’s good. That’s what I got out of it, was being opposed to other business models and ways. If I look back at my experience, I’ve always wanted financial freedom and the freedom to work on interesting things and work on what I want. I tried to get that early on with investing in stocks and then I tried to do it via real estate and then I did it via entrepreneurship. Even in the early days, it was not all software. I acquired some e-books, I did had an e-commerce site, I had this whole variety of things and then I got into SaaS. I’ve been through that but it’s like I’ve never been married to a single business model or a single way to make money or have been dogmatic about it. Should we dive into the importance of consistency?
Mike: Sure, why don’t we?
Rob: Hey, it’s the 400th episode, man. We kind of get to do what we want to do today, I think. That’s how I feel about this.
Mike: Technically, we used to do that every time.
Rob: That’s a good technicality. We did get some high-fives and some compliments from a couple of folks. Austin Peak [ph] wrote in and he said, “I just want to thank you. I’ve been listening to your podcast for years and you guys helped inspire me. I can remember the second you changed my life and opened me up to even more business podcasts. It was Episode 240. I was folding laundry in my bedroom. I stopped what I was doing and I wrote down every other podcast you mentioned and it helped change my life.”
That’s kind of cool. Now and again, we get these, “You’ve changed my life,” or, “You really opened my eyes to something that I didn’t see before.” I think you and I take for granted that we just hop on the mic every week, we ship the podcast 20 to 30 minutes, typically, but we really have had a striking impact on a lot of people both through FounderCafe and Micropreneur Academy, MicroConf and the podcast. In fact, I want to roll an audio clip here from Fatcat Apps’ own David Hehenburger.
A3: Hey, Rob and Mike. This is David Hehenburger. I’ve been listening to your podcast since the early days and it’s had a huge impact on me. The biggest thing was when I first listened to the podcast, I was stuck in a consulting business that I wasn’t really trying that much. By listening to your podcast and following your Rob’s advice of stair-stepping, I was able to get out of consulting, launch a number of successful work-less plugins and now, over the last of year, also launched a successful SaaS app. This podcast has just had a huge impact on me. Thanks so much for everything, guys.
Rob: Mike, I don’t think we toot our own horns very much and I think that’s probably a good quality. We come across as authentic on the podcast because we are just who we are, but I think the 400th episode is the time when we can celebrate what we’ve done, what we’ve built and the impact that we’ve had on people. I was perusing our very ancient website, startupsfortherestofus.com. We need a facelift on that thing soon, but there’s a Success Stories tab and we stopped updating this a while ago.
Basically, we did a call at one point for people who had listened to the podcast and launched a product that allowed them to leave their day job. There’s about 20 names on it and, again, we added names for a couple of months and then stopped. I know that there are more people impacted, but Kevin Taylor from Beam Calcs, Duncan Murtagh from Vetter, Tom Fakes from FHRNews, Phil Derksen from WP Simple Pay, David Hehenburger who just sent the voicemail in, Jerome Samuels, Brecht Palombo from Distressed Pro–a lot of folks don’t know that he was an early member of the Micropreneur Academy and said that he implemented a bunch of stuff that we’d mentioned in there–Jordan Sherer from Widefido, Nate Grahek from StickyAlbums–StickyAlbums, as far as I know, is a seven-figure business. He’s very succesful in the photography space and eh had just been a long-time listener, Richard Chen from phpGrid and there are others.
I think it’s cool to do that. I think, for me, a lot of times, it doesn’t feel real. What’s your take on it? How does all that resonate with you?
Mike: I agree with you. I think I’m in the same camp where I don’t think about it often. Occasionally, we will get somebody who writes into us a set of questions at startupsfortherestofus.com and says, “Hey, I just wanted to let you know we did this and would you mind putting our link up under the success stories?” We obviously don’t go and update it a lot but there are occasions where people will write in and say something, saying, “Hey, you changed my life,” or, “We implemented this,” or, “We launched this new app that got me out of a job that sucked.”
We will do that on occasion but I don’t think about it too much, I guess. Maybe I should but I do know that, obviously, I see the stats and stuff. It’s hard, in many ways, to associate an email address or a blip on the screen from some metric someplace with actual people, I’ll say, because there’s that level of abstraction. I actually teach people this when I’m talking to them about Bluetick because in every email address there, there’s a person behind it. You have to treat it that way. I think it’s very easy to lose sight of that especially when you’re looking at all these different marketing tools that measure this or analyze that. It’s like every single one of those has typically keyed off a person.
Rob: Yeah, and I think we made a good move in launching MicroConf. I remember the reason we did it and it was because Micropreneur Academy had a community it was building and we wanted to meet people in person. The fact that we now know, in person, face-to-face, by name, so many podcast listeners, I think, is a unique thing because if we didn’t have MicroConf, how would we have met all these people? Maybe at BoS or maybe at other conferences, but that has helped me understand who are audience is more.
I think it’s also helped shape some of the content that we produce and how we talk on the show. There are days when I will outline a podcast while we’re on the show and I’m saying something almost specifically to one person based on either one conversation I had with them or just the persona of, “Yes, this person with these WordPress plugins, this episode’s for you. These are all my thoughts that I would tell you if I had the time to do an individual call with you but, instead, I’m just going to record this podcast.” I think that’s been helpful to have real people on the other side of the earbuds because a lot of podcasts don’t have that.
Think about if you had 20,000 listeners and you didn’t have a conference. How would you possibly know the people who are listening?
Mike: Yeah, you have absolutely no idea. I do the same thing to some extent as well on occasion in an episode and there was somebody who emailed me earlier in the week or earlier in the month and said, “Hey, what are your thoughts on this?” and, a lot of times, I’ll reiterate them through the course of a podcast episode because you can be a lot more expansive on a podcast episode than you can in an email. I have tried to cut down on the length of the emails that I write these days but it’s easier to talk about it and just do a podcast episode on it than it is to drill into all the little details and edge cases in an email versus somebody asking for advice about a specific thing. Speaking of which, we should also put out a call and say, “If anyone has questions that they want answered for the podcast, this would be a good time to send those in because we’re running low on questions,” I believe. Is that correct?
Rob: That’s correct, yep. If you can, you can call into our voicemail or send us an .mp3 file or even just drop us an email because we are almost out of them so we would get your question quite soon.
Mike: We’re accepting emails now?
Rob: Accepting emails and accepting five-star reviews on iTunes. I’m kidding. I wanted to run through just a couple of favored and most popular episodes but it’s hard to know what resonates with different people. I remember Episode 47 was Movies for Nerds and it was a bunch of startup tales, and I remember that being a big deal for a while. I think it had our highest listenership of our first 50 episodes for quite some time. Then, a favorite is always the podcast for startup founders. Episode 104, 240 and 395 are basically that episode. It’s podcasts and we’ve updated that several times. Then, Episode 255, Moving on from AuditShark, seems to have gotten a spike in listenership on that one and some extra-popularity which I think is interesting. You can still get that one in the podcast feed. I think the feed goes back to Episode 254. Are there any others that you remember offhand or do they all start to blend together at some point?
Mike: I think they blend a lot, to be honest. It’s hard for me to go back and say because I was there for the entire conversation so it’s hard for me to point to any particular one where it’s like, “That really stuck out to me,” or, “I listened to that half a dozen times,” because I was involved in the discussions. There’s not many that really pop out. It’s like, “This is interesting,” although I have heard people who have commented on the Moving on from AuditShark and how difficult that was, especially leading up to that whole decision.
Rob: That makes sense. I have gone back periodically and I’ll just go back and randomly pick 10 episodes. I might go back a year or even a year and a half. I’ll go back to that early podcast feed or as far back as it goes, which I think goes back 150 episodes so I guess that would be almost three years. I’ll listen to 5 or 10 in a row and it’s kind of fun to walk down memory lane. Typically, you’re either working on AuditShark or just moving on. I’m working on Drip or, even before that, HitTail.
It’s interesting for me to see what I agree with that we say and what I disagree with. I think things change that quickly, that there are opinions that one or both of us had that I’m like, “You know what? I don’t think that holds true anymore,” or there’s things that we say that I’m like, “Wow, that’s really insightful. That’s a pretty smart thing. “It’s not patting myself on the back; it’s just like, yeah, Mike and I had a really solid answer to that listener’s questions or a solid take on pre-launch email marketing or that kind of stuff. It’s fun to do that. I don’t do that much but, when I do, there’s definitely some good content on the show, I think.
Mike: One of the things I wonder about is, a long time ago, we’ve made the decision to put the transcripts of all the episodes out there partly for SEO reasons but also just so that it made it easier for us to go back and search through if we’ve found something. I think that we’re still very happy that we made that decision even though it cost money for every single one of those transcriptions, but what I find interesting about what you just said is that when our opinions on something change, there’s still that record of what our opinions were at the time. I wonder if there’s any confusion that could potentially be drawn out of that by people who search for something and then say, “This is what Mike’s and Rob’s opinions were on this back in 2014 or something like that,” and maybe that leads them down the wrong path. I wonder if that’s a nonsensical concern but I’m thinking about that too much.
Rob: I don’t know. People have definitely asked for an updated take on certain topics. I guess it’s hard to know or impossible to know.
Mike: Yeah, you wouldn’t know unless somebody said, “Hey, I followed this advice,” and then you’re like, “Yeah, now that you asked me again, I’m thinking about that and I would do something different now versus then.” That’s part of the value of having that transcript or being able to say, “This is from four years ago or five years ago.” People can also take that in context and say, “It’s from X years ago. Does that still hold true?”
Rob: Yeah, that’s true. I think you’re leading us to the topic of today’s episode, which is probably just going to be a short conversation at this point because I feel like this has been good. Just reminiscing and talking about things, I think, is fun to do. We don’t do that very much and so it’s interesting to think about. We titled this one The Importance of Consistency and I think the consistency of showing up every week has been perhaps one of our biggest weapons or one of our biggest strengths in building the podcast.
I know, early on, we did every week and then we ran at a content about 20 episodes in and then we started going every other week and realized that the listenership was not growing at all. Then, we made it a commitment and we also made it easier. We make it so that we show up, we record and then our editor does everything from there. I think that was a game-changing issue for us, getting someone who we can essentially pay to really get the show produced. That’s the only reason.
I think the two reasons we’ve been so consistent–I know from my perspective–is, number one, because it’s not a ton of work for me. Even in the busiest and most stressful days of growing Drip, selling Drip and all of that stuff, I knew that I could show up on the mic for about 45 minutes and you and I could record and that it would be there. It’s very, very rare that you or I miss an episode because we’re too busy. I know if that ever happens. It’s always because there’s a vacation or we have a scheduling snafu or something.I can’t remember a time where you were like, “You know what? I’m just swamped this week. I can’t record.” It just doesn’t happen. We’ve prioritized it and it’s on both of our calendars. That’s the other thing. If this was a solo podcast, there would be so many weeks where I wouldn’t show up, but the fact that I know that you’re going to be there means I can’t leave you hanging.
Mike: I think that has to do more with accountability and having yourself accountable to somebody else. It’s like a gym partner. If you’re going to the gym by yourself, it’s a lot easier to fall off the wagon than if you know that your buddy is going to meet you there and you’re going to lift weights every Tuesday or four to five days a week at 7:00 AM. Somebody else is depending on you to be there.
Rob: Yeah, that makes sense. As you pulled a couple of references, there’s an inked.com article, differenceconsulting.com and [0:30:13.5] Express. We’ll link them up in the show notes but these are talking about consistency and the power of it.
Mike: Yep, and I think the first one is that, for me at least, consistency builds predictability. For other people, it’s essentially eliminating the unknown. We drop this podcast early in the morning every single Tuesday almost without fail except when there’s a technical glitch. When that happens, there are people who will email us and say, “Hey, I don’t see the episode out there. What’s going on?” Everyone knows it’s going to be there and if there’s something that comes up where we’re going to need to record an episode in advance, we make it happen. We always have a contingency plan. We plan ahead and make sure that that’s going to happen because we know that if we don’t, we’re going to get emails, tweets and things like that like, “Hey, where is the podcast episode?” That happens when there’s a glitch, but we don’t miss the episodes.
Rob: That’s right. Even in the weeks of MicroConf which are super busy and taxing for us, we record ahead, in essence. We get an episode or two ahead. I was thinking there was one episode that was about 40 episodes ago so probably around 360-ish where you went on vacation or something happened last-minute and I was trying to get a guest and I couldn’t.
Mike: It was Episode 360, the one where Rob takes over the show.
Rob: Something happened where my guest fell through and I couldn’t get anybody online. It’s just a solo episode and I comment in the episode like, “I’m doing this because we need to ship something and I’m just going to talk to the mic.” I answered a bunch of listener questions that day and it was actually fun. I wouldn’t want to do it every week but it’s that kind of thing of just making sure that we get something into your earbuds every Tuesday morning.
Mike: Interesting that you said you’re going to talk to the mic.
Rob: I know. Consistency has done a lot for us. It builds trust. It’s predictable so it eliminates unknown for folks, and I think these articles were saying it shows dedication. It shows that we’re committed to something. I think subscribing to a podcast and sticking with it is a commitment. It’s a bummer when I subscribe to podcasts and I get invested and then they just pod-fade and they disappear. It’s like, “Man, this sucked.” I think the fact that we do have this many episodes can be a show of dedication and allows people to trust us more that we’re going to keep shipping.
Mike: Right, and the other thing I think is interesting is that, early on, what our main goal with the podcast was, really, to help promote FounderCafe but I think that that changed over time because we really don’t promote FounderCafe too much on the podcast. In fact, I’ve heard from people, “You should.” People tell us, “You should promote FounderFace a lot more on the show because, then, you get more people into it and you get more conversations and there’s the whole network of facts that can go into that.”
If you are interested, go over to foundercafe.com. There’s an application that you can fill out. It’s $100.00 per quarter and it’s a set of forums that you can join to interact with and ask questions of and get information from people about whatever it is that you’re working on, whether it’s a new marketing campaign or you have a question about how to use a particular product or what other products people would recommend for a certain situation. Definitely go in there and check it out. The application process is really just to help filter people out that are not a good fit. There are people where we’ve essentially turned them away because in the application, we ask what they want to get out of it and, if they’re not going to get out of it, what they would expect, then we’re just going to say, “Hey, look. This is not a good fit for you.”
Rob: Yep. It’s an online community of seasoned entrepreneurs just like you, and we do a really good job with the application process in making sure that we get folks in there who are going to help each other succeed in essence foundercafe.com.
Mike: I think the other interesting thing about the podcast and how we’ve been so consistent over time is that, as I said, we changed what the main reason that we’re doing it early on was but, since then, one of the things that comes to mind is back when we first started the podcast, there really weren’t any other podcasts that were like ours or was catering to our audience. It’s interesting that there are a lot of other podcasts that have popped up that are, in a similar vein, startup founders, working from home, boot-strapped or self-funded and building something and just talking about it. I think it’s really interesting to have seen those but early on–and, again, not to toot our horn here–we’re trailblazing. At this point, we’re no longer trailblazing. We’re like the old horse on the track.
Rob: That’s true. Sometimes, I wonder if someone comes along and says, “You have 400 episodes? That’s either really cool and shows you’re consistent or it’s overwhelming.” They’re like, “Well, I don’t want to get into this show. There’s already 400 episodes. I can’t possibly catch up.”
Mike: I was going to say potentially demotivating to certain people because they’re like, “I would start a podcast but these guys have got hundreds of episodes. Who would listen to me if these guys are going that strong or going for that long?”
Rob: Yeah, I wonder if it cuts both ways. I was thinking more from a listener perspective, someone who decides to subscribe or not. 400 episodes could honestly discourage them because they just can’t catch up. It’s like, “Well, I’ve already missed all that.” It’s like coming into a show or hearing about it when it’s five seasons and it’s like, “Why? I don’t think I really want to watch all that.”
Mike: Yeah, I’m not sure. That can happen with TV shows and stuff like that like The Sopranos. I’m never going to go and watch that. It’s just not going to happen.
Rob: I know. I’ve heard it’s so good but there’s too many episodes. There isn’t too much good TV out these days.
Mike: I think that’s a little bit different from what this podcast offers just because in this podcast, every episode is different and you can take it as a standalone thing versus something like a TV show where if you’re not really involved from the beginning, it can be hard to get in there. I think General Hospital has 14,000 episodes or something like that. It’s some ridiculous thing. They’ve been going since the ’60s or ’70s and they just drop a new one every week. I think Sesame Street has some ridiculous number as well.
Rob: You can drop into them. I think our podcast is more like Law & Order because it’s episodic. It’s like a single episode, start to finish, you can get value out of it or you can follow the story over the years. That’s what I’ve heard from people who liked the podcast, is they say they came for the content, originally, and the tips and the tactics and then they stick around to hear what we’re up to, in essence.
Mike: I guess it can go either way, then. What do you get out of the podcast these days?
Rob: That’s a good question. I don’t know that I’ve asked myself that question in a few years. I think, early on, it was definitely because there was no other content like it and I felt like it should exist in the world. I wanted there to be people talking about this stuff much for the same reason that we had Micropreneur Academy and FounderCafe and MicroConf because we wanted them to exist in a world and we wanted to be part of those communities.
That’s what the podcast was in the early days as well to promote what’s now FounderCafe. Then, over the years, I think, it’s certainly helped with Drip because just having the audience as an early seed, an early customer group, was helpful. These days, I don’t know. I don’t know that I can point directly to something right now that I’m gaining from being on the podcast but I do enjoy it, if that makes sense. I don’t know that I gain anything by playing Dungeons and Dragons with my 11-year-old but it’s fun. I have gotten things out of it in the past. It’s worthwhile, certainly, to show up and do the show because it has yielded so many things, I think, for both of us.
Mike: I think I would call a random benefit generator, like you don’t know what the benefits are. It’s hard to point to any specific thing like, “By doing this podcast, I’m going to get 75 new people added to my product and I’m going to make these certain relationships.” I think it’s just hard to predict those in advance or, even at the time and, say, “Down the road, I’m going to get these benefits out of it.” There’s definitely examples you can point to in the past, but I think that there’s a lot of things that you just get this random set of benefits moving forward that’s hard to nail down and say, “This is what I get out of it.”
Rob: Yeah, that makes sense. Someone said a portion of the value you put into the world, you get a small portion of that back, and I think that’s a really apt and insightful thought, and that has been true in my experience. I think that, by putting the podcast out, there’s value created in the world and they put in the hard work. The founders who listen to this, they put in the hard work. If we had some type of influence or motivation or we provide something for them, I think there’s a lot of value created in the world and a little bit of that does wind up coming back to us, whether it’s the ability to sell at a conference, whether it’s business opportunities or whether it’s if you or I needed to raise funding to do a small, bootstrap kind of angel round.
I think that the podcast has made that so much more possible for us, and we’ve had other avenues as well. Obviously, I still have an email list from my blog. I have the book list. There are other things that we do but the podcast is probably the thing that you and I have done. Certainly, for me, it’s the thing I’ve done with the most consistency because of what we said earlier. We’ve made it pretty streamlined and it’s enjoyable and because of the commitment to do it. Imagine if we missed a week.
Mike: I think the internet would freak out for a little while.
Rob: It would feel really weird to me to not have an episode or if we decided that today was the last show. At 400, we’re just going to be done. That would really be odd to not be putting something into the world. I think that’s the thing, is blogging is so time-consuming and as much as I loved doing it, just once the business has gotten in the way and I needed to focus, I had to stop blogging. I made that decision to do it, but I still want to be able to put thoughts into the world because I am experiencing new things and I feel like I still have things to teach and share with people, and the podcast is such a good way to do that because of the low time commitment.
Mike: I also think that it’s a better medium for doing it than a blog post where somebody might hit upon a blog post and they may or may not read it. If somebody subscribes to your podcast, it becomes a much more intimate experience where they feel invested in the story and the people who are doing the podcast, and I don’t think a blog can raise that level of connection between the reader and the author versus something with a podcast, like you’re in their ear. Your actual value is in their ear.
Rob: It’s definitely much more engaging, and I think we learned that early on. I talked to a few podcasters who are also bloggers and, in our early days, I remember my blogging audience was 10 times the size of the podcast audience but I felt like the podcast audience was so, so much more engaged and so much more willing to interact with us. Now that the podcast audience has grown to what it is, there’s just a lot of value in having people listening in through the earbuds, as you said.
Mike: I guess we should at least give one tip for consistency, though, because we’ve talked about the importance of it but we haven’t actually talked too much about any sort of tips for maintaining consistency. We talked a little bit about having an accountability partner or something along those lines. I think we briefly talked about what the goals are, the benefits of doing something for a while. Do you have a tip that you can share for consistency?
Rob: You just couldn’t let it go, huh? You had to go with the patented Starters for the Rest of Us formula of providing some kind of tip or tactic in every episode.
Mike: You want to give that tip on the next episode? That’ll be the cliffhanger for Episode 400?
Rob: I have a couple of tips and it’s what I’ve just said. If you want to be consistent, have that accountability partner where you have to show up, make it easy or reduce all the friction you can. If you want to be consistent about going to the gym, have all your gym clothes already in the car so you don’t have to look for them in the morning. Just make it easy, and that’s what we’ve done with the podcast, is hiring an editor and making the process so we just let this get put into Dropbox and then it magically shows up in my feed five days later with the transcript and all that. I think those would be my two biggest ones, is remove friction and try to have someone else busting your chops if you don’t show up.
Mike: I think those are good ones to leave off with. If you have a question for us, you can call into our voicemail number at 1-888-801-9690 or you can email it to us at questions@startupsfortherestofus.com. The theme music is excerpt from We’re Outta Control by MoOt used under creative commons. Subscribe to us in iTunes by searching for Startups and visit startupsfortherestofus.com for the full transcript of each episode. Thanks for listening. We’ll see you next time and thanks for sticking with us for our 400 episodes.
Rob: Nice work, man. High-five on 400 episodes. I’m pretty proud that we’ve done this.
Mike: Me, too.
Episode 399 | How Derrick Reimer is Validating His Ambitious Third SaaS Application
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Show Notes
In this episode of Startups For The Rest Of Us, Rob talks with Derrick Reimer, co-founder of Drip, about his new SaaS application Level. They talk about what inspired the idea as well as ways Derrick went about trying to validate it.
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Rob: In this episode of Startups for the Rest of Us, I talked with Drip cofounder Derrick Reimer about what it’s like building and launching his next start up Level. This is Startups for the Rest of Us episode 399.
Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at building, launching, and growing software products. Whether you’ve built your first product, or you’re just thinking about it. I’m Rob.
Derrick: I’m Derrick.
Rob: We’re here to share our experiences to help you avoid the same mistakes we’ve made. How are you this week sir?
Derrick: Well, I am deep in the process right now of building out some mockups of my new app called Level, to hopefully get some more concrete things in front of some of my early access list folks.
Rob: That makes sense. If folks are interested just right from the top, level.app is the domain name. You have a really tight landing page. If you’re listening to this and you want to see–this is maybe 400 to 500 words of text–and it is on point. You’ve got the headings, you can skim it, at the bottom is fomo, the reserve your handle today, you can claim a little slice of real estate on level.app. Then you have the social proof, right? 3,542 people who have reserved their handle including me, and so if your name is Rob, I’m sorry but I got level.app/rob. How’s the landing page working for you?
Derrick: It’s working really well. That is actually a live query now showing the current count. It works surprisingly well. I wasn’t sure exactly what to expect when I first built that but I figured that the scarcity play would be effective. I and had a few conversations with folks at MicroConf too, about this. I saw their eyes light up, and they’re like, “Oh yeah, make sure to let me know before you do that.”
Rob: That’s when you know you’re on to something.
Derrick: This is a good sign. They can appreciate it from a from a marketing ploy and then they’re like, this kind of instinct of, “By the way, I really want to know when you do that so I can get mine.”
Rob: For those listening, if you don’t know what Level is, it’s an alternative to real time chat designed for the software development workflow. I just pulled that right from your landing page but it’s ostensibly a competitor to Slack but a much less interruptive experience. More asynchronous, not the blinking red dot, I guess it’s not blinking in Slack but everything’s synchronous by default. In Slack and you’re going for the opposite in essence, and this stems from?
Derrick: From really my experience with Slack. My first time using Slack was with Drip when we were a team of like two or three. It was not painful at all at that stage, but gradually, as our team size grew, it started to get a little bit more cumbersome. I remember actually, the first time I was in a “big Slack,” team was in our building back in Fresno. That was like an early warning that, “Hmm, I think this maybe doesn’t scale so well as your team grows.”
The building chat was full of just folks tossing around various pieces of information, most of them not urgent but often pushed through with an @channel or an @here, “Hey, there’s some cookies in the in the kitchen.” And it’s like, “Do I really need to get pulled out a flow to hear that piece of information?” That was like an early sign that Slack seems kind of broken especially when there’s a lot of people chatting back and forth.
That experience was reinforced after we were acquired by Leadpages and we joined the broader company wide chat. There was about 150 people in there, and a really similar experience where a lot of well-intentioned people who weren’t trying to interrupt each other, but the tool just kind of failed as in essence and made it really hard not to accidentally interrupt people’s flow. Level is really kind of a reaction to that problem. I just observed this over the course of years and I just couldn’t get it out of my head, so now I’m building my take at a solution.
Rob: Yup. You wrote a manifesto a few months back and published it on your blog derrickreimer.com. I see now you’ve you republished it at level.app/manifesto. In essence, you’re describing the pain points you’ve just indicated—of the interruptive stuff in your story.
Derrick: Yeah. The manifesto was kind of step one actually for introducing the idea to the world. I didn’t really waste any time after moving on from Drip. I think I’ve published it on my last day at Drip, is when it kind of soft launched. Then the following Monday, I really did a big push in the manifesto. I was just sort of itching to get this out into the world. That promotion was probably, I think it worked really well because it sort of made a splash, it made a bold statement. I was able to gather quite a few email addresses off of that. I think it was maybe 300 to 400 within the first couple of days, and so that gave me a nice launching pad of folks to start engaging with. Obviously, people sharing it around on social helps too. I think that was a really effective strategy for making the first intro to the world.
Rob: II know you had kind of been noodling on it for awhile just in the background in your head and because we’re faced with the limitations of Slack everyday working on the Drip team, and you left Drip was it February of this year or was it March? I guess it was three or four months ago?
Derrick: Yeah, three or four months ago. Beginning of March, yeah.
Rob: Because that’s the more important thing for someone who’s listening to this two years from now, they don’t care what month it is. You hit the ground running. When you published the manifesto, I remember you wrote it up in a Google doc and then you had a couple of friends come in and edit and make suggestions and all that stuff, and then you published. What is it Twitter that gave you most of your sign ups? Because I remember, it didn’t go up in Hacker News, right? It got a few or something but it didn’t make it to the front page which I was frankly surprised by. How do you think you got those 300 or 400 sign up for someone else who’s thinking about doing it?
Derrick: It was predominantly Twitter. I think that was effective particularly for me because this is a product that’s marketed towards developers, and that’s kind of the premier place where designer, developer types hang out online. I think that was where most of my strategy was focused was trying to get people to retweet it, to like it, to share it. I did assemble a list of folks who are in my inner circle, friends of mine who also have a decent following on Twitter and did manual reach out to those folks just to tell them, “Hey, I’m going to be sharing this thing, if you wouldn’t mind, could you please tweet it out to your followers?”
Most people are really eager to help out. I think it’s where a lot of the lift came from. I did actually try running some Twitter ads that day. I didn’t really tuned the audience too much. I just let Twitter auto choose that by hitting the promote button. That drove probably 30% of the impressions for it but zero activity. I would say majority, I think I put in maybe $100 into that just to see if this is going to help provide any additional lift. I think a majority of it was really organic shares on social. I also emailed my own personal newsletter list which is pretty small just like a couple hundred folks on there at the time. I think I generated some shares off of that as well.
Rob: I could imagine that. I remember there were some comments, I think it was on Twitter but my favorite comments are always the ones that completely missed the point of an article. I would spend eight hours writing something. I know you spent a lot of time writing this, and then you have a one sentence that has something that is debatably, maybe factual, and someone rips into that, and you’re like, “Dude, that has nothing to do with the point.” There was one of these sentences we’re talking about, “Yeah, once we started using Slack, it was great. This is not news now, but five years ago, it was pretty groundbreaking.” There were somebody like, “Well, 12 years ago or 15 years ago, I was using IRC.” That’s not really the point, what are we even talking about right? Did you did you have much of that or was it the minority?
Derrick: It was very much the minority. I think it was on Reddit actually, and maybe I sort of attracted some of that flaming because I did post my own manifesto on there which I know is a little bit against the way you’re supposed to use the service. I was like, “Oh, what the heck. I’ll just post it in the developer subletter or whatever.” Some people took issue with the timing of when Chat was invented. The whole notion of arguing that this whole argument is invalid because I got the year wrong on when it came to the forefront, it was just laughable.
Rob: Yeah, it is what it is. Luckily, that tends to be the minority thing but it does always side track. That’s actually one of the reason that I completely disabled comments on my blog. I got tired of those conversations going on. There were good comments, and then just the ones that were irritating, or ill-informed, or just obviously looking to nitpick stuff. That’s just not helpful. That’s been my own personal journey with that.
You posted the manifesto, you got a few hundred emails, and you’re on the Art of Product Podcast with Ben Orenstein, mutual friend of ours, and you’ve been talking about your process through that, so I’m sure that that has helped get other developers interested in what you’re up to and probably slowly built your list over time. Once you had that list, what were your next steps? Because I know that you and I had talked about this a while back. This is a very ambitious project, and it’s either going to be awesome, or you’re just going to get smoked by Slack. They’re just going to stomp you, or not even notice you, and no one’s going to switch because of the high switching costs. It’s one or the other, and you’re fully aware of that upfront. What were your early steps of trying to validate the idea a bit more than just positing, “Hey, I can build a better Slack.” It’s like, “Okay, step two is…” What are you up to next?
Derrick: I was definitely leery of making the classic mistake of taking a little bit of early indication that we’re on to something, and just running with it and not talking to anybody—which is a mistake that I’ve made before in the past—and so many folks do. I really wanted to air on the side of having too many conversations with people to try to asses out is this, “Am I on the right track with this? Is this actually going to sell well in the market?”
I think it was within a few weeks after launching the manifesto, I sent an email out to the list. I decided to email the entire list which looking back was probably should have started with a smaller slice just to gauge what the response rate would be. But I basically emailed out and said, “Hey, thanks so much for signing up. I want to have a conversation with you and hear more about what your pain points have been with real time chat in the workplace. At this point, I’m not trying to propose any solution to you beyond what I’m kind of alluding to in the manifesto. I really just want to hear what particularly about real time chat isn’t working for you enough that you gave me your email address.”
I sent this out and I sent a Calendly link with that so that people could book a 20-minute slot on my calendar. I kind of reserved it to afternoons only, thankfully, to reserve the mornings for productive time. I think I got around 40 people booking time on my calendar.
Rob: Dope. That’s both really good news and also like, “Oops,” Were they 20 minutes each? What was that? 16 hours?
Derrick: Something like that. It turned out to be basically three and a half to four weeks of afternoons booked pretty solid. At first I was like, “Oh boy, this is a lot.” But I think, at the time, it’s early enough, I’m like, “This is probably where my time is best spent. Talking to people and hearing in their words what problems they’re having.” That did help guide the way I would thought about the product. I would say influenced where I thought the biggest emphasis should be.
I wasn’t sure if the emphasis should be on reducing interruptions, or just organizing content better, or should I be focused around really optimizing for asynchronous, where are the pain points actually. It helps clarify my thinking. One of the things that we’ve talked about a lot that helped in the early days of Drip was just getting feedback from people and looking for patterns. What are the things that we’re hearing over and over again, and those are likely to be things that we should be paying attention to. I did spot some of those themes and patterns. Looking back, it was helpful to have a decent sample size. If I’d only talked to 10 or 15 people, then that may not have been enough to spot patterns. I think it was good overall.
Rob: Yeah, I know it was a lot of time. It seems like you were learning quite a bit as you were going, and at that time, you didn’t have any mockups right? You really were just talking through how would this sound, or how would you use this, or that kind of stuff.
Derrick: Yeah. I tried hard not to actually tip my hand on what I was thinking. I just wanted to hear unbiased people’s take on like, “You know, if there’s one thing I could change about Slack.” or I ask questions like, “Do you use Slack threads and what do you think about them?” Or, “Do you use search heavily in Slack?” Just to get an idea of like how much are people relying on the tool to be their source of the repository of historical information, versus how much is just ephemeral conversations that get transferred into project management tools. There was a lot of things I was just trying to learn and SaaS out from people without tipping my hand too much on my thoughts of a solution.
Rob: Right. In the back your mind, obviously, you know that you need some kind of differentiation, pretty strong differentiation from Slack because everyone’s going to immediately compare you to Slack. One thing you’ve chosen is to niche down to developers, right? You know that interruptions piss developers off. It breaks your flow. You and I have experienced this first hand as our development team grew.
I used to tell people snooze your Slack for two hours, do not disturb it during this time, just try to get focus so that we can continue ship code at high velocity. You have that but there was there was one other thing, that early on, you made a decision to do that is potentially risky but it’s another differentiator. You want to talk a little bit about that?
Derrick: Sure. You and I noodled this little bit when I was just in the idea stage, and I think we were having drinks one day and I was like, “Alright. I think I figured out the one thing that’s going to really make Level stand out. Let’s open source it.” You spit your drink all over my face. There are examples of this happening, there’s Discourse, there’s Ghost, there’s GitLab, so there are companies that are already doing this.
Rob: Not in the chat space, those are in other spaces but it’s a mockup.
Derrick: Yeah. I will say there are other open source chat tools but I don’t think they’re really making any kind of headway as a business. They’re just open source only. The model of open source, the core code base, but then charge people for hosted version of the service is basically the model that I’m going for. The thinking behind it is that one, since this product is marketed towards developers, a lot of developers sort of appreciate when things are open source, when they can look at the source and see what’s happening with their data, and just sort of have that transparency, and also be able to download it, and stand up a cluster of servers, and manage it themselves if they really want to do that.
I’m sort of banking on the fact that most companies that have sufficient budget to pay for a tool aren’t going to want to go through the hassle of managing their own servers, and patching them, and keeping them up to date and all that kind of stuff. They’re just going to want to pay me for the hosted version. But if you don’t have the budget or if you’re bootstrapped, and you’re really scrappy, then by all means, download it, stand it up on your serve, and when you’re ready, you can transfer the data into the hosted service.
Rob: This was, in essence, around that you and I kept talking about, how you can have a free plan because I think you need one. We both thought you need one because that’s kind of part of the course in the space, and how are you going to do that as a bootstrapper, and not get killed by hosting costs, or not get killed by support and all that, and this is a way to do two things. That’s pretty ingenious if it works, and it’s, like you said, developers or more tech-oriented folks, this is in essence the free plan in addition to the benefit of it being open source which most people like, and then they can pay you for whatever the hosting, and the support, and as an almost SaaS app.
Derrick: Yeah, exactly. It’s not only the free plan but it also kind of paves the way for potentially offering on-prem if I’m sort of optimizing for the ability to setup the entire service from the ground up easily as opposed to just running a SaaS app or maybe you kind of cobble together your own hosting situation that’s not easily replicable. I think building it in this way paves the path for companies that don’t want to run a hosted service, or trust another company to run a hosted service for them, they can download it, and run it inside their firewall too.
Rob: Yeah, and that’s really interesting. Can you do that with Slack?
Derrick: No, I don’t think so.
Rob: There’s no on-prem version as far as I know. That could be an interesting enterprise play. I know that wouldn’t necessarily be the market you go after first, but if you get traction, you get name brand, and people are like, “Hey, not only is this open sourced–” which big companies tend to. They either hate it or love it, but if they understand it they’ll love it, and then like you said, you can do the on-prem play, and those are super expensive, that would be a really nice, high-end revenue source for you if you’re willing to put up with the headaches.
Derrick: Right. That probably would be down the line where I have traction, and a team, and I could kind of establish a team to run that end without me having to do all the sales and all that kind of stuff.
Rob: Totally, yeah. After you got all of the information from those Skype calls, I know you and I then met. I know you did a bunch of thinking on your own for a couple of weeks and then you were at a point and you said, “You know what, I have thoughts, it’s not ready to go into mockups yet. It’s not ready to build a UI. I have a bunch of ideas about different message types and how to structure these, let’s do wide port session.” And so you and I met at the local library, actually, in a nice little room, and you wanted to talk about I think, the value of that, or what that felt like and just the point of doing that.
Derrick: A lot of times there are these key points when you’re designing products where it’s like, there’s a lot of information scattered about and kind of coalescing that information into something actually tangible. It’s hard to hold that all in one person’s head, I feel like. I tried doing a little bit of solo whiteboarding, and I jotted down in a notebook, and I probably could have arrived at similar conclusions, but I think it would have taken a lot longer and probably wouldn’t have been quite as crisp and clear.
We whiteboarded for probably an hour and a half or two hours. I think we came away with some really concrete takeaways. It kind of started with like, “Okay, I have all these types of messages that people send in Slack. There’s water cooler type chat. There’s people shelling their work. There’s people announcing things to their team. There’s synchronous discussions maybe around an incident, or something happening in production where we’re needed to go back and forth quickly, and there’s people requesting something from someone else, or maybe things blocking their work.”
I had this long list of things. I was like, “Okay, I need to kind of build up what’s similar about these, what’s different, how will the application know what types of message do I need to ask the user to tell the app what type of message this is, or can we infer it. Then, how does this translate into a priority and notifications?” It was sort of like a really central piece of the application. I felt like I couldn’t just start designing UI because it all kind of hinges on how each of these types of messages is treated. I think this was a really good candidate for whiteboarding, and yeah, I felt kind of like we’ve reignited some of the magic from the Drip days–it was really fun too and motivating. I would say, if you’re solo founder, I think it can be really valuable to find a friend that you have good rapport with, and can kind of brainstorm with, and bounce ideas off of, and just get there kind of two brains thinking about the problem, it can often lead to a really great result in the end.
Rob: Yeah. I was, I don’t know–concerned is probably not the right word–but going into it I was like, “Uh-oh, Derrick’s been thinking about this for months and I’m way out of that whole process. Are we going to be able to rekindle the old magic?” On Drip, we just used to whiteboard all the time, and came up with really good stuff–I thought. I use to say, with the two of us in the room, it’s like 10 times better. We catch all the edge cases and it’s like you said, two people holding the whole thing in the collective heads rather than one person trying to do it. There’s always a back and forth, there’s your sanity checking, there’s just the collaboration, it’s just night and day. If you’re standing in front of a whiteboard on your own, I think you and I really found how different that could be when we started collaborating right on Drip.
Derrick: Yeah, because you’re thinking about stuff, and you reach these points where my train of thought hits a dead end. If you don’t have someone there to kind of either pivot it or just pick up where you left off, then it can be a really frustrating process. You feel like you’re slogging through mud, and just having a pair there to help keep things moving. There were times when we would sit there and just kind of stare off in the space for a minute or two, and that’s okay too. It was a really fun exercise.
Rob: I agree. Being comfortable with silence too. We’ve talked about this when I came on your podcast. If you are going to whiteboard with someone, one or two people, I don’t know if we ever found a third who is as in our own heads as we are, as in the flow. We certainly had some good collaborators at Drip but you and I can sit there for five minutes with complete silence and not feel weird. I think that’s a big thing is you let the other person think and you’re thinking as well.
That’s the other thing I think with whiteboarding is oftentimes, if I try to do it on my own, I’ll get to a point and I just get stuck. I just can’t get past this and that’s when you will step in, and be like, “What if we think about this?” It’s like, “Oh.” Now you got us past it, and we’re still in the flow, and then we could finish the whole rest the hour. But I would have stopped there and just got hung up on it for a day, potentially. I think that’s a good point where you’re like, you could have gotten there eventually but it may have taken you weeks, and it was 90 minutes or whatever for us. That was super fun, by the way. I came out of that feeling great.
You came out of that then with kind of a mental model of message types, and not quite UI. I know we threw you why ideas around. We never sketched anything but it was always kind of hand wavy and talking as we’re like, “This alert to do this in this flow.” Then did you go straight from there into mockups or what was your next step? I know there was a vacation in there as well, right?
Derrick: Yeah, I did take a little vacation. I’ve been having this feeling of like a little bit of guilt as a product person that I should be getting some more concrete ideas in front of users to get feedback—sort of what I alluded to at the top of the show. I did try to take a stab at building some mockups. I’ve been working on them for a little while now. It’s taking a lot longer than I expected. I think part of that is that, we had some concrete ideas formed from the whiteboarding session but like we said, they’re not actual envisioning of where the pixels will sit, and how the product will actually form together. It was still a pretty fuzzy vision of it.
It felt like I had a lot more work out of my head than I actually did when I started to lay out UI elements. I think that’s probably true of any idea where it’s easy to sort of picture this thing that’s not actually real, and once you try to make a concrete, it’s like, “Oh, there’s actually a lot here to still think through and work through.” Perhaps actually, we could whiteboard on this again and maybe burst through another kind of wall, or I just need to keep slogging through it and returning back to it every so often, and incrementally building it out.
Rob: Yeah, that makes sense. It sounds like you hit—not a robot necessarily—but it’s a bit harder, a bit more challenging than you thought it would be. Mockups are often like that. You’re almost trying to invent something new and you have to thread a needle because you can’t be Slack but you can’t be email.
Derrick: Most of the difficulty that I’m having is centering around this inbox in Level. That’s one of the core pieces of the product is–it’s something that’s really missing from Slack–is that I want to have one place where I can come to and quickly see, in priority order, all the things that need my attention. Then I can step away for six hours, go into deep focus mode, come back, and feel confident that everything I need to see with relative urgency is it’s all laid out for me just as I want it.
Once you start kind of exploring, “Well, what happens when there’s 100 messages posted in this group and 50 in this group? How does the inbox mutate over times, that things don’t become overwhelming, and it doesn’t devolve into kind of the email inbox mess that so many people experience? How can I actually make good on the promise that I am threading the needle well between email and chat?” Once I overcome this, it’s going to be, hopefully, something really good and is really going to resonate with people. But until then, I don’t feel like I can just start showing these theoretical mockups where I just kind of hand wavy say, “Oh, it’ll be always manageable for you.” I want to give some proof that I’m actually on to something–some framework or some methodology for categorizing and organizing these messages.
Rob: Right. Because the challenge when you’re building something new is to validate your most risky hypothesis–that the ones that are most likely to fail where the risk is. Typically, it’s not the code itself unless you’re going to build—“I’m going to build an AI engine to predict stocks.” Well, it’s like, “Alright, that’s your first thing. Can you even do that?” But here, you know that you can write the code to make messages go in and out of a queue and come out of the things. There’s two risks left that I see. One is, can you design a UI that is novel enough, and does thread that needle between the two, and is 3X better or 5X better than the other experience for a certain group of people. Then the last risk will be, will people pay for it?
You validated that somewhat through building your email list and having this in-person conversations. I’m guessing once you have mockups or at some point you’re probably asked for whether it’s verbal commitments, or you may take money upfront, and I don’t think you’ve decided on when you’ll do that. That is a big issue—building the mockups and figuring out how is this flow going to work, and is it as novel enough and iterating on it until it is.
Derrick: I think this is arguably one of the most important pieces to work out because without this, the whole promise falls down. It’s one thing to just introduce threads for example. Slack has kind of arguably, poorly implemented threads. If I just implemented something that was just like, “Oh, everything’s a thread. That’s great but that still doesn’t solve the problem of not being a complete catastrophe when you step away from it for a long time.” It’s one of the critical moments, I would say.
Rob: Indeed. I want to switch up a little bit. We’ve talked a lot about the specifics of Level and your process of validating it, and getting the design going. I’m curious, this is in essence, kind of the third app or third startup really that you’re launching. I know that you launched a couple that came and went pretty quickly. But then, you had obviously, Drip with me. You did Codetree, codetree.com which is kind of project management that sits on top and you did that on the side. You sold that while we were, actually, right around the time that we sold Drip, you sold that if I recall.
Derrick: I sold that, we sold Drip, and I sold my house when we moved. I had three big sales.
Rob: That was crazy.
Derrick: Talk about massive liquidation.
Rob: I know. This really is, for all intents, your third act here. I’m curious if you think it’s easier this time around, is it harder, is there more pressure. Talk me through the emotional side or the mental side of where you’re at with it.
Derrick: I think it’s unique in that, with Drip, I started out as a contractor, and so I was gathering a paycheck. Then I went full time on it and then we had HitTail bankrolling our efforts a bit. It was a self-funded endeavor that was throwing off enough money for a least a decent paycheck so that I could live. Codetree was a side thing–that was nights and weekends. I was basically sacrificing my free time, but in exchange, it wasn’t really costing me actual money. Now, this is the first time that I’m really, as an adult, going off and saying like, “I’m not going to earn any salary or revenue for the whole time that I’m building this thing, or at least until I launch it.”
I think that that introduces, in itself, a bit of pressure that I’m trying to just like always mentally overcome that. Obviously, selling Drip and Codetree helped give me a little bit of runway so that I can afford to do this. That’s arguably the whole reason why we do this is so that we can afford to work on the things we want to work on. I’ve had to do some things like, set aside my living expenses for the next year, and figure out loosely what my budget’s going to look like, and then make transfers from this account to my checking account, and just say like, “I’m paying myself for the next year. I’m not allowed to think about money or stress about it.” It’s a work in progress but working on trying to do things like that to keep myself sane and not get too stressed out.
Rob: That makes sense. I find it funny you’re like, “This isn’t the first time as an adult,” because you were an adult all the time but now you’re married. You have real expenses. You live in a city where the cost of living is not super high. But Minneapolis is definitely akin to a California city that’s not L.A. or San Francisco. It was similar to Fresno which is not super cheap. It’s not like you’re going to live on $2,000 a month here. Depending on how you live and where you live, it’s a non-trivial sum.
I’m glad you did that. I know that you were stressed early on about burning some cash. As you said, the two exits you have helped bolster that, but I think your wife also distinctly gave you permission. She’s like, “You need to do this. You earned this.” Is that the phrasing? It was something like that. Like, “That’s what you did these other ones.”
Derrick: Exactly. This is not the time now to say, “Oh, I don’t know. Maybe I should keep a job and do this nights and weekends.” She’s like, “No, no. This is the whole reason why you sell companies.” I think she has a lot of wisdom in that.
Rob: Yeah, I would agree. Cool sir. Thanks for joining me today while Mike is out of town filling in our 399th episode.
Derrick: Oh my gosh. You’re one off from 400.
Rob: Isn’t that crazy? We’re going to figure something out to do that’s like a big bang, not just Mike and I talking about five ways to wrap or something. Can we do something different? We were the worst at that. We’ve looked back and I think 300 we may have just done a normal episode, that’s kind of a shame.
Derrick: Yeah, you got to take these milestones and squeeze some juice out of them.
Rob: Yup, yup, celebrate them a bit. Cool sir. Well, if folks want to keep up with you, they can hit level.app yeah and then derrickreimer.com. That’s where you blog now and again about your experience. You’re building Level for developers out there, you’re building it in Elixir and Phoenix.
Derrick: Elixir Phoenix is the web, framework web, kind of the rails of Elixir.
Rob: GraphQL…
Derrick: GraphQL is the API layer, and then Elm on the frontend, so the Elm translates into javascript. It’s a very shiny new tech stack for me. But I’m having a lot of fun building in it.
Rob: Well, I think for most people.
Derrick: Yeah, for most people. It’s a fairly proven technology but still on the newer side. I feel it’s really exciting. It’s predominantly centered around functional programming languages. Elixir and Elm, they’re very functional. It’s a bit different from what I’ve been doing. I’ve been writing Ruby for the past eight years, but yeah, I’m having a lot of fun for it. I’m hoping that the Level codebase can be a good example of like a full-scale SaaS application that’s kind of out there in the world for people to reference.
Rob: Yeah. I obviously don’t know any of the languages you’re using but you have such a good way of organizing our codebases, and your Read Me was super clean. I was like, “Ha, if I had a few extra hours this week, I would just run these commands and try to see if I get this thing right.” It was kind of fun. It was good to see it and then get out there. Cool. Well, thanks again for coming on the show.
Derrick: Yeah, thanks for having me.
Rob: I think that wraps us up for today. If you have a question for us, call our voicemail number at 888-801-9690, email us at questions@startupsfortherestofus.com. Our theme music is an excerpt from We’re Outta Control by MoOt, it’s used under Creative Commons. Subscribe to us in iTunes by searching for Startups. Visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening. We’ll see you next time.
Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs be awesome at building, launching, and growing software products. Whether you’ve built your first product, or you’re just thinking about it. I’m Rob.
Derrick: I’m Derrick.
Rob: We’re here to share our experiences to help you avoid the same mistakes we’ve made. How are you this week sir?
Derrick: Well, I am deep in the process right now of building out some mockups of my new app called Level, to hopefully get some more concrete things in front of some of my early access list folks.
Rob: That makes sense. If folks are interested just right from the top, level.app is the domain name. You have a really tight landing page. If you’re listening to this and you want to see–this is maybe 400 to 500 words of text–and it is on point. You’ve got the headings, you can skim it, at the bottom is fomo, the reserve your handle today, you can claim a little slice of real estate on level.app. Then you have the social proof, right? 3,542 people who have reserved their handle including me, and so if your name is Rob, I’m sorry but I got level.app/rob. How’s the landing page working for you?
Derrick: It’s working really well. That is actually a live query now showing the current count. It works surprisingly well. I wasn’t sure exactly what to expect when I first built that but I figured that the scarcity play would be effective. I and had a few conversations with folks at MicroConf too, about this. I saw their eyes light up, and they’re like, “Oh yeah, make sure to let me know before you do that.”
Rob: That’s when you know you’re on to something.
Derrick: This is a good sign. They can appreciate it from a from a marketing ploy and then they’re like, this kind of instinct of, “By the way, I really want to know when you do that so I can get mine.”
Rob: For those listening, if you don’t know what Level is, it’s an alternative to real time chat designed for the software development workflow. I just pulled that right from your landing page but it’s ostensibly a competitor to Slack but a much less interruptive experience. More asynchronous, not the blinking red dot, I guess it’s not blinking in Slack but everything’s synchronous by default. In Slack and you’re going for the opposite in essence, and this stems from?
Derrick: From really my experience with Slack. My first time using Slack was with Drip when we were a team of like two or three. It was not painful at all at that stage, but gradually, as our team size grew, it started to get a little bit more cumbersome. I remember actually, the first time I was in a “big Slack,” team was in our building back in Fresno. That was like an early warning that, “Hmm, I think this maybe doesn’t scale so well as your team grows.”
The building chat was full of just folks tossing around various pieces of information, most of them not urgent but often pushed through with an @channel or an @here, “Hey, there’s some cookies in the in the kitchen.” And it’s like, “Do I really need to get pulled out a flow to hear that piece of information?” That was like an early sign that Slack seems kind of broken especially when there’s a lot of people chatting back and forth.
That experience was reinforced after we were acquired by Leadpages and we joined the broader company wide chat. There was about 150 people in there, and a really similar experience where a lot of well-intentioned people who weren’t trying to interrupt each other, but the tool just kind of failed as in essence and made it really hard not to accidentally interrupt people’s flow. Level is really kind of a reaction to that problem. I just observed this over the course of years and I just couldn’t get it out of my head, so now I’m building my take at a solution.
Rob: Yup. You wrote a manifesto a few months back and published it on your blog derrickreimer.com. I see now you’ve you republished it at level.app/manifesto. In essence, you’re describing the pain points you’ve just indicated—of the interruptive stuff in your story.
Derrick: Yeah. The manifesto was kind of step one actually for introducing the idea to the world. I didn’t really waste any time after moving on from Drip. I think I’ve published it on my last day at Drip, is when it kind of soft launched. Then the following Monday, I really did a big push in the manifesto. I was just sort of itching to get this out into the world. That promotion was probably, I think it worked really well because it sort of made a splash, it made a bold statement. I was able to gather quite a few email addresses off of that. I think it was maybe 300 to 400 within the first couple of days, and so that gave me a nice launching pad of folks to start engaging with. Obviously, people sharing it around on social helps too. I think that was a really effective strategy for making the first intro to the world.
Rob: II know you had kind of been noodling on it for awhile just in the background in your head and because we’re faced with the limitations of Slack everyday working on the Drip team, and you left Drip was it February of this year or was it March? I guess it was three or four months ago?
Derrick: Yeah, three or four months ago. Beginning of March, yeah.
Rob: Because that’s the more important thing for someone who’s listening to this two years from now, they don’t care what month it is. You hit the ground running. When you published the manifesto, I remember you wrote it up in a Google doc and then you had a couple of friends come in and edit and make suggestions and all that stuff, and then you published. What is it Twitter that gave you most of your sign ups? Because I remember, it didn’t go up in Hacker News, right? It got a few or something but it didn’t make it to the front page which I was frankly surprised by. How do you think you got those 300 or 400 sign up for someone else who’s thinking about doing it?
Derrick: It was predominantly Twitter. I think that was effective particularly for me because this is a product that’s marketed towards developers, and that’s kind of the premier place where designer, developer types hang out online. I think that was where most of my strategy was focused was trying to get people to retweet it, to like it, to share it. I did assemble a list of folks who are in my inner circle, friends of mine who also have a decent following on Twitter and did manual reach out to those folks just to tell them, “Hey, I’m going to be sharing this thing, if you wouldn’t mind, could you please tweet it out to your followers?”
Most people are really eager to help out. I think it’s where a lot of the lift came from. I did actually try running some Twitter ads that day. I didn’t really tuned the audience too much. I just let Twitter auto choose that by hitting the promote button. That drove probably 30% of the impressions for it but zero activity. I would say majority, I think I put in maybe $100 into that just to see if this is going to help provide any additional lift. I think a majority of it was really organic shares on social. I also emailed my own personal newsletter list which is pretty small just like a couple hundred folks on there at the time. I think I generated some shares off of that as well.
Rob: I could imagine that. I remember there were some comments, I think it was on Twitter but my favorite comments are always the ones that completely missed the point of an article. I would spend eight hours writing something. I know you spent a lot of time writing this, and then you have a one sentence that has something that is debatably, maybe factual, and someone rips into that, and you’re like, “Dude, that has nothing to do with the point.” There was one of these sentences we’re talking about, “Yeah, once we started using Slack, it was great. This is not news now, but five years ago, it was pretty groundbreaking.” There were somebody like, “Well, 12 years ago or 15 years ago, I was using IRC.” That’s not really the point, what are we even talking about right? Did you did you have much of that or was it the minority?
Derrick: It was very much the minority. I think it was on Reddit actually, and maybe I sort of attracted some of that flaming because I did post my own manifesto on there which I know is a little bit against the way you’re supposed to use the service. I was like, “Oh, what the heck. I’ll just post it in the developer subletter or whatever.” Some people took issue with the timing of when Chat was invented. The whole notion of arguing that this whole argument is invalid because I got the year wrong on when it came to the forefront, it was just laughable.
Rob: Yeah, it is what it is. Luckily, that tends to be the minority thing but it does always side track. That’s actually one of the reason that I completely disabled comments on my blog. I got tired of those conversations going on. There were good comments, and then just the ones that were irritating, or ill-informed, or just obviously looking to nitpick stuff. That’s just not helpful. That’s been my own personal journey with that.
You posted the manifesto, you got a few hundred emails, and you’re on the Art of Product Podcast with Ben Orenstein, mutual friend of ours, and you’ve been talking about your process through that, so I’m sure that that has helped get other developers interested in what you’re up to and probably slowly built your list over time. Once you had that list, what were your next steps? Because I know that you and I had talked about this a while back. This is a very ambitious project, and it’s either going to be awesome, or you’re just going to get smoked by Slack. They’re just going to stomp you, or not even notice you, and no one’s going to switch because of the high switching costs. It’s one or the other, and you’re fully aware of that upfront. What were your early steps of trying to validate the idea a bit more than just positing, “Hey, I can build a better Slack.” It’s like, “Okay, step two is…” What are you up to next?
Derrick: I was definitely leery of making the classic mistake of taking a little bit of early indication that we’re on to something, and just running with it and not talking to anybody—which is a mistake that I’ve made before in the past—and so many folks do. I really wanted to air on the side of having too many conversations with people to try to asses out is this, “Am I on the right track with this? Is this actually going to sell well in the market?”
I think it was within a few weeks after launching the manifesto, I sent an email out to the list. I decided to email the entire list which looking back was probably should have started with a smaller slice just to gauge what the response rate would be. But I basically emailed out and said, “Hey, thanks so much for signing up. I want to have a conversation with you and hear more about what your pain points have been with real time chat in the workplace. At this point, I’m not trying to propose any solution to you beyond what I’m kind of alluding to in the manifesto. I really just want to hear what particularly about real time chat isn’t working for you enough that you gave me your email address.”
I sent this out and I sent a Calendly link with that so that people could book a 20-minute slot on my calendar. I kind of reserved it to afternoons only, thankfully, to reserve the mornings for productive time. I think I got around 40 people booking time on my calendar.
Rob: Dope. That’s both really good news and also like, “Oops,” Were they 20 minutes each? What was that? 16 hours?
Derrick: Something like that. It turned out to be basically three and a half to four weeks of afternoons booked pretty solid. At first I was like, “Oh boy, this is a lot.” But I think, at the time, it’s early enough, I’m like, “This is probably where my time is best spent. Talking to people and hearing in their words what problems they’re having.” That did help guide the way I would thought about the product. I would say influenced where I thought the biggest emphasis should be.
I wasn’t sure if the emphasis should be on reducing interruptions, or just organizing content better, or should I be focused around really optimizing for asynchronous, where are the pain points actually. It helps clarify my thinking. One of the things that we’ve talked about a lot that helped in the early days of Drip was just getting feedback from people and looking for patterns. What are the things that we’re hearing over and over again, and those are likely to be things that we should be paying attention to. I did spot some of those themes and patterns. Looking back, it was helpful to have a decent sample size. If I’d only talked to 10 or 15 people, then that may not have been enough to spot patterns. I think it was good overall.
Rob: Yeah, I know it was a lot of time. It seems like you were learning quite a bit as you were going, and at that time, you didn’t have any mockups right? You really were just talking through how would this sound, or how would you use this, or that kind of stuff.
Derrick: Yeah. I tried hard not to actually tip my hand on what I was thinking. I just wanted to hear unbiased people’s take on like, “You know, if there’s one thing I could change about Slack.” or I ask questions like, “Do you use Slack threads and what do you think about them?” Or, “Do you use search heavily in Slack?” Just to get an idea of like how much are people relying on the tool to be their source of the repository of historical information, versus how much is just ephemeral conversations that get transferred into project management tools. There was a lot of things I was just trying to learn and SaaS out from people without tipping my hand too much on my thoughts of a solution.
Rob: Right. In the back your mind, obviously, you know that you need some kind of differentiation, pretty strong differentiation from Slack because everyone’s going to immediately compare you to Slack. One thing you’ve chosen is to niche down to developers, right? You know that interruptions piss developers off. It breaks your flow. You and I have experienced this first hand as our development team grew.
I used to tell people snooze your Slack for two hours, do not disturb it during this time, just try to get focus so that we can continue ship code at high velocity. You have that but there was there was one other thing, that early on, you made a decision to do that is potentially risky but it’s another differentiator. You want to talk a little bit about that?
Derrick: Sure. You and I noodled this little bit when I was just in the idea stage, and I think we were having drinks one day and I was like, “Alright. I think I figured out the one thing that’s going to really make Level stand out. Let’s open source it.” You spit your drink all over my face. There are examples of this happening, there’s Discourse, there’s Ghost, there’s GitLab, so there are companies that are already doing this.
Rob: Not in the chat space, those are in other spaces but it’s a mockup.
Derrick: Yeah. I will say there are other open source chat tools but I don’t think they’re really making any kind of headway as a business. They’re just open source only. The model of open source, the core code base, but then charge people for hosted version of the service is basically the model that I’m going for. The thinking behind it is that one, since this product is marketed towards developers, a lot of developers sort of appreciate when things are open source, when they can look at the source and see what’s happening with their data, and just sort of have that transparency, and also be able to download it, and stand up a cluster of servers, and manage it themselves if they really want to do that.
I’m sort of banking on the fact that most companies that have sufficient budget to pay for a tool aren’t going to want to go through the hassle of managing their own servers, and patching them, and keeping them up to date and all that kind of stuff. They’re just going to want to pay me for the hosted version. But if you don’t have the budget or if you’re bootstrapped, and you’re really scrappy, then by all means, download it, stand it up on your serve, and when you’re ready, you can transfer the data into the hosted service.
Rob: This was, in essence, around that you and I kept talking about, how you can have a free plan because I think you need one. We both thought you need one because that’s kind of part of the course in the space, and how are you going to do that as a bootstrapper, and not get killed by hosting costs, or not get killed by support and all that, and this is a way to do two things. That’s pretty ingenious if it works, and it’s, like you said, developers or more tech-oriented folks, this is in essence the free plan in addition to the benefit of it being open source which most people like, and then they can pay you for whatever the hosting, and the support, and as an almost SaaS app.
Derrick: Yeah, exactly. It’s not only the free plan but it also kind of paves the way for potentially offering on-prem if I’m sort of optimizing for the ability to setup the entire service from the ground up easily as opposed to just running a SaaS app or maybe you kind of cobble together your own hosting situation that’s not easily replicable. I think building it in this way paves the path for companies that don’t want to run a hosted service, or trust another company to run a hosted service for them, they can download it, and run it inside their firewall too.
Rob: Yeah, and that’s really interesting. Can you do that with Slack?
Derrick: No, I don’t think so.
Rob: There’s no on-prem version as far as I know. That could be an interesting enterprise play. I know that wouldn’t necessarily be the market you go after first, but if you get traction, you get name brand, and people are like, “Hey, not only is this open sourced–” which big companies tend to. They either hate it or love it, but if they understand it they’ll love it, and then like you said, you can do the on-prem play, and those are super expensive, that would be a really nice, high-end revenue source for you if you’re willing to put up with the headaches.
Derrick: Right. That probably would be down the line where I have traction, and a team, and I could kind of establish a team to run that end without me having to do all the sales and all that kind of stuff.
Rob: Totally, yeah. After you got all of the information from those Skype calls, I know you and I then met. I know you did a bunch of thinking on your own for a couple of weeks and then you were at a point and you said, “You know what, I have thoughts, it’s not ready to go into mockups yet. It’s not ready to build a UI. I have a bunch of ideas about different message types and how to structure these, let’s do wide port session.” And so you and I met at the local library, actually, in a nice little room, and you wanted to talk about I think, the value of that, or what that felt like and just the point of doing that.
Derrick: A lot of times there are these key points when you’re designing products where it’s like, there’s a lot of information scattered about and kind of coalescing that information into something actually tangible. It’s hard to hold that all in one person’s head, I feel like. I tried doing a little bit of solo whiteboarding, and I jotted down in a notebook, and I probably could have arrived at similar conclusions, but I think it would have taken a lot longer and probably wouldn’t have been quite as crisp and clear.
We whiteboarded for probably an hour and a half or two hours. I think we came away with some really concrete takeaways. It kind of started with like, “Okay, I have all these types of messages that people send in Slack. There’s water cooler type chat. There’s people shelling their work. There’s people announcing things to their team. There’s synchronous discussions maybe around an incident, or something happening in production where we’re needed to go back and forth quickly, and there’s people requesting something from someone else, or maybe things blocking their work.”
I had this long list of things. I was like, “Okay, I need to kind of build up what’s similar about these, what’s different, how will the application know what types of message do I need to ask the user to tell the app what type of message this is, or can we infer it. Then, how does this translate into a priority and notifications?” It was sort of like a really central piece of the application. I felt like I couldn’t just start designing UI because it all kind of hinges on how each of these types of messages is treated. I think this was a really good candidate for whiteboarding, and yeah, I felt kind of like we’ve reignited some of the magic from the Drip days–it was really fun too and motivating. I would say, if you’re solo founder, I think it can be really valuable to find a friend that you have good rapport with, and can kind of brainstorm with, and bounce ideas off of, and just get there kind of two brains thinking about the problem, it can often lead to a really great result in the end.
Rob: Yeah. I was, I don’t know–concerned is probably not the right word–but going into it I was like, “Uh-oh, Derrick’s been thinking about this for months and I’m way out of that whole process. Are we going to be able to rekindle the old magic?” On Drip, we just used to whiteboard all the time, and came up with really good stuff–I thought. I use to say, with the two of us in the room, it’s like 10 times better. We catch all the edge cases and it’s like you said, two people holding the whole thing in the collective heads rather than one person trying to do it. There’s always a back and forth, there’s your sanity checking, there’s just the collaboration, it’s just night and day. If you’re standing in front of a whiteboard on your own, I think you and I really found how different that could be when we started collaborating right on Drip.
Derrick: Yeah, because you’re thinking about stuff, and you reach these points where my train of thought hits a dead end. If you don’t have someone there to kind of either pivot it or just pick up where you left off, then it can be a really frustrating process. You feel like you’re slogging through mud, and just having a pair there to help keep things moving. There were times when we would sit there and just kind of stare off in the space for a minute or two, and that’s okay too. It was a really fun exercise.
Rob: I agree. Being comfortable with silence too. We’ve talked about this when I came on your podcast. If you are going to whiteboard with someone, one or two people, I don’t know if we ever found a third who is as in our own heads as we are, as in the flow. We certainly had some good collaborators at Drip but you and I can sit there for five minutes with complete silence and not feel weird. I think that’s a big thing is you let the other person think and you’re thinking as well.
That’s the other thing I think with whiteboarding is oftentimes, if I try to do it on my own, I’ll get to a point and I just get stuck. I just can’t get past this and that’s when you will step in, and be like, “What if we think about this?” It’s like, “Oh.” Now you got us past it, and we’re still in the flow, and then we could finish the whole rest the hour. But I would have stopped there and just got hung up on it for a day, potentially. I think that’s a good point where you’re like, you could have gotten there eventually but it may have taken you weeks, and it was 90 minutes or whatever for us. That was super fun, by the way. I came out of that feeling great.
You came out of that then with kind of a mental model of message types, and not quite UI. I know we threw you why ideas around. We never sketched anything but it was always kind of hand wavy and talking as we’re like, “This alert to do this in this flow.” Then did you go straight from there into mockups or what was your next step? I know there was a vacation in there as well, right?
Derrick: Yeah, I did take a little vacation. I’ve been having this feeling of like a little bit of guilt as a product person that I should be getting some more concrete ideas in front of users to get feedback—sort of what I alluded to at the top of the show. I did try to take a stab at building some mockups. I’ve been working on them for a little while now. It’s taking a lot longer than I expected. I think part of that is that, we had some concrete ideas formed from the whiteboarding session but like we said, they’re not actual envisioning of where the pixels will sit, and how the product will actually form together. It was still a pretty fuzzy vision of it.
It felt like I had a lot more work out of my head than I actually did when I started to lay out UI elements. I think that’s probably true of any idea where it’s easy to sort of picture this thing that’s not actually real, and once you try to make a concrete, it’s like, “Oh, there’s actually a lot here to still think through and work through.” Perhaps actually, we could whiteboard on this again and maybe burst through another kind of wall, or I just need to keep slogging through it and returning back to it every so often, and incrementally building it out.
Rob: Yeah, that makes sense. It sounds like you hit—not a robot necessarily—but it’s a bit harder, a bit more challenging than you thought it would be. Mockups are often like that. You’re almost trying to invent something new and you have to thread a needle because you can’t be Slack but you can’t be email.
Derrick: Most of the difficulty that I’m having is centering around this inbox in Level. That’s one of the core pieces of the product is–it’s something that’s really missing from Slack–is that I want to have one place where I can come to and quickly see, in priority order, all the things that need my attention. Then I can step away for six hours, go into deep focus mode, come back, and feel confident that everything I need to see with relative urgency is it’s all laid out for me just as I want it.
Once you start kind of exploring, “Well, what happens when there’s 100 messages posted in this group and 50 in this group? How does the inbox mutate over times, that things don’t become overwhelming, and it doesn’t devolve into kind of the email inbox mess that so many people experience? How can I actually make good on the promise that I am threading the needle well between email and chat?” Once I overcome this, it’s going to be, hopefully, something really good and is really going to resonate with people. But until then, I don’t feel like I can just start showing these theoretical mockups where I just kind of hand wavy say, “Oh, it’ll be always manageable for you.” I want to give some proof that I’m actually on to something–some framework or some methodology for categorizing and organizing these messages.
Rob: Right. Because the challenge when you’re building something new is to validate your most risky hypothesis–that the ones that are most likely to fail where the risk is. Typically, it’s not the code itself unless you’re going to build—“I’m going to build an AI engine to predict stocks.” Well, it’s like, “Alright, that’s your first thing. Can you even do that?” But here, you know that you can write the code to make messages go in and out of a queue and come out of the things. There’s two risks left that I see. One is, can you design a UI that is novel enough, and does thread that needle between the two, and is 3X better or 5X better than the other experience for a certain group of people. Then the last risk will be, will people pay for it?
You validated that somewhat through building your email list and having this in-person conversations. I’m guessing once you have mockups or at some point you’re probably asked for whether it’s verbal commitments, or you may take money upfront, and I don’t think you’ve decided on when you’ll do that. That is a big issue—building the mockups and figuring out how is this flow going to work, and is it as novel enough and iterating on it until it is.
Derrick: I think this is arguably one of the most important pieces to work out because without this, the whole promise falls down. It’s one thing to just introduce threads for example. Slack has kind of arguably, poorly implemented threads. If I just implemented something that was just like, “Oh, everything’s a thread. That’s great but that still doesn’t solve the problem of not being a complete catastrophe when you step away from it for a long time.” It’s one of the critical moments, I would say.
Rob: Indeed. I want to switch up a little bit. We’ve talked a lot about the specifics of Level and your process of validating it, and getting the design going. I’m curious, this is in essence, kind of the third app or third startup really that you’re launching. I know that you launched a couple that came and went pretty quickly. But then, you had obviously, Drip with me. You did Codetree, codetree.com which is kind of project management that sits on top and you did that on the side. You sold that while we were, actually, right around the time that we sold Drip, you sold that if I recall.
Derrick: I sold that, we sold Drip, and I sold my house when we moved. I had three big sales.
Rob: That was crazy.
Derrick: Talk about massive liquidation.
Rob: I know. This really is, for all intents, your third act here. I’m curious if you think it’s easier this time around, is it harder, is there more pressure. Talk me through the emotional side or the mental side of where you’re at with it.
Derrick: I think it’s unique in that, with Drip, I started out as a contractor, and so I was gathering a paycheck. Then I went full time on it and then we had HitTail bankrolling our efforts a bit. It was a self-funded endeavor that was throwing off enough money for a least a decent paycheck so that I could live. Codetree was a side thing–that was nights and weekends. I was basically sacrificing my free time, but in exchange, it wasn’t really costing me actual money. Now, this is the first time that I’m really, as an adult, going off and saying like, “I’m not going to earn any salary or revenue for the whole time that I’m building this thing, or at least until I launch it.”
I think that that introduces, in itself, a bit of pressure that I’m trying to just like always mentally overcome that. Obviously, selling Drip and Codetree helped give me a little bit of runway so that I can afford to do this. That’s arguably the whole reason why we do this is so that we can afford to work on the things we want to work on. I’ve had to do some things like, set aside my living expenses for the next year, and figure out loosely what my budget’s going to look like, and then make transfers from this account to my checking account, and just say like, “I’m paying myself for the next year. I’m not allowed to think about money or stress about it.” It’s a work in progress but working on trying to do things like that to keep myself sane and not get too stressed out.
Rob: That makes sense. I find it funny you’re like, “This isn’t the first time as an adult,” because you were an adult all the time but now you’re married. You have real expenses. You live in a city where the cost of living is not super high. But Minneapolis is definitely akin to a California city that’s not L.A. or San Francisco. It was similar to Fresno which is not super cheap. It’s not like you’re going to live on $2,000 a month here. Depending on how you live and where you live, it’s a non-trivial sum.
I’m glad you did that. I know that you were stressed early on about burning some cash. As you said, the two exits you have helped bolster that, but I think your wife also distinctly gave you permission. She’s like, “You need to do this. You earned this.” Is that the phrasing? It was something like that. Like, “That’s what you did these other ones.”
Derrick: Exactly. This is not the time now to say, “Oh, I don’t know. Maybe I should keep a job and do this nights and weekends.” She’s like, “No, no. This is the whole reason why you sell companies.” I think she has a lot of wisdom in that.
Rob: Yeah, I would agree. Cool sir. Thanks for joining me today while Mike is out of town filling in our 399th episode.
Derrick: Oh my gosh. You’re one off from 400.
Rob: Isn’t that crazy? We’re going to figure something out to do that’s like a big bang, not just Mike and I talking about five ways to wrap or something. Can we do something different? We were the worst at that. We’ve looked back and I think 300 we may have just done a normal episode, that’s kind of a shame.
Derrick: Yeah, you got to take these milestones and squeeze some juice out of them.
Rob: Yup, yup, celebrate them a bit. Cool sir. Well, if folks want to keep up with you, they can hit level.app yeah and then derrickreimer.com. That’s where you blog now and again about your experience. You’re building Level for developers out there, you’re building it in Elixir and Phoenix.
Derrick: Elixir Phoenix is the web, framework web, kind of the rails of Elixir.
Rob: GraphQL…
Derrick: GraphQL is the API layer, and then Elm on the frontend, so the Elm translates into javascript. It’s a very shiny new tech stack for me. But I’m having a lot of fun building in it.
Rob: Well, I think for most people.
Derrick: Yeah, for most people. It’s a fairly proven technology but still on the newer side. I feel it’s really exciting. It’s predominantly centered around functional programming languages. Elixir and Elm, they’re very functional. It’s a bit different from what I’ve been doing. I’ve been writing Ruby for the past eight years, but yeah, I’m having a lot of fun for it. I’m hoping that the Level codebase can be a good example of like a full-scale SaaS application that’s kind of out there in the world for people to reference.
Rob: Yeah. I obviously don’t know any of the languages you’re using but you have such a good way of organizing our codebases, and your Read Me was super clean. I was like, “Ha, if I had a few extra hours this week, I would just run these commands and try to see if I get this thing right.” It was kind of fun. It was good to see it and then get out there. Cool. Well, thanks again for coming on the show.
Derrick: Yeah, thanks for having me.
Rob: I think that wraps us up for today. If you have a question for us, call our voicemail number at 888-801-9690, email us at questions@startupsfortherestofus.com. Our theme music is an excerpt from We’re Outta Control by MoOt, it’s used under Creative Commons. Subscribe to us in iTunes by searching for Startups. Visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening. We’ll see you next time.
Episode 398 | SaaS Marketing Lessons You’ll Wish You’d Learned Sooner
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Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about SaaS marketing lessons you’ll wish you’d learned sooner. Based on an article on karolakarlson.com they break the list down to 9 key lessons including growth plans, mission statements, tracking metrics and more.
Items mentioned in this episode:
Mike: In this episode of Startups for the Rest of Us, Rob and I are going to be talking about SaaS marketing lessons you’ll wish you’d learn sooner. This is Startups for the Rest of Us, Episode 398. Welcome to Startups for the Rest of Us, the podcast that helps developers, designers and entrepreneurs to be awesome building, launching and growing software products, whether you put your first product or you’re just thinking about it. I’m Mike.
Rob: I’m Rob.
Mike: We’re here to share experiences to help you avoid the same mistakes we’ve made. What’s the word of this week, Rob?
Rob: The word this week is a little bit of wrestling with Google and they’re indexing in webmaster tools because I 301 redirected my entire old blog site, Software by Rob, and I got a new domain, Rob Walling, and I 301’d all that and got it all set up. There’s just always more complexity than you think there’s going to be. I had this seven-step checklist that I went through and, of course, parts of it went wrong and parts of it got cached while I was in the middle of troubleshooting and so you don’t know what the real version is.
I’m literally like–I texted Derek and I’m like, “Can you hit this URL and let me know what you see?” even though I flushed my cash and all that. It was just giving me–from different browsers, it was giving me different results. It wasn’t that big of a deal but then the redirect was fine, everything’s been working and then the Google indexing has really not started. It probably took–it’s been almost 10 days, maybe 14 days, and it’s just now picking up on the new domain. I’m looking at the search analytics and just starting to see 50 total clicks. It’s literally like one day’s worth of clicks or less than that, actually, has started to pick up.
Mike: The hard part about that is that, because Google has different Google-plexes all over the place, different people are going to be different ones so they’re not–the different indexes are in different places, which kind of sucks.
Rob: Yeah, I agree. This is just–it’s like try not to redirect stuff. You can totally do it and not lose traffic in the long term but, in the short term, it’s kind of always a bit more work and there’s always these loose ends that happen. By no means was it a disaster or anything; it was kind of a fun little thing to, I don’t know, stay busy with, but I’ll just be happy when everything’s moved over. Again, the whole site’s functional if you go to Rob Walling. You can go look around and everything’s there but, now, I’m just trying to get Google to make all the Google search results look use Rob Walling instead of the old site. How about you? What’s going on?
Mike: I was looking through some of the comments on some of our older episodes and there was one or a couple of episodes ago where we had talked about the moniker of “the Rest of Us” and how we should have trademarked that or something like that, not that we probably would have gone that road. Glen Bennett wrote and said that there was an Apple ad from the ’80s where they called it “The Computer for the Rest of Us” so we were beat by quite a lot on that.
Rob: Yeah, and that’s been a part of the English language for, I guess, 50 years. I have no idea what the first use of it was but I definitely heard it growing up, just people talking about that.
Mike: Yup. Yeah, so we definitely missed the door on that one.
Rob: Yeah, for sure. There were some other pretty interesting comments. There’s a comment from Rasmus on Episode 389, which was titled Pro Tips for Attending Conferences, and he says something else he does is go to the gym in the morning. It really makes your mind and body ready to listen and learn all day. That is something we forgot to say because I actually try to go to the gym when I’m at conferences, and it’s especially easy at MicroConf because of our 10:00 AM start time. When we used to start at 9:00, I never had time because I was too tired. That is something that I recommend, even to go for a short run, even if it’s only 15 minutes or something. I like getting up and getting out.
Another couple of comments on Episode 395, which was 20 Podcasts We Like, we had two more that requested. Kristoff Engelhart recommended How I Built This by Guy Raz. That’s at NPR podcast, I believe, and he said he specifically liked the episode with the Collision Brothers from Stripe, the guy from Home Depot and the one with the Founders of Ben and Jerry’s. I’ve listened to a few episodes of How I Built This and I liked it. I think I struggled with the fact there were some–the signal to noise for me was a bit low because it’s an NPR show and so it’s tailored to the masses and I always struggle to consume startup stuff made for the masses. Honestly, it’s a really well-produced show if you’re interested. It’s just in interview format, basically, and it’s as you would expect from NPR.
The last comment was from the same episode from Abdu, and he says, “I find it odd you didn’t mention Mixergy. Even Rob was a guest on it.” Yeah, I’ve been a guest on Mixergy six times, I think–five or six times–but it’s not something that I currently have in my rotation. I definitely used to listen to it but the volume of shows that comes out–it just hasn’t been on my radar for a while. Totally, I still see Andrew at conferences and every once and a while. When I hear that someone I know or there’s a particularly interesting interview on Mixergy, I absolutely download it and listen to it, but it’s not on my everyday podcast subscription feed anymore.
Again, that’s mostly due to the sheer volume of shows that come out of there and the interview format. Andrew was one of the early pioneers of that. They were folks who were doing startup interviews but he came on the scene and really revolutionized that, way before John Lee Dumas and several other folks who’ve done it since then. I have a ton of respect for what he’s built and, obviously, have enjoyed my conversations on Mixergy with him. I, in all honesty, listen to less interview shows than I used to. If you do look at that list of 20, there are very few truly just all interview shows. Even like This Week in Startups that we just mentioned, they do some interviews but I personally skip many of those and I listen to a lot more to the news round tables and even some of the pitching ones.
Mike: Going back to your blog redesign that you did for your website, there’s a missed business opportunity in there where somebody could have acquired Rob Walling and sold it to you.
Rob: Someone did. I bought it from another guy named Rob Walling.
Mike: Really?
Rob: Yeah, I bought it a couple of months ago.
Mike: That’s different. If you bought it from another Rob Walling whereas if you would have bought it from Mike Taber, then that would have been different.
Rob: I know. It was funny. When I emailed him, the guy was like, “Whoa, this is kind of weird.” He’s like, “I thought it was a trick email.” I was like, “No, this is actually another Rob Walling.” We had different middle names, of course, but he was funny. He said, “Well, I can tell by your name that you are a scholarly gentleman of great intelligence and manners,” or something. I was like, “Well done, Sir. This is going to be fun.” Just the negotiation and buying it from him was kind of fun.
Mike: That reminds me of when I was at Home Depot a couple of years ago. They paged Mike Taber over the intercom and so, of course, I go come to find out there’s a guy who works there named Mike Taber who lives nearby. It was interesting to meet another Mike Taber.
Rob: Yeah, totally. Very cool. What are we talking about today?
Mike: Today, we are going to be going over a blog article written by Karola Karlson, and it’s over at karolakarlson.com and we’ll link that up in the show notes. It is about SaaS marketing lessons. The title of this episode is SaaS Marketing Lessons You’ll Wish You’d Learn Sooner and what I did was I kind of consolidated a bunch of these things because there’s some things in here that overlap a lot with other topics, and there’s 35 different items in this particular blog article. We’re going to condense that down a little bit. I’m going to talk more focused about some of these different pieces where it applies specifically to the types of people who are listening to this show.
Rob: We have about 9, it looks like, down from 35.
Mike: 9 SaaS marketing lessons.
Rob: They’re making a listicle!
Mike: The first one is about finding your high expectation customer, and there’s another link that we’ll add into the show notes because there is a link over to a blog article that somebody else wrote all about finding what your high expectation customer is, and the basic definition of that is the type of customer who has very high expectations for your product and they know exactly what it is that they want to do. There’s a series of questions that you can answer very specifically about them. For example, “Who is it that needs the product? What does it do for them? How do they feel about it? What’s the true benefit for them?” and, “Will your product exceed their expectations?”
If all those criteria are met, then you have what’s called a high expectation customer because they know exactly what it is that they want and they need, and their bar is very high. If you can exceed that bar, then you’re going to satisfy a much larger number of customers. Early on, it’s going to be very difficult for you to meet that especially because they’re going to be an advanced customer; they’re not going to be an early adopter. Assuming that you can meet that bar for that customer, then you’re going to be able to sell to a much larger pool of people. This is going to help you to grow the business a lot just because of that much larger pool, and knowing those numbers helps you in a great number of other ways which we’ll talk about later in this episode.
Rob: Right, and when they define the high expectation customer, they say it’s the most discerning person within your target demographic. It’s someone who will acknowledge and enjoy your product or service for its greatest benefit, and that person needs to be someone who others aspire to emulate because they see them as clever, judicious and insightful.
Mike: The second lesson is to not sell to everyone. I think, generally speaking, this is obvious advice that’s repeated a lot by different people on the startups basis, but the real question is, “Why is this repeated so often?” It’s because it tells you who not to sell to, who should you not be targeting for your SaaS or your products, or your service. The real benefit of doing that is that, if you can get rid of those people in certain marketing channels or you avoid marketing to them because they’re not a great fit for your product, either that could be for a variety of reasons; either they churn out a lot or it’s an ancillary benefit to them, they’re not really looking for your products.
There’s all these different reasons why they might not be your ideal customer but, by removing them from the pool of people that you’re actively marketing to, then it’s going to yield a lot better ROI across all of your marketing channels and it allows you to focus much more on the types of people who are a good fit for your product versus the ones that are not as good a fit and you’re going to have to do a lot more work in order to sell them on your product.
Rob: Yeah, and, in the early days, this is all you can do, right? Especially if you’re bootstrapped but even when you’re funded. Five years ago, I thought about a venture-funded company and thought, “Man, they have infinite resources and they can just sell to everyone.” Then, of course, I worked inside Leadpages for 20 months and realized that, “No, even there, there are these massive trade offs. They just can’t hire enough good people.” Even with really high budgets, they can’t hire enough good people to sell to everyone.
I think your point about, “Yes, we hear this over and over,” is well-taken, but why do we hear it? It’s because people make this mistake over, and over, and over. In your early days, it’s really easy that anyone who gives you a dollar, you want to get the product to them because you want to maximize your revenue because every dollar means you can market more. The problem with that is you can quickly, especially if you’re a software product, go off the rails with folks who are requesting things that take you away from your core vision or the core vision that’s going to meet the needs of most people versus someone, again–if you’re selling to internet marketers or the SaaS founders and then a photographer who comes in, he can pay $1000.00 a year but he’s going to have totally different requests.
I went through this exact thing early on with Drip where we just got a request that was like, “We don’t really want to build that and that doesn’t help anybody else,” and so then that person was disappointed and they didn’t love the product. We eventually parted ways but it was a lesson I think each of us learns as we go, is just say no fairly frequently. If you don’t think they’re going to get value of it or they’re not in your core market, I would err on the side of saying no in the early days.
Mike: That kind of leads a little bit into the next one, which is to have a mission statement. I think, most of the time, this is probably not a great place to focus a lot of your time and effort but the reality is that when you have a mission statement about what it is that you are trying to do and what you are trying to achieve with the product and the business, then it allows you to use that as marketing collateral so you can tell your customers what it is that you’re trying to achieve, who you’re trying to do that for and who you are like and who you are not like.
By default, by having this mission statement, it allows you to decide what it is that you don’t do in addition to what it is that you are going to do. By having that mission statement, you can refer back to it when you’re trying to look at these customers who come in and one of them says, “Oh, I run a photography business.” You’re like, “Yeah, that’s probably not a great fit,” and you can tell that my going back and looking at your mission statement. I don’t think a mission statement is something that you can do on Day One just because it’s probably going to take some time to figure out what that is based on who your ideal customer is, and you’re not going to know that on Day One. That’s going to take some time and effort to figure that out over the course of many months or even, potentially, years. Once you have that mind, it gives you that reference point to go back and say no.
Rob: I would edit this one a bit. In the article, Kerola says that you absolutely must know your unique value proposition and your mission statement. For me, the unique value proposition comes way before a mission statement because the mission statement is that global thing of like, “Google wants to organize the world’s information.” I don’t think you know that from the start; very few people do especially if you’re bootstrapped, you’re doing customer development or even funded for that matter.
I know I often say that if you’re bootstrapped, then blah, blah, blah, but it applies to both in so many cases that if you’re just trying to figure out what to build, I don’t know that your mission statement matters as much as you’re honing in on a solution for your folks for the people who are using you or asking for you to make changes to the app. It’s like, “What separates you from the other solutions on the market?” and that’s what your unique value proposition is, the UVP. It’s UVP or USP, unique selling proposition, but it’s what makes you different.
When you’re building out an email solution, it’s like, “Well, how are you different than Yesware or than MailChimp, and you’ve just got to hone in on that because, if you’re not different, then it’s just a “me too” play. It’s possible to make a living doing that. It’s possible to build a business. Certainly, people have done it but it’s so much harder because you’re just going to be slogging it out for sales that you still don’t have enough of a differentiator. If you’re going to build something that’s a “me too” play, then you need to find a unique traffic source. You need to be really good at SEO and rank in the top three and outrank everybody else and just expect that a certain amount of people are going to sign up without looking at your competitions. There are ways to do this but, in my book, trying to figure out early on how you’re going to be differentiated from the competition is probably the number one thing I’d look at.
Mike: The next item on the list is that what you’re putting together your growth plans, you should focus on actions, not just not the numbers that you need to hit. I think both of them are absolutely important but, without those numbers, you don’t know what it is you’re trying to achieve but, without the actions, you’re never going to be able to achieve them because those actions are critical to being able to meet whatever numbers you put on paper. Based on the numbers, you can backtrack from there and decide what actions need to be taken in order to get that point.
I think in a previous episode, we’ve talked about, basically, mapping out what your goals look like and reverse based on the endpoint that you’re trying to reach and then backtracking from there. “What is it do I need to do before to I get to that point?” and continuing along that path but you need to have those actions and decide what order those actions need to be taken because, if you’re not doing it in the right order or you’re doing it in the wrong places–for example, if you want to do SEO on your website, that’s great and all in order to increase the footprint but what pages are the ones that you should start with. Certain pageants are just not going to matter at all versus other ones, and being able to prioritize those is critical.
Rob: I have mixed thoughts about this one. I agree that it should focus on both, in my opinion. I like focusing on actions, of course, because of exactly what you said and what she says in the article because, then, you’re just delivering–as Ellie said, you’re making those hard phone calls a day, not focusing on the end result and making X sails, but you’re just putting in the work. I’m also motivated by numbers and I’m motivated by the success of seeing things grow. I like to have a goal to strive for that’s not just going through the motions.
I know this is not just saying go through the motions but I think I could fall into the trap if I’m not also keeping my eye on the numbers of just doing things during the day. I think a lot of people can fall under that type. It’s like my actions are to tweet this and to do a blogpost. To do some Instagram on social media–and that could be your plan, but it’s like you have to then measure and make sure that’s moving the numbers, and maybe that’s where I’m kind of nitpicking this one, is I think it should be heavily correlated. You can’t attribute everything to numbers but, man, if you’re not getting out of the plan you’re doing, then you have to change that up. I think that’s where I’m saying–I think I focused on both actions and numbers.
Mike: Maybe focus is a wrong way to put it. It needs to include both as opposed to should focus on one or the other. If you have a growth plan and it’s just, “Hey, these are the numbers that I want to hit,” it’s going to be useless. You have to have those actions as well. If you’re going to go through those actions, you also need to do some sort of measurements and have numbers that you’re going to hit afterwards because, if you’re just doing actions, as you said, and you’re not getting any results of out it, then why are you doing those things? The critical piece here is where you have to have both; it’s not just one or the other.
Moving on, the next one is to optimize for growth, not leads, and it kind of ties back a little back to the growth plan. If you are optimizing for adding, let’s say, newsletter subscribes. That’s great and all, but how are you getting them through the rest of your funnel? Are you trying to optimize them to get them to become activated or sign up to download other things from your newsletter? Are you trying to get them over to the pricing page? What is it that you’re trying to get them to do next?
You need to track the customer or that prospect through the entire sales because, if you’re not doing that, then you can’t track those numbers and you have no way to identify how many people are moving from one step to the next. By tracking those things, it allows you to get rid of the lower IRO activities that you’re doing because those are time and money sinks, and it’s just going to take up a lot of your time and attention. You could be using to spend on other higher IRO activities because those are the things that are generated in better leaves and those and those better leads become better customers because they’re going to seek around for longer and because they’re a better fir for you.
Rob: This reminds me of a couple of conversations I’ve had over the years with folks who are measuring too early in the funnel. I was talking to one sort of founder who said, “Yeah, I have 10,000 uniques a month in my website. How many uniques do you have?” I was like, “That doesn’t matter.” It really doesn’t matter unless we’re talking about certain things but if we’re talking about just making sales, it’s like, “How many trials did you get out of that? How many converted to paid? How many stuck around for more than two or three months?”
It’s like, “Go deeper in the funnel,” which is essentially what this is saying: Don’t get hung up on these top-of-the-funnel metrics. Now, the top-of-the-funnel metrics can be important because they obviously feed the later metrics, but if you’re not closing and retaining people, you are leaking people out of the bottom of your funnel and you’re never going to grow the business. What’s funny is I think it was the same conversation. The guy said he had 10,000 uniques and, at the time, DotNetInvoice was doing 1000 uniques or 1500, but it was doing three or four grand a month, and he was blown away by that because he’s doing way more than his app.
I was like, “It’s because a lot of people who come–it’s highly-targeted traffic and so many of the people who come buy,” and it’s $300.00 a month. There all these reasons why the math work but it was just a head-exploding thing. Really, it’s just mass. It’s just, “Look at the top and you’re going to lose certain people out of each step of that funnel, whether it’s to a demo or to a trial, and then it’s to paid, and then it’s how long they stuck around. With the rules-of-thumb that we frequently covered in this podcast–have covered in talks, have covered in blog posts and such–you can tell which step of the funnel you need to focus on. That’s the biggest thing, is optimizing for growth means focus on that part of the funnel where you have the opportunity to make the biggest difference.
As you grow your app, that is going to move. It’s going to move down the funnel. Probably, early on, it’s going to be like, “Oh my, gosh. We’re not retaining anyone,” and it’s like, “Well, it’s because you don’t have product market fit,” and this can be like, “Oh my, gosh. No one’s setting up for a trial.” It’s because your marketing’s off with your product market fit now. Then, it’s like, “Oh my, gosh. We don’t have nearly enough people hitting our website. It’s like, “Yeah, it’s because you haven’t been focusing on marketing; you’ve been focusing on customer development and building your product.” You’re going to move up and then you’ll probably move the other way and move right back down one to two years in your product, assuming that you have something that’s reasonably successfully.
That actually takes us to our next one, which I think is Points 5 or 6, and it’s track the right metrics. It’s things like monthly recurring revenue, cost per acquisition, cost to acquire a customer and your lifetime value. You obviously need to look at top-of-funnel stuff like, “How many uniques to my website? How many trials am I getting? What is the visit-to-trial percentage? What is the trial-to-paid percentage?” You need to look at those, but those are not as important as the ones I just said, because the ones that MRR, cost per acquisition and the lifetime value are the ones that are optimizing for growth.
A loose rule of thumb is that lifetime value should be greater than or equal three times your cost to acquire a customer. That means it’s a solid acquisition channel if you can make those numbers line up. Now, one thing to say is that what holds true for funded companies and, typically, if you’re funded, you want to acquire a customer for less than one year of their value to you. The average revenue per user or even the revenue for this particular user is $20.00. Then, no matter how long they stick around or even if they stick around five years, if you’re funded, you tend to want to spend less than about $240.00 to acquire that person because it’s $20.00 times 12.
Now, if you’re not funded, cash is a real issue. Typically, I see folks wanting to keep their customer acquisition costs between two and four months of what they’re going to get back from that customer. I remember we hit tail on them on them with Drip as we got more money coming in, we extended that out to 5, and then 6, and then 7 and then you learn to manage your cash and you learn that this month’s cash is coming in and I can now spend more and more to acquire. The more you can spend, the more customers you can put through the funnel. You can’t do this without tracking the right metrics and you have to keep in mind not just these loose rules of thumb that are thrown around for fun in companies but, if you’re bootstrapped, it’s going to be a little bit of a tighter grip on that purse unless you have a big bucket of funding that you’re pulling from.
Mike: Just to reiterate on that piece that Rob had commented on, if you’re bootstrapped, you really want to get your money back a lot quicker if you can with Bluetick I’m going through the same thing where it’s very difficult to allocate a lot of money and resources towards acquiring customers in certain channels just because I know that it’s going to take a heck of a lot longer, and the reality is I just don’t have the money to be able to dump a lot in because if you–let’s say it costs you $500.00 to acquire a customer and, yes, you’ll get $1,500.00 out of it, but it’s going to take you a full year to get there. You can end up going broke if you try and dump all your money into that. You kind of have to play long ball there.
The point of that particular anecdote is that everything takes a lot longer than you want it to. You’re going to have to truck your funnel activity over a longer period of time, you’re probably going to get your lifetime value from these customers in a much longer period of time than you would like to, your tests will take longer to complete, then you’re going to have to analyze them and act on them, but everything is going to take a lot longer than you would like it to. That includes goals and stuff that you put forward as well. If you decide that, “Hey, we’re going to do this marketing campaign and we expect it to take 3 or 4 weeks,” it’s probably going to take you 5 or 6 if not longer just because of all the other things that are going on that are going to demand your attention in the business. Support tickets will come up, things like that, and it just takes longer to do just about everything.
Rob: Our second-to-last lesson you’ll wish you’d learned sooner is to publish with intent, and it’s basically to have a strategy behind what you publish to provide value in a consumable format, value quality over quantity and to track performance and double down on promoting content that does well. Five years ago, quantity actually went out over quality, not in every case but people just cranked out–companies that were cranking out 1 post a week, and then 3, and then 5, and then literally 10 a week twice a day during the week were winning the SEO game and the content marketing game.
That has switched. That’s changed up. Now, folks are focusing on much longer pieces of content, really pillar content, The Ultimate Guide to This and The Definitive Guide to That that might be 20-30,000 words, half the length of the book, and they make it available as a download but also, for the SEO, put it in HTML format. It’s fewer and bigger bats is what it is, and then you double down on the ones that work and you walk away from the ones that don’t. That’s essentially what Kerola’s talking about here.
Mike: The last SaaS marketing lesson you’ll wish you’d learned sooner is that prospects are people. Pretty much everybody on your mailing list that has signed up for it at some point, there’s a person behind every single one of those email addressed. People don’t generally like to be sold to; what they enjoy in going to a website is going to educate them because you’re the expert in a particular space and they’re trying to learn from you. Moving on from that, once you have established that trust, then you’re going to be able to sell your product to them, but it’s more of a situation where they’re the ones who are deciding that they’re going to take that next step.
This is mainly because it is an online marketing scenario. If you are in a direct sales demo, then you are essentially pitching, but you’re on that schedule within whatever the time of that meeting is, but when they’re coming to your website, they’re on their own schedule, and they can pick and choose when they’re going to move forward and you have very, very little control over it. The reality is you have to treat them like a person when you’re interacting with them through the mailing list and take time to build that trust; don’t try to pitch, pitch, pitch because it’s just simply not going to work. Going the education route, helping them to become better at whatever it is that they’re trying to do is going to be much more effective than trying to build all of the trust in a particular email and then sell them on a particular touch point. They’re not just going to go come to your website and buy something on the first shot.
Rob: Yeah, there are very few products that you can sell with one touch point. Often, info products are this way because they tend to be impulse purchases and you can put time constraints and reward pressure and all that stuff, and that is one reason that info marketers have these big splashy launches, is that it’s not a recurring payment. It’s just aspirational and you can sell a lot more of something when it’s aspirational. When it’s software, it requires people’s time and so, as you’re saying, folks are very unlikely to come and buy the first time and there does have to be some type of trust or relationship built up.
Now, there are ways to shortcut this. One of the ways is to have social proof, in essence, to have other people vouch for you. I should back up and say the first way to do it is just to build your own audience. You don’t have to do that to start a product. There’s a bunch of people who do it without ever having an audience of people that follow them. I’ve done it several times with several products, and it’s totally doable and it’s not a bad way to go. I don’t think building an audience is the only way to do it.
However, these days, it is easier than ever to build an audience if that’s your thing. You can do that to build trust in advance. The problem is you have to have a massive list. Let’s say you have a list of 1,000 people who are really following you and you want to sell a SaaS product that’s $10.00 or $20.00 a month. You’re not going to get to critical mass that way. You’re just not going to sell enough licenses or subscriptions to your software to make that work.
If you’re selling a book and you have 1,000 people really following you, you might sell 300 or 400 copies of that book. It would be an ambitious amount, but I’ve done it myself. My first book did that. That is enough to kind of get a ball rolling that could potentially result in stuff down the line. Those are kind of the two sides of building the audience yourself. Another way to do it, as I was saying earlier, is that the next step is to kind of have other people vouch for you, and whether that means testimonials or whether that means they’ll do joint webinars with you, in some way, endorsing your product, saying that they use it, assuming that they do.
That’s another way to kind of shortcut that trust and get growth faster than having to educate everyone individually about why they should trust you, and that was one thing that Clay Collins did really well in the early days of Leadpages, was to do the webinar model and to do with it a bunch of his internet marketing friends who would vouch for Leadpages because they were using it, and then, there you go, you have access to literally hundreds of thousands of people even though your audience is not that large.
That’s just one angle of this “prospects are people” but the real thing to think about is that every prospect, every person, makes their own decision based on what they know about you and the product and what they’ve heard about you and the product. It’s something to keep in mind, that just numbers and conversion rates can help you forget much to your detriment. To recap, the 9 SaaS marketing lessons you’ll wish you’d learn sooner are, number one, find your high expectation customer; number two, don’t sell to everyone; number three, have a mission statement; number four, growth plan should focus on actions and not numbers; number five, optimize for growth, not leads; number six, track the right metrics; number seven, everything takes time; number eight, publish with intent; and, number nine, prospects are people.
If you have a question for us, call our voicemail number at 8888-01-9690 or record an MP3 and email us at questions@startupsfortherestofus.com. Our theme music is an excerpt from We’re Out of Control by Moot, used under Creative Commons. Subscribe to us on iTunes by searching for startups and visit Startups for the Rest of Us for a full transcript of each episode. Thanks for listening. We’ll see you next time.
Rob: I’m Rob.
Mike: We’re here to share experiences to help you avoid the same mistakes we’ve made. What’s the word of this week, Rob?
Rob: The word this week is a little bit of wrestling with Google and they’re indexing in webmaster tools because I 301 redirected my entire old blog site, Software by Rob, and I got a new domain, Rob Walling, and I 301’d all that and got it all set up. There’s just always more complexity than you think there’s going to be. I had this seven-step checklist that I went through and, of course, parts of it went wrong and parts of it got cached while I was in the middle of troubleshooting and so you don’t know what the real version is.
I’m literally like–I texted Derek and I’m like, “Can you hit this URL and let me know what you see?” even though I flushed my cash and all that. It was just giving me–from different browsers, it was giving me different results. It wasn’t that big of a deal but then the redirect was fine, everything’s been working and then the Google indexing has really not started. It probably took–it’s been almost 10 days, maybe 14 days, and it’s just now picking up on the new domain. I’m looking at the search analytics and just starting to see 50 total clicks. It’s literally like one day’s worth of clicks or less than that, actually, has started to pick up.
Mike: The hard part about that is that, because Google has different Google-plexes all over the place, different people are going to be different ones so they’re not–the different indexes are in different places, which kind of sucks.
Rob: Yeah, I agree. This is just–it’s like try not to redirect stuff. You can totally do it and not lose traffic in the long term but, in the short term, it’s kind of always a bit more work and there’s always these loose ends that happen. By no means was it a disaster or anything; it was kind of a fun little thing to, I don’t know, stay busy with, but I’ll just be happy when everything’s moved over. Again, the whole site’s functional if you go to Rob Walling. You can go look around and everything’s there but, now, I’m just trying to get Google to make all the Google search results look use Rob Walling instead of the old site. How about you? What’s going on?
Mike: I was looking through some of the comments on some of our older episodes and there was one or a couple of episodes ago where we had talked about the moniker of “the Rest of Us” and how we should have trademarked that or something like that, not that we probably would have gone that road. Glen Bennett wrote and said that there was an Apple ad from the ’80s where they called it “The Computer for the Rest of Us” so we were beat by quite a lot on that.
Rob: Yeah, and that’s been a part of the English language for, I guess, 50 years. I have no idea what the first use of it was but I definitely heard it growing up, just people talking about that.
Mike: Yup. Yeah, so we definitely missed the door on that one.
Rob: Yeah, for sure. There were some other pretty interesting comments. There’s a comment from Rasmus on Episode 389, which was titled Pro Tips for Attending Conferences, and he says something else he does is go to the gym in the morning. It really makes your mind and body ready to listen and learn all day. That is something we forgot to say because I actually try to go to the gym when I’m at conferences, and it’s especially easy at MicroConf because of our 10:00 AM start time. When we used to start at 9:00, I never had time because I was too tired. That is something that I recommend, even to go for a short run, even if it’s only 15 minutes or something. I like getting up and getting out.
Another couple of comments on Episode 395, which was 20 Podcasts We Like, we had two more that requested. Kristoff Engelhart recommended How I Built This by Guy Raz. That’s at NPR podcast, I believe, and he said he specifically liked the episode with the Collision Brothers from Stripe, the guy from Home Depot and the one with the Founders of Ben and Jerry’s. I’ve listened to a few episodes of How I Built This and I liked it. I think I struggled with the fact there were some–the signal to noise for me was a bit low because it’s an NPR show and so it’s tailored to the masses and I always struggle to consume startup stuff made for the masses. Honestly, it’s a really well-produced show if you’re interested. It’s just in interview format, basically, and it’s as you would expect from NPR.
The last comment was from the same episode from Abdu, and he says, “I find it odd you didn’t mention Mixergy. Even Rob was a guest on it.” Yeah, I’ve been a guest on Mixergy six times, I think–five or six times–but it’s not something that I currently have in my rotation. I definitely used to listen to it but the volume of shows that comes out–it just hasn’t been on my radar for a while. Totally, I still see Andrew at conferences and every once and a while. When I hear that someone I know or there’s a particularly interesting interview on Mixergy, I absolutely download it and listen to it, but it’s not on my everyday podcast subscription feed anymore.
Again, that’s mostly due to the sheer volume of shows that come out of there and the interview format. Andrew was one of the early pioneers of that. They were folks who were doing startup interviews but he came on the scene and really revolutionized that, way before John Lee Dumas and several other folks who’ve done it since then. I have a ton of respect for what he’s built and, obviously, have enjoyed my conversations on Mixergy with him. I, in all honesty, listen to less interview shows than I used to. If you do look at that list of 20, there are very few truly just all interview shows. Even like This Week in Startups that we just mentioned, they do some interviews but I personally skip many of those and I listen to a lot more to the news round tables and even some of the pitching ones.
Mike: Going back to your blog redesign that you did for your website, there’s a missed business opportunity in there where somebody could have acquired Rob Walling and sold it to you.
Rob: Someone did. I bought it from another guy named Rob Walling.
Mike: Really?
Rob: Yeah, I bought it a couple of months ago.
Mike: That’s different. If you bought it from another Rob Walling whereas if you would have bought it from Mike Taber, then that would have been different.
Rob: I know. It was funny. When I emailed him, the guy was like, “Whoa, this is kind of weird.” He’s like, “I thought it was a trick email.” I was like, “No, this is actually another Rob Walling.” We had different middle names, of course, but he was funny. He said, “Well, I can tell by your name that you are a scholarly gentleman of great intelligence and manners,” or something. I was like, “Well done, Sir. This is going to be fun.” Just the negotiation and buying it from him was kind of fun.
Mike: That reminds me of when I was at Home Depot a couple of years ago. They paged Mike Taber over the intercom and so, of course, I go come to find out there’s a guy who works there named Mike Taber who lives nearby. It was interesting to meet another Mike Taber.
Rob: Yeah, totally. Very cool. What are we talking about today?
Mike: Today, we are going to be going over a blog article written by Karola Karlson, and it’s over at karolakarlson.com and we’ll link that up in the show notes. It is about SaaS marketing lessons. The title of this episode is SaaS Marketing Lessons You’ll Wish You’d Learn Sooner and what I did was I kind of consolidated a bunch of these things because there’s some things in here that overlap a lot with other topics, and there’s 35 different items in this particular blog article. We’re going to condense that down a little bit. I’m going to talk more focused about some of these different pieces where it applies specifically to the types of people who are listening to this show.
Rob: We have about 9, it looks like, down from 35.
Mike: 9 SaaS marketing lessons.
Rob: They’re making a listicle!
Mike: The first one is about finding your high expectation customer, and there’s another link that we’ll add into the show notes because there is a link over to a blog article that somebody else wrote all about finding what your high expectation customer is, and the basic definition of that is the type of customer who has very high expectations for your product and they know exactly what it is that they want to do. There’s a series of questions that you can answer very specifically about them. For example, “Who is it that needs the product? What does it do for them? How do they feel about it? What’s the true benefit for them?” and, “Will your product exceed their expectations?”
If all those criteria are met, then you have what’s called a high expectation customer because they know exactly what it is that they want and they need, and their bar is very high. If you can exceed that bar, then you’re going to satisfy a much larger number of customers. Early on, it’s going to be very difficult for you to meet that especially because they’re going to be an advanced customer; they’re not going to be an early adopter. Assuming that you can meet that bar for that customer, then you’re going to be able to sell to a much larger pool of people. This is going to help you to grow the business a lot just because of that much larger pool, and knowing those numbers helps you in a great number of other ways which we’ll talk about later in this episode.
Rob: Right, and when they define the high expectation customer, they say it’s the most discerning person within your target demographic. It’s someone who will acknowledge and enjoy your product or service for its greatest benefit, and that person needs to be someone who others aspire to emulate because they see them as clever, judicious and insightful.
Mike: The second lesson is to not sell to everyone. I think, generally speaking, this is obvious advice that’s repeated a lot by different people on the startups basis, but the real question is, “Why is this repeated so often?” It’s because it tells you who not to sell to, who should you not be targeting for your SaaS or your products, or your service. The real benefit of doing that is that, if you can get rid of those people in certain marketing channels or you avoid marketing to them because they’re not a great fit for your product, either that could be for a variety of reasons; either they churn out a lot or it’s an ancillary benefit to them, they’re not really looking for your products.
There’s all these different reasons why they might not be your ideal customer but, by removing them from the pool of people that you’re actively marketing to, then it’s going to yield a lot better ROI across all of your marketing channels and it allows you to focus much more on the types of people who are a good fit for your product versus the ones that are not as good a fit and you’re going to have to do a lot more work in order to sell them on your product.
Rob: Yeah, and, in the early days, this is all you can do, right? Especially if you’re bootstrapped but even when you’re funded. Five years ago, I thought about a venture-funded company and thought, “Man, they have infinite resources and they can just sell to everyone.” Then, of course, I worked inside Leadpages for 20 months and realized that, “No, even there, there are these massive trade offs. They just can’t hire enough good people.” Even with really high budgets, they can’t hire enough good people to sell to everyone.
I think your point about, “Yes, we hear this over and over,” is well-taken, but why do we hear it? It’s because people make this mistake over, and over, and over. In your early days, it’s really easy that anyone who gives you a dollar, you want to get the product to them because you want to maximize your revenue because every dollar means you can market more. The problem with that is you can quickly, especially if you’re a software product, go off the rails with folks who are requesting things that take you away from your core vision or the core vision that’s going to meet the needs of most people versus someone, again–if you’re selling to internet marketers or the SaaS founders and then a photographer who comes in, he can pay $1000.00 a year but he’s going to have totally different requests.
I went through this exact thing early on with Drip where we just got a request that was like, “We don’t really want to build that and that doesn’t help anybody else,” and so then that person was disappointed and they didn’t love the product. We eventually parted ways but it was a lesson I think each of us learns as we go, is just say no fairly frequently. If you don’t think they’re going to get value of it or they’re not in your core market, I would err on the side of saying no in the early days.
Mike: That kind of leads a little bit into the next one, which is to have a mission statement. I think, most of the time, this is probably not a great place to focus a lot of your time and effort but the reality is that when you have a mission statement about what it is that you are trying to do and what you are trying to achieve with the product and the business, then it allows you to use that as marketing collateral so you can tell your customers what it is that you’re trying to achieve, who you’re trying to do that for and who you are like and who you are not like.
By default, by having this mission statement, it allows you to decide what it is that you don’t do in addition to what it is that you are going to do. By having that mission statement, you can refer back to it when you’re trying to look at these customers who come in and one of them says, “Oh, I run a photography business.” You’re like, “Yeah, that’s probably not a great fit,” and you can tell that my going back and looking at your mission statement. I don’t think a mission statement is something that you can do on Day One just because it’s probably going to take some time to figure out what that is based on who your ideal customer is, and you’re not going to know that on Day One. That’s going to take some time and effort to figure that out over the course of many months or even, potentially, years. Once you have that mind, it gives you that reference point to go back and say no.
Rob: I would edit this one a bit. In the article, Kerola says that you absolutely must know your unique value proposition and your mission statement. For me, the unique value proposition comes way before a mission statement because the mission statement is that global thing of like, “Google wants to organize the world’s information.” I don’t think you know that from the start; very few people do especially if you’re bootstrapped, you’re doing customer development or even funded for that matter.
I know I often say that if you’re bootstrapped, then blah, blah, blah, but it applies to both in so many cases that if you’re just trying to figure out what to build, I don’t know that your mission statement matters as much as you’re honing in on a solution for your folks for the people who are using you or asking for you to make changes to the app. It’s like, “What separates you from the other solutions on the market?” and that’s what your unique value proposition is, the UVP. It’s UVP or USP, unique selling proposition, but it’s what makes you different.
When you’re building out an email solution, it’s like, “Well, how are you different than Yesware or than MailChimp, and you’ve just got to hone in on that because, if you’re not different, then it’s just a “me too” play. It’s possible to make a living doing that. It’s possible to build a business. Certainly, people have done it but it’s so much harder because you’re just going to be slogging it out for sales that you still don’t have enough of a differentiator. If you’re going to build something that’s a “me too” play, then you need to find a unique traffic source. You need to be really good at SEO and rank in the top three and outrank everybody else and just expect that a certain amount of people are going to sign up without looking at your competitions. There are ways to do this but, in my book, trying to figure out early on how you’re going to be differentiated from the competition is probably the number one thing I’d look at.
Mike: The next item on the list is that what you’re putting together your growth plans, you should focus on actions, not just not the numbers that you need to hit. I think both of them are absolutely important but, without those numbers, you don’t know what it is you’re trying to achieve but, without the actions, you’re never going to be able to achieve them because those actions are critical to being able to meet whatever numbers you put on paper. Based on the numbers, you can backtrack from there and decide what actions need to be taken in order to get that point.
I think in a previous episode, we’ve talked about, basically, mapping out what your goals look like and reverse based on the endpoint that you’re trying to reach and then backtracking from there. “What is it do I need to do before to I get to that point?” and continuing along that path but you need to have those actions and decide what order those actions need to be taken because, if you’re not doing it in the right order or you’re doing it in the wrong places–for example, if you want to do SEO on your website, that’s great and all in order to increase the footprint but what pages are the ones that you should start with. Certain pageants are just not going to matter at all versus other ones, and being able to prioritize those is critical.
Rob: I have mixed thoughts about this one. I agree that it should focus on both, in my opinion. I like focusing on actions, of course, because of exactly what you said and what she says in the article because, then, you’re just delivering–as Ellie said, you’re making those hard phone calls a day, not focusing on the end result and making X sails, but you’re just putting in the work. I’m also motivated by numbers and I’m motivated by the success of seeing things grow. I like to have a goal to strive for that’s not just going through the motions.
I know this is not just saying go through the motions but I think I could fall into the trap if I’m not also keeping my eye on the numbers of just doing things during the day. I think a lot of people can fall under that type. It’s like my actions are to tweet this and to do a blogpost. To do some Instagram on social media–and that could be your plan, but it’s like you have to then measure and make sure that’s moving the numbers, and maybe that’s where I’m kind of nitpicking this one, is I think it should be heavily correlated. You can’t attribute everything to numbers but, man, if you’re not getting out of the plan you’re doing, then you have to change that up. I think that’s where I’m saying–I think I focused on both actions and numbers.
Mike: Maybe focus is a wrong way to put it. It needs to include both as opposed to should focus on one or the other. If you have a growth plan and it’s just, “Hey, these are the numbers that I want to hit,” it’s going to be useless. You have to have those actions as well. If you’re going to go through those actions, you also need to do some sort of measurements and have numbers that you’re going to hit afterwards because, if you’re just doing actions, as you said, and you’re not getting any results of out it, then why are you doing those things? The critical piece here is where you have to have both; it’s not just one or the other.
Moving on, the next one is to optimize for growth, not leads, and it kind of ties back a little back to the growth plan. If you are optimizing for adding, let’s say, newsletter subscribes. That’s great and all, but how are you getting them through the rest of your funnel? Are you trying to optimize them to get them to become activated or sign up to download other things from your newsletter? Are you trying to get them over to the pricing page? What is it that you’re trying to get them to do next?
You need to track the customer or that prospect through the entire sales because, if you’re not doing that, then you can’t track those numbers and you have no way to identify how many people are moving from one step to the next. By tracking those things, it allows you to get rid of the lower IRO activities that you’re doing because those are time and money sinks, and it’s just going to take up a lot of your time and attention. You could be using to spend on other higher IRO activities because those are the things that are generated in better leaves and those and those better leads become better customers because they’re going to seek around for longer and because they’re a better fir for you.
Rob: This reminds me of a couple of conversations I’ve had over the years with folks who are measuring too early in the funnel. I was talking to one sort of founder who said, “Yeah, I have 10,000 uniques a month in my website. How many uniques do you have?” I was like, “That doesn’t matter.” It really doesn’t matter unless we’re talking about certain things but if we’re talking about just making sales, it’s like, “How many trials did you get out of that? How many converted to paid? How many stuck around for more than two or three months?”
It’s like, “Go deeper in the funnel,” which is essentially what this is saying: Don’t get hung up on these top-of-the-funnel metrics. Now, the top-of-the-funnel metrics can be important because they obviously feed the later metrics, but if you’re not closing and retaining people, you are leaking people out of the bottom of your funnel and you’re never going to grow the business. What’s funny is I think it was the same conversation. The guy said he had 10,000 uniques and, at the time, DotNetInvoice was doing 1000 uniques or 1500, but it was doing three or four grand a month, and he was blown away by that because he’s doing way more than his app.
I was like, “It’s because a lot of people who come–it’s highly-targeted traffic and so many of the people who come buy,” and it’s $300.00 a month. There all these reasons why the math work but it was just a head-exploding thing. Really, it’s just mass. It’s just, “Look at the top and you’re going to lose certain people out of each step of that funnel, whether it’s to a demo or to a trial, and then it’s to paid, and then it’s how long they stuck around. With the rules-of-thumb that we frequently covered in this podcast–have covered in talks, have covered in blog posts and such–you can tell which step of the funnel you need to focus on. That’s the biggest thing, is optimizing for growth means focus on that part of the funnel where you have the opportunity to make the biggest difference.
As you grow your app, that is going to move. It’s going to move down the funnel. Probably, early on, it’s going to be like, “Oh my, gosh. We’re not retaining anyone,” and it’s like, “Well, it’s because you don’t have product market fit,” and this can be like, “Oh my, gosh. No one’s setting up for a trial.” It’s because your marketing’s off with your product market fit now. Then, it’s like, “Oh my, gosh. We don’t have nearly enough people hitting our website. It’s like, “Yeah, it’s because you haven’t been focusing on marketing; you’ve been focusing on customer development and building your product.” You’re going to move up and then you’ll probably move the other way and move right back down one to two years in your product, assuming that you have something that’s reasonably successfully.
That actually takes us to our next one, which I think is Points 5 or 6, and it’s track the right metrics. It’s things like monthly recurring revenue, cost per acquisition, cost to acquire a customer and your lifetime value. You obviously need to look at top-of-funnel stuff like, “How many uniques to my website? How many trials am I getting? What is the visit-to-trial percentage? What is the trial-to-paid percentage?” You need to look at those, but those are not as important as the ones I just said, because the ones that MRR, cost per acquisition and the lifetime value are the ones that are optimizing for growth.
A loose rule of thumb is that lifetime value should be greater than or equal three times your cost to acquire a customer. That means it’s a solid acquisition channel if you can make those numbers line up. Now, one thing to say is that what holds true for funded companies and, typically, if you’re funded, you want to acquire a customer for less than one year of their value to you. The average revenue per user or even the revenue for this particular user is $20.00. Then, no matter how long they stick around or even if they stick around five years, if you’re funded, you tend to want to spend less than about $240.00 to acquire that person because it’s $20.00 times 12.
Now, if you’re not funded, cash is a real issue. Typically, I see folks wanting to keep their customer acquisition costs between two and four months of what they’re going to get back from that customer. I remember we hit tail on them on them with Drip as we got more money coming in, we extended that out to 5, and then 6, and then 7 and then you learn to manage your cash and you learn that this month’s cash is coming in and I can now spend more and more to acquire. The more you can spend, the more customers you can put through the funnel. You can’t do this without tracking the right metrics and you have to keep in mind not just these loose rules of thumb that are thrown around for fun in companies but, if you’re bootstrapped, it’s going to be a little bit of a tighter grip on that purse unless you have a big bucket of funding that you’re pulling from.
Mike: Just to reiterate on that piece that Rob had commented on, if you’re bootstrapped, you really want to get your money back a lot quicker if you can with Bluetick I’m going through the same thing where it’s very difficult to allocate a lot of money and resources towards acquiring customers in certain channels just because I know that it’s going to take a heck of a lot longer, and the reality is I just don’t have the money to be able to dump a lot in because if you–let’s say it costs you $500.00 to acquire a customer and, yes, you’ll get $1,500.00 out of it, but it’s going to take you a full year to get there. You can end up going broke if you try and dump all your money into that. You kind of have to play long ball there.
The point of that particular anecdote is that everything takes a lot longer than you want it to. You’re going to have to truck your funnel activity over a longer period of time, you’re probably going to get your lifetime value from these customers in a much longer period of time than you would like to, your tests will take longer to complete, then you’re going to have to analyze them and act on them, but everything is going to take a lot longer than you would like it to. That includes goals and stuff that you put forward as well. If you decide that, “Hey, we’re going to do this marketing campaign and we expect it to take 3 or 4 weeks,” it’s probably going to take you 5 or 6 if not longer just because of all the other things that are going on that are going to demand your attention in the business. Support tickets will come up, things like that, and it just takes longer to do just about everything.
Rob: Our second-to-last lesson you’ll wish you’d learned sooner is to publish with intent, and it’s basically to have a strategy behind what you publish to provide value in a consumable format, value quality over quantity and to track performance and double down on promoting content that does well. Five years ago, quantity actually went out over quality, not in every case but people just cranked out–companies that were cranking out 1 post a week, and then 3, and then 5, and then literally 10 a week twice a day during the week were winning the SEO game and the content marketing game.
That has switched. That’s changed up. Now, folks are focusing on much longer pieces of content, really pillar content, The Ultimate Guide to This and The Definitive Guide to That that might be 20-30,000 words, half the length of the book, and they make it available as a download but also, for the SEO, put it in HTML format. It’s fewer and bigger bats is what it is, and then you double down on the ones that work and you walk away from the ones that don’t. That’s essentially what Kerola’s talking about here.
Mike: The last SaaS marketing lesson you’ll wish you’d learned sooner is that prospects are people. Pretty much everybody on your mailing list that has signed up for it at some point, there’s a person behind every single one of those email addressed. People don’t generally like to be sold to; what they enjoy in going to a website is going to educate them because you’re the expert in a particular space and they’re trying to learn from you. Moving on from that, once you have established that trust, then you’re going to be able to sell your product to them, but it’s more of a situation where they’re the ones who are deciding that they’re going to take that next step.
This is mainly because it is an online marketing scenario. If you are in a direct sales demo, then you are essentially pitching, but you’re on that schedule within whatever the time of that meeting is, but when they’re coming to your website, they’re on their own schedule, and they can pick and choose when they’re going to move forward and you have very, very little control over it. The reality is you have to treat them like a person when you’re interacting with them through the mailing list and take time to build that trust; don’t try to pitch, pitch, pitch because it’s just simply not going to work. Going the education route, helping them to become better at whatever it is that they’re trying to do is going to be much more effective than trying to build all of the trust in a particular email and then sell them on a particular touch point. They’re not just going to go come to your website and buy something on the first shot.
Rob: Yeah, there are very few products that you can sell with one touch point. Often, info products are this way because they tend to be impulse purchases and you can put time constraints and reward pressure and all that stuff, and that is one reason that info marketers have these big splashy launches, is that it’s not a recurring payment. It’s just aspirational and you can sell a lot more of something when it’s aspirational. When it’s software, it requires people’s time and so, as you’re saying, folks are very unlikely to come and buy the first time and there does have to be some type of trust or relationship built up.
Now, there are ways to shortcut this. One of the ways is to have social proof, in essence, to have other people vouch for you. I should back up and say the first way to do it is just to build your own audience. You don’t have to do that to start a product. There’s a bunch of people who do it without ever having an audience of people that follow them. I’ve done it several times with several products, and it’s totally doable and it’s not a bad way to go. I don’t think building an audience is the only way to do it.
However, these days, it is easier than ever to build an audience if that’s your thing. You can do that to build trust in advance. The problem is you have to have a massive list. Let’s say you have a list of 1,000 people who are really following you and you want to sell a SaaS product that’s $10.00 or $20.00 a month. You’re not going to get to critical mass that way. You’re just not going to sell enough licenses or subscriptions to your software to make that work.
If you’re selling a book and you have 1,000 people really following you, you might sell 300 or 400 copies of that book. It would be an ambitious amount, but I’ve done it myself. My first book did that. That is enough to kind of get a ball rolling that could potentially result in stuff down the line. Those are kind of the two sides of building the audience yourself. Another way to do it, as I was saying earlier, is that the next step is to kind of have other people vouch for you, and whether that means testimonials or whether that means they’ll do joint webinars with you, in some way, endorsing your product, saying that they use it, assuming that they do.
That’s another way to kind of shortcut that trust and get growth faster than having to educate everyone individually about why they should trust you, and that was one thing that Clay Collins did really well in the early days of Leadpages, was to do the webinar model and to do with it a bunch of his internet marketing friends who would vouch for Leadpages because they were using it, and then, there you go, you have access to literally hundreds of thousands of people even though your audience is not that large.
That’s just one angle of this “prospects are people” but the real thing to think about is that every prospect, every person, makes their own decision based on what they know about you and the product and what they’ve heard about you and the product. It’s something to keep in mind, that just numbers and conversion rates can help you forget much to your detriment. To recap, the 9 SaaS marketing lessons you’ll wish you’d learn sooner are, number one, find your high expectation customer; number two, don’t sell to everyone; number three, have a mission statement; number four, growth plan should focus on actions and not numbers; number five, optimize for growth, not leads; number six, track the right metrics; number seven, everything takes time; number eight, publish with intent; and, number nine, prospects are people.
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