Show Notes
In this episode of Startups For The Rest Of Us, Mike interviews Wade Foster of Zapier, about supporting over 700 services. Wade gives a brief history of Zapier as well as how they went from zero to 1.5 million users in 5 years. He also shares some early marketing techniques he used.
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Transcript
Mike [00:00]: In this episode of ‘Startups for the Rest of Us,’ I’m going to be talking to Wade Foster about how they support over 700 services with Zapier. This is ‘Startups for the Rest of Us’ episode 327.
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.
Wade [00:27]: And I’m Wade.
Mike [00:28]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. How you doing this week, Wade?
Wade [00:32]: I’m doing great. Thanks for having me, Mike.
Mike [00:34]: Awesome. It’s great to have you on. I wanted to give a very brief intro to you and to tell people a little bit about who you are. You’re one of the cofounders of Zapier. Zapier is, essentially, the glue that holds together a lot of different applications and passes data back and forth between them. But I guess with that said, I’ll turn it over to you because you’re probably going to rephrase that much better than I possibly could.
Wade [00:54]: Oh, yeah. The old, “What does Zapier do question?” Glue is a good word. Connector, integrations is a good word. Honestly, it’s just this work for automation platform that lets you hook up basically any app you might be using in your business. A simple use case might be I get an email and it has an attachment. You can set up a little rule in Zapier that automatically saves those attachments to Dropbox. Something more sophisticated might be someone fills out a lead form on my site that’s being powered by a tool like say Unbounce and it pushes it through a tool like Clearbit that grabs a bunch of social data for it. Then based on some conditions it maybe decides, “I’m going to send this into my CRM and have a salesperson follow up with it.” Or maybe I’ll send it into a tool like Rob’s Drip and say, “Let’s nurture this user.” Something like that. So it can do a lot more sophisticated things as well.
Mike [01:47]: But it’s all about automating workflows in a business process and you really don’t necessarily see the product itself. You see all the results of it though. It’s always working in the background for you.
Wade [01:58]; Yeah. Exactly. Zapier is an invisible product in the sense of when it’s running. You set up the rules in Zapier. So there’s a UI for setting up the rules and how data should flow from app to app. But once you have that set up, Zapier just cranks away. So if you’re technical, it’s kind of like a Cron job more or less but on steroids.
Mike [02:13]: Cool. So why don’t you give us a bit of a brief history of Zapier. When did you start on it? How long did it take before you went from this whole idea of having it to going through a little bit about the validation process and then actually launching it as a product.
Wade [02:28]: We started Zapier in late 2011. So I guess a little before that, Brian and I, who’s one of my cofounders had been doing a decent amount of freelancing messing around with various projects. And one of the things that came up a handful of times was these little integration projects. So push these PayPal sales into QuickBooks for me. Or push this set of leads into Salesforce for me. Stuff like that. It was kind of annoying work to do because no one particularly likes doing API work it seems. But it was really valuable for these customers. So Brian messaged me on chat and said, “I think we can build a tool that lets these business owners or nontechnical use case users set up these sorts of integrations without having to employ a developer, an engineer.” And I found myself nodding my head saying like, “That makes a lot of sense.”
We actually teamed up with Mike, who’s our third cofounder and built off the original version of Zapier at a hackathon, a startup weekend if you’ve ever heard of those. And things went really well and we’re like, “Let’s really give this a go because this seems like something that folks could use.” We were back in Columbia, Missouri at that time and we decided, “We can’t go at this full-time because we need to have money and things like that.” You don’t just raise a bunch of money in the Midwest typically.
So we kept our day jobs. Mike was still in school. Kept finishing up school. And we worked on this nights and weekends. We tried to find ways that we could figure out if people wanted this. The best ways for that were looking into user forums. I distinctly remember Highrise, the CRM, having a thread that was several years old asking for Google contacts integration and had hundreds of comments on it where people wanted this thing. We’d go find for little bitty signs like that that showed, “If we could build something like this, people would be interested.” So that’s really kind of how Zapier got its start.
Mike [04:24]: Cool. One of the things that I’ll just point out is it’s pronounced z-a-p-i-e-r not z-A-p-i-e-r, right?
Wade [04:28]: Yep. Zapier makes you happier is the trick we always share with folks.
Mike [04:32]: Oh, nice. That’s a good way to remember it and let people know that’s how to pronounce it. Because I’ve honestly mispronounced it for years.
Wade [04:39]: Yep. We’ve heard z-A-p-i-e-r; z-A-p-i-A; z-a-p-i-A. Yeah. We’ve heard every pronunciation under the sun.
Mike [04:46]: Cool. That was back in 2011. Fast forward six years and how many apps are you managing right now in terms of the integrations?
Wade [04:55]: Sure. There’s 750 plus. I think 788 is the exact number. It changes daily. There’s a lot.
Mike [05:03]: How are you actually managing those? Are you responsible for every single one of those or is it really the developers behind the applications that are responsible for them?
Wade [05:13]: The vast majority are built and maintained by the vendors behind these companies. So you look at companies like Slack or HubSpot or Gravity Forms or Pipedrive or Drip. Those vendors have built and maintain their integrations on Zapier. Now we do a lot of work to help and assist with that because ultimately Zapier is our service so we feel responsible for the quality of those integrations but these days that’s how it happens. Originally we did build out the original 50 or 60 or so apps. But once we launched our developer platform, we started to expand the universe of people who could add apps to Zapier.
Mike [05:52]: I think that’s an interesting point to bring up just because when I was looking at Zapier and trying to think about how I could integrate Bluetick in it, my initial thought was that I had approach you guys and convince you that you should build an integration for Bluetick into this so that then it would be available through your platform. And you’re saying you’ve got this developer platform that allows the developers themselves to just build something, right?
Wade [06:15]: Exactly. Yeah. Early on we realized we were getting so many requests to add services to Zapier. And we just realized that there was just no way we’ll be able to keep up with the demand for this because we would have so many developers saying, “Build my app. Build my app. Build my app.” As much as we would want to do that, that was just not going to be possible for us. So we’re like we need to build a way that lets them do it themselves because the interest is so strong. So, in 2012 we launched v1 of our developer platform to kind of kick start that process.
Mike [06:48]: Yeah. So, this developer platform. Can you tell me a little bit more about what the process is for a developer who has an app and maybe they want to get it integrated into Zapier so that people who are using Zapier can send data back and forth between Zapier and that app and the other applications that you guys support? What’s the process for somebody getting started with that?
Wade [07:07]: It’s relatively straight forward. It’s self-serve. So you go to Zapier.com/developer and you can basically just start building against it. We have an API that we kind of call a standard, I guess for a lack of a better word. So if it fits those types of standards, it’s going to be super easy to set up because we automatically configure a lot of this stuff for you. If you kind of do authentication by OOF2 by the book, more or less, we auto set that up for you. If you’re end points are rest based JSON endpoints that can sort by descending order chronologically, you’re going to basically be able to just plug stuff into Zapier and it’s just going to work.
However, lots of services don’t have those things set up in what we would call the standard way, I guess more or less. I say standard because there’s lots of ways to do this stuff.
Mike [07:57]: It’s called a guideline.
Wade [07:58]: Guidelines.
Mike [07:59]: Recommended guidelines.
Wade [08:00]: Yeah. Right.
Mike [08:02]: And it’s not even –
Wade [08:03]: That’s not a problem, right. So we have this whole scripting environment where you can manipulate the requests to match our recommended guidelines, if you will.
Mike [08:13]: – yeah. And the two things that I came across when I was doing the integration with Bluetick and Zapier was that one: I didn’t realize how easy it was to get started. If you have a Zapier account, you just go into the developer platform and you can just create a Zap and there’s – I didn’t realize this – but there were three different ways that you can build it. You can build it as private so it’s just you that can see it. Essentially what that means is if somebody doesn’t have a Zapier integration you could almost create it for them. And then just not share it. You can keep it to yourself.
And then there’s the invite only which is where you would probably use it to invite some of your beta customers. And then there’s the global. And it’s interesting there’s that progression there. But you could build your own Zapier integration for somebody else’s product technically.
Wade [08:55]: Yeah. You totally can. People use that private state for like hobby projects and small little things all the time. That invite only stage gets used by slightly bigger companies to hook in apps that are their own internal tools, more or less, and invite their own employees or teammates in to use them with no intentions of ever having a public app on Zapier. You can have apps in any of these stages or intend to have an app in any of these stages at Zapier.
Mike [09:24]: And you essentially make sure that when people are pushing out new versions of it, they’re not breaking existing functionality, right?
Wade [09:31]: Yeah. We have this whole process. One for when you want a public app it goes [?] and things like that. I think that was one of the lessons we learned early on is that we would push out apps just because we wanted to move that number of apps supported count up. And we would probably skimp on a QA quality check sort of thing. But we realized over time that’s not helping anybody. It’s helping our ego, maybe, but the end user might suffer for that.
So we pushed folks through a quality check. And then when migrations or changes are made to apps that are live, there’s a whole migration process to mitigate some of those breaking changes for folks who are relying on it.
Mike [10:10]: Now how long does it take for somebody to go through that process? Let’s say that they’ve got an initial version out there integrated into Zapier’s developer platform and they want to push it live. Is there additional manual buttons that need to be pushed? Or is it all more or less automated?
Wade [10:25]: It really depends. If you have an API that already fits those guidelines that match us, you can physically do this really quickly. We actually have a video of our CTO adding Etsy in under six minutes because our API fits those guidelines that we have. You can actually do the integration super quickly if you’re familiar with it. And then if you’re not familiar, you have to read some docs and figure some of that stuff out which can take a little bit of time. And then, of course, I mentioned the QA process. So that you nail it the style guide right out the gate. Pay attention to all the rules and configurations that we suggest. You can nail it the first time around and that might take 24 to 48 hours for someone to go through the review Q & A process.
If you’re not matching those guidelines, it might be a little bit of work. It could maybe take a couple days of people time. If that’s the only thing you’re focusing on to maybe get that ironed out. I know, Mike, you just went through one so maybe you can comment for you on what your experience was.
Mike [11:24]: Yeah. My experience was probably more painful. I think you’re right in terms of the people time. But the reality is it’s not like that was my sole focus. There’s lots of other things that I was doing and working on. And changing, like with my product, the entire product is built on my API. So in order to make it work with Zapier, it was actually much more painful because if I made any changes to the API then I had to go into my client code and change all that code. And then I had to go to Zapier.
So it was actually significantly more painful. And the work around I ended up coming up with was I just created a custom Zapier endpoint and anything that needs to be done, I just send it to there and then I’m not affecting my client site code inside of the app.
Wade [12:05]: Yeah. That’s a consideration lots of apps will have if they already have users relying on a particular input and it doesn’t match our API guidelines, well, something’s got to give right there. I think your solution is actually a pretty common one what folks adopt just to say this is the way it needs to be done for Zapier so let’s make an endpoint for that.
Mike [12:24]: Cool. Moving on a little bit from the technical aspects of it. You went from zero to one and a half million users in five years. What made that possible?
Wade [12:35]: I think this is the magic of having 700 plus apps on Zapier, honestly. Every new app that we would add to Zapier, or later on that somebody else would add to Zapier later on, was a new user base that we could tap into. Really early on we started developing kind of playbook for doing marketing alongside of our partners. So every time a new app is launched on Zapier, we’re trying to get an announcement in their monthly newsletter or their feature launch newsletter. We’re trying to get listed in their integrations directories. We’re making sure that their onboarding email sequence, when they send out the advanced tips email, that Zapier is included there.
So we’re doing all sorts of things with them to try and continually just tap into their user base. We sent up landing pages for all the potential integrations that could possibly exist so we can start driving search traffic to it. Just lots of different ways that we can just try and tap into this existing user base that already exists and get those to us. That’s really been the bread and butter for us.
And then it’s five years of work. You just kind of make progress every single day and push yourself to be a little bit better each day and that kind of compounds upon itself.
Mike [13:54]: Yeah. It sounds to me like the couple of different things that you had going for you was one: I guess from external to Zapier. We call it integration marketing but it’s really integrating into other apps and, honestly, Zapier is one of the big ones that is pushed because you have such a large user base and there’s all these other apps that you are essentially cross promoting your app between them because it gives you that viral component. And that sort of plays into it as well and you’re in the middle so you get the benefit of both of those things.
Wade [14:22]: Yeah. Totally. You can leverage the fact that we have a big user base to reach to our user base. Like we launched that to an email list of a million plus. Plus, if you’re creative, you can go to the apps that are on Zapier and say, “We now have an integration through Zapier. Let’s do some marketing around this.”
Mike [14:39]: You know, what’s interesting is I’ve actually used – I don’t know if you’ve heard this before – I’ve used Zapier as essentially a search engine to find solutions to problems.
Wade [14:47]: Yeah. That’s more or less what’s happening more and more these days. It’s like our app directory has tons of stuff. We have a lot of content around the best apps for certain categories of things. So people more and more kind of look at Zapier and say, “If they’re on Zapier, they’re probably a pretty good app.” It probably means their open; they play well with others. There’s some other nice signals that they’re getting from our directory.
Mike [15:12]: One of the things that you talked about very early on was the fact that you had been working with different customers to try and do integrations from your previous company where you were just doing web development for people. What were some of the earliest things that you found that got you some initial traction with Zapier?
Wade [15:30]: I mentioned the forums earlier and that was probably the best thing for getting a handful of folks. So that Highrise forum that had hundreds of comments. I remember one on Evernote and I remember one on Dropbox. I remember one on Salesforce as well, that had these forums where people would ask for it. And I would drop into these forums and say, “I’m working on a project where I might be able to solve this for you. If you’re interested get in touch here.” And I would drop a link back to Zapier in a contact form. And a decent chunk of people would say, “This is what I’ve been looking for. It doesn’t look like I’m going to get an official support for a native integration so this seems like the next best bet.” And we would get a decent chunk of folks coming in that way. One link in a forum might drive 10 site visitors and five of them would fill out that form.
So early on that was just perfect for us because it was just the right amount of people we needed to test our assumptions, build out the initial apps we needed on Zapier.
Mike [16:31]: Now that sounds like an extremely high ratio of people who visited and filled that out. I mean, you’ve got 10 visitors which does not sound like a lot. Most people would look and say, “I really want to get 100 or 1000 or 5000.” But you’re saying that 10 was what really did it for you? That’s all it took?
Wade [16:48]: Yeah. For us, I think it was those forum posts were so – If you go back – I don’t even know if you could find them anymore. A lot of people have nuked their forums. But the comments in there were so visceral to these people. It’s like, “I need this integration so bad.” It was so needed for them they took time to write on a forum about it. Just the fact that we were offering that, I think, people were like, “Oh my god. There’s a way I can get this.” So they went through, clicked through and if it seemed like it was going to solve their problem then they were more than happy to give it a try. And so I think that’s why the conversion rates on those 10 visits were so high. It was just like, “This is a thing I’ve already raised my hand and said I’m begging for this. I need this really bad.”
Mike [17:32]: Right. The fact of the matter is that they saw your explanation in the forum and then they clicked the link and now they’re at a page where they’ve almost already raised their hand and said, “Yes. I’m interested in this.” And then you put it right in front of them and say, “Here’s a form to fill out to contact us and then we’ll talk.” So they’re already interested. They’re kind of past that point. So that’s kind of an interesting data point.
Wade [17:52]: Yeah. It’s like, you know, people who are like, “I want some Girl Scout cookies.” And we just walked up and said, “We got some. You want to buy them?” They’re like, “Yes, please.”
Mike [17:58]: Yes. I’ll take 400 boxes of Thin Mints.
Wade [18:01]: Yeah. More or less.
Mike [18:04]: So, obviously, it sounds like that one worked out for you really well. What are some other marketing techniques that you tried that just completely bombed? I think that that’s an interesting conversation.
Wade [18:13]: Good question. I think later on as we got bigger, we started experimenting with some of the different tactics you hear. And one of the ones that we tried was running joint webinars with a lot of our partners. This one was one we really struggled to make super effective for us. And I think it might be because we have this freemium low cost sort of thing and webinars took a lot of time and effort to put a nice one together and to get enough people on them. And so maybe that’s why it didn’t work. But ultimately we would do these things and we might get a decent chunk of folks to show up. Like we’d get 200 or 300 folks to register and maybe half of that would show up. But a lot of them would already be signed up to Zapier so it wasn’t helping us get new users. We were hoping that the partners, the app that was in mind, would promote this more heavily to their user base. But a lot of times they would just talk about it on their blog or on Twitter or something like that which didn’t ultimately drive much traffic to it.
And so, it was just a lot of time and work for relatively low amounts of people coming to us. We were just hoping to get it scaled out more. We still do some of these mostly just to make some of our bigger partners happy. But when we were really trying to do it, we did maybe a dozen of them and we really maybe only had one that was any meaningful result for us.
Mike [19:38]: Yeah. It sounds to me like if the intent was to help out the partners who are integrating into your app then that would have been beneficial for them but not necessarily for you because most of the people who are attending are already users of Zapier. It doesn’t really make a difference.
Wade [19:53]: Yeah. It was like these people, maybe they’re looking for some extra use cases for Zapier but that’s the kind of stuff we could have solved with an email and said like, “Here’s 10 use cases with this particular app. Go try these out. They’re probably pretty good.” And you don’t have to take time to put on a real time event sort of thing.
Mike [20:11]: Right. Cool. One of the things that comes to mind is that Zapier is primarily a remote company, correct?
Wade [20:17]: Yep. 100%.
Mike [20:20]: So last week’s episode, Rob and I talked about some of the pros and cons of a local versus a remote team. And Rob also talked about kind of hybrid approach that he used with building Drip. What’s some of the biggest challenges that you’ve found with running a remote team? You’ve got what, around 70 employees right now?
Wade [20:35]: Yep. I think the biggest challenge is it really forces you to be more disciplined around communication and information sharing. So you think for us, we hire all around the world as well. So we’re in about a dozen time zones. Right now, I have teammates that are sleeping or not working. If I’m doing work that is going to affect them, I have to make sure to document that either in code like in GitHub or it needs to be Trello or Quip or somewhere that they can take advantage of it. So when they come in and start to pitch in on the projects I’m working on, they can pick up where I left off and not have any dangling threads outstanding.
So I think really just being intentional about building that communication fire hose so that people can tap into the information that exists but don’t necessarily have to tap on someone’s shoulder to get it.
Mike [21:25]: Kind of related to that, have you ever thought about opening an office some place or is it your intention to just keep the company remote forever? Or at least until the foreseeable future?
Wade [21:32]: Yeah. We’re all in on the remote side of things. The benefits for us just so far outweigh some of the challenges. And the main benefit of course being the people that you get to work with. We’ve got some fantastic folks that are working with us here at Zapier that, if we limited ourselves to a 30-mile radius around where we live, we just never would have an opportunity to work with them. And it just makes recruiting easier because you can recruit from anywhere instead of that 30-mile field which turns out anywhere is a lot bigger than 30 miles around where you live.
Mike [22:07]: Yeah. And think that that is an interesting contrast to how Rob built up Drip and his team. His view on it was that they hybrid model for them worked really well where they did have an office but they also had everybody coming into the office a couple of days a week because the collaboration opportunities and the comradery really trumps that being completely remote and in different time zones.
And I’m not saying that one mechanism is better than the other, but I do want to point out that it seems to me like, depending on who the founders are and how they best operate and the types of people that you hire, either one can work equally well. It’s really just a matter of how well you put together the team and how well everybody gels together.
Wade [22:48]: Yeah. Absolutely. We’ve had folks that we’ve brought in at Zapier that didn’t work out. They realized a couple months on the job like, “Remote’s just not going to work for me. I just need to be around more people regularly.” It’s been relatively few but it has happened. And I think that’s just you as a founder but then also you if you’re going to be going to work for somebody has to just be honest about what’s a good work environment for you. What makes you thrive?
Mike [23:16]: So, along that line, what would be your advice for people who are looking to hire either remote contractors or remote employees? Are there things that they should be specifically looking for? Like traits in those individuals. Or are there specific red flags that you can think of?
Wade [23:30]: For us, the things that we really like are folks who have shown a propensity to start and finish projects independently. This could mean that they’ve got a side project that they’ve done a pretty good job with. It could mean that at their last job they started a pretty new initiative and saw it through. You know, kick started with the principle impactors. Just anyone that kind of just gets stuff done is a big one.
We look a lot for folks who are really good at communicating through written word. So folks who aren’t curt but know how to, hey, like an exclamation point or an extra emoji or smiley face goes a long way to giving those things that you don’t get like body language when writing is your principle medium.
I think probably the last thing that’s important which could sometimes be tough to judge because it’s kind of outside of what’s legally askable but it’s really nice if folks have a social circle outside of work. If they principally use work as their social outlet, it’s really going to be tough in a remote setting because there’s just not any people around to be that. But if they have family or friends or meetup group that they go to regularly. If there’s a co-working coffee joint where they’ve got a lot of friends or something like that that they can get locally. That really helps out too.
Mike [24:53]: You know, it’s interesting because that actually came up. We kind of phrased it differently. I don’t think we worded it quite as well as you did. But the basic idea was that feeling of isolation and, specifically, looking for what somebody has going on outside of work to maintain a social life. That’s a really good piece of advice I think.
Wade [25:10]: Yeah. We have a ton of families at Zapier and it seems like a lot of them get through family. But we also have folks that don’t have families and have friends or other social outlets to make it happen too.
Mike [25:21]: Cool. In terms of red flags, what are things that you would look for that say this person would probably not be a good fit for a remote working environment?
Wade [25:29]: Well, that communication one is a big one. If they feel like, “Let’s get on the phone to discuss everything.” Maybe your remote environment is set up to work through the phone. But that’s not how it is at Zapier. We do everything through Slack or some other written medium. If they can’t communicate well in an email or their always like, “Let’s get on a call to discuss that.” It’s like is this what it going to be all the time. You can’t get on a phone call with someone who’s half way across the world very easily to discuss a thing. You’ve got to figure out how to do it written and asynchronously.
I think that’s a big one. And really it’s the opposites of some of these things. It’s like do they not get stuff done. You can ask them about a time they shipped a project. Or if you’re hiring for a customer support role, talk about the customers you supported. And you can pay attention to what do they think is impressive versus what do you think is impressive. If they’re like, “I helped out 10 customers over email today.” Well, for us that’s not super impressive. We’ve got folks that are doing 60, 70, 80. So that’s totally different volume of work.
So you can just ask those behavioral interview type questions to figure out is this the type of person that gets stuff done? Or do they tend to not be that motivated, I guess?
Mike [26:43]: So when you’re actually going through the process of hiring somebody, do you do phone calls for them or Skype interviews? Or is it all through email?
Wade [26:52]: We do both. We have an application form that asks some questions that we think will elicit responses that tell us how they will do the job. And then we do a follow up phone screen that makes sure they understand the role. Makes sure we understand who they are and get a sense for is this the type of person that is going to be a good communicator, they’re going to get stuff done, that they can empathize with other teammates. Kind of some of the values that we have here at Zapier.
And then we have a second interview which is a skills test interview where we actually have some scenarios that we’ve built out that represent the work of that role at Zapier. So we run them through that skills test. And that skills test has probably been the best addition to our hiring process because it really makes sure that folks do have the underlying skills to be successful at Zapier.
Mike [27:43]: One of the things I’ve encountered is that you make the process sound rather lengthy and the reality is it sounds like it’s only about three to four steps long. But I think for somebody who’s building something in their living room or from their kitchen table that process sounds overly long and overly burdensome for them. But at the same time, if you don’t go through that process, it’s very easy to fall into a situation where you’re made a bad hire or somebody’s not going to work out. And then you spend three months stringing things along instead of just ending it and saying, “We need to part ways because this isn’t going to work out.”
Wade [28:17]: Yeah. And you know, from start to finish, it could go really fast. When we decide to review the applicants from the time where we’re like let’s schedule that first phone screen and go through that skills interview process. We’ve had that done, start to finish, in less than a week before. So it can go really fast if you’re dedicated to making it happen.
Mike [28:37]: I guess the next question I have for you is that you’ve established a substantial sized company now. You’ve got 70 employees. You’ve got one and half million users. What’s one of the biggest challenges you see for the business moving forward?
Wade [28:49]: I think the big thing is most companies don’t fail because of some sort of external factor. Most of them fail because the people inside the company, and likely the founders, honestly. So Brian, Mike or myself, mess something up. We do something that hurts the culture. People turn against us or we make some dumb decision that drastically affects our ability to ship a good project or ship good product. Something like that. I think I’m just constantly paranoid about trying to make sure that Zapier is a fantastic place to work and that we’re bringing in high caliber folks who can make sure that we are making good decisions and that we’re making good forward progress and shipping things fast and all the stuff that we want.
Mike [29:35]: Is that something that kind of as an executive team you guys meet and talk about? Or is that just something that you guys kind of keep in mind moving forward as you make decisions about the company? I’m just wondering how much of it is keeping this in mind versus being intentional about that.
Wade [29:48]: We actually do try and do this intentionally. So once a month when the executive team, we ask two questions of each member on the executive team which is: What is the biggest problem you and your team are having right now? And then a second follow up question to it is: What’s a problem that might pop up down the road if it’s not addressed now? And honestly, that second question is way more important to me because the problems that people talk about now are the stuff you already know about. It’s like, “We know that that’s a problem. We’re working to address it.” We’re going to get that fixed up.”
That second one is the stuff that people haven’t articulated yet. It’s stuff they haven’t shared. And usually it’s phrased such as like, “What’s a problem that will pop up?” But honestly when they answer it, it’s stuff that’s already popping up now. They’re sharing things that I’ve already seen this happen once. And so you know when you hear that, it’s like, “We need to start fixing that stuff now too.” So it really helps you cut off the problem areas before they get enough room to cause a really big issue.
Mike [30:50]: Yeah. I think that’s a really good question to ask yourself. I have a couple of things that I have on my monthly to do list that just kind of pops up on the first of each month that just says look at the biggest problems you’ve had this past month and then review what the goals are moving forward to reevaluate things and find out if there’s anything that needs to be either reprioritized or anything like that. I think intentionally thinking about what could be problem down the road that would almost be a business killer is probably something good to add to that list.
Wade [31:20]: Yeah. And I think the combo, like asking them together, is what’s really interesting. Because you get kind of those things that you already know about and you already see, and then you get it contrasted against some of the stuff that maybe you don’t see. And when a company gets to a certain size, those types of questions are really helpful. Especially for me. I don’t have the visibility to everything at Zapier like I used to. I used to do everything so I used to know everything that goes on as we’ve grown –
Mike [31:46]: Now that you’re CEO, you know nothing.
Wade [31:47]: – yeah. Right. It’s just a little tougher. You have to work harder to get some of those insights that you just learned by almost osmosis in the past.
Mike [31:56]: Right. You’re a little bit more removed. There’s a layer of abstraction between you and the actual problem so you’re trying to interpret things more than anything else.
Wade [32:03]: Exactly. And it’s like, “That is a problem.” So maybe I’ll actually step in and do some of that work. Like, “There’s a problem in support.” I’ll go back and do some support. I’ve got that skill set. I can jump in and see like, “How is that causing problems? How can I better understand this so that we can come up with a good solution here?”
Mike [32:20]: Cool. So I guess to wrap things up a little bit, where can people follow up with you or keep in touch with you?
Wade [32:25]: Yeah. Two places. Email: Wade@zapier.com. And then Twitter, I’m pretty active as well. @Wadefoster. I’ve got open DM so you can DM me there too.
Mike [32:33]: Great. Well, thanks for coming on. I really appreciate you coming and talking to us and sharing the experience that you had with Zapier.
Wade [32:39]: Yeah. Thanks, Mike. I’m really excited to be here.
Mike [32:41]: If you have a question for us, you can call it into our voicemail number at 1-888-801-9690 or email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from ‘We’re Outta Control’ by MoOt used under Creative Commens. 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 326 | Building a Local vs. a Remote Team
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about the pros and cons of having a remote versus local team. They also discuss a hybrid approach that Rob used with Drip that he believes is superior to either methods.
Items mentioned in this episode:
Transcript
Rob [00:00]: In this episode of ‘Startups for the Rest of Us,’ Mike and I talk about building a local versus a remote team, and we also weigh in on what I think is the ideal way to build a startup team. This is ‘Startups for the Rest of Us’ episode 326.
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 [00:31]: And I’m Mike.
Rob [00:32]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, Mike?
Mike [00:37]: Well, there’s a little bit of snow on the ground and, fortunately for me, next week I’m headed out to Big Snow, Tiny Conf in Vermont. So I’ll be headed up there with a guy named Jeremy from Forecast.ly. And then there’s about a dozen other people who’ll be meeting us up there, and a couple of days of skiing, and mastermind’s during the evenings. It should be a lot of fun.
Rob [00:55]: Sounds great. Who puts that one together? Is that the one that Brian Casel puts together?
Mike [00:59]: Yeah. It’s Brian Casel of Audience Ops and Brad Touesnard of Delicious Brains. The two of them put that together, and they also have a couple of sister conferences I’ll say. One of them is in Colorado, and that one is mostly put together by Dave Rodenbaugh but Brian and Brad are involved in that. And then there’s also Big Snow Tiny Conf in Europe which is done by Craig Hewitt. Brad I believe went to that one. That was last month. But the two in the U.S. are actually being held during the same week.
Rob [01:26]: Sounds like fun. And you’ve gone to at least one in the past, haven’t you?
Mike [01:29]: Yeah. I think I’ve gone to two so far. This is the fourth one. So this will make my third.
Rob [01:34]: That’s cool.
Mike [01:35]: Cool. What about you?
Rob [01:36]: I am also off to a conference next week. I’m repping Drip and Leadpages at SaaStr in San Francisco. So Jason Lemkin’s SaaStr has grown up to I think it was 5,000 attendees last year, and it’s supposed to be more than that this year. So it’s quite an event, and not something that I’ve ever gone to purely because of that. You know how we built MicroConf into the conference we wanted to attend. A 5,000-person conference is not a conference I like to attend. I just don’t love big groups of people. I’ve heard a lot of good things about it on a number of fronts in terms of the networking opportunities, just that everyone’s there, blah-blah-blah. I’m interested in checking it out, exploring that, and I’m already setting up meetings, and just meetups, and trying to figure out who’s going to be there that I can connect with that I haven’t seen in a while. It should be an interesting experience for me as someone who doesn’t particularly like these big – it’s a big multi track conference, and it’s a lot of the Silicon Valley stuff that doesn’t necessarily jive with the way that we grow and build businesses. So it’s going to be the assumption that everybody’s raising funding, the assumption everybody wants to get to 100 million, the assumption that if you’re not doing that, you’re crazy. That kind of stuff. With that said, there’s a lot of value still that can come out of – I really like Jason Lemkin’s thinking. I respect his outlook and opinions on so many aspects of growing SaaS businesses, and there’s a lot of folks who are going to be on stage that, I think, have a ton of knowledge and experience to lend to anyone starting a SaaS company. I do like that it is focused. It’s not just startups. I’ve been to some startup conferences where you’re just standing amid the health care startups, and the food startups, and the drone startups, and 3D printing startups. As much as I like those things as a consumer, I have really no interest in doing any of them as an actual business, and so I find that it’s less relevant. The more focused a conference can be, the more interested I am in it. So that’s it. I’m going to be out in San Francisco for four or five days just kind of getting it done.
Mike [03:31]: Yeah. You’ll have to let us know how it goes and see if we should multiply MicroConf by 100.
Rob [03:36]: I know. It’s just such a different conference. It’s not better or worse, it’s just a different way to approach an event. It’s such a different way than MicroConf. And it should be interesting.
Mike [03:47]: I just realized how terrible I am at math because it’s not 100 it’s –
Rob [03:51]: It’s 180. Because we have what, 220, 230 at MicroConf? And the fee is 5,000 – Yeah. So anyways, it’ll be good. I’m genuinely looking forward to it. I love San Francisco. I’m from about 30, 40 minutes east of San Francisco. The Bay area is my town, San Francisco is my city, and so I’d love to get back there, and I will probably see at least parts of my family who can make it out to see me in the city. I don’t want to sound like I’m not looking forward to it because I very much am. I’m just a little bit skeptical I guess that how much value I’m going to be able to get out of an event that’s that large. I’m excited to go in with both feet and see the rubber meet the road and see what I can get out of it.
Mike [04:32]: You just mentioned how close some family, and where you used to live in relation to San Francisco. I used to have a little joke in my back pocket where I would tell people I lived about an hour east of Boston just to see if they would catch on to the geography.
Rob [04:44]: Well, yeah, right. Because you’re west. East is in the water.
Mike [04:48]: Right.
Rob [04:50]: Indeed.
Mike [04:50]: So what are we talking about this week?
Rob [04:52]: This week we design an entire episode around a listener question. And the question is from Johannes Akesson. He says: “Hi Mike and Rob. Johannes from SQL Spreads at sqlspreads.com. One idea I have for a topic is the pros and cons of a local versus a remote team. I’ve been thinking a lot about this. So far, I have used mostly remote employees and only local subcontractors. I’m in the phase of growing my team and I’m thinking a lot about this. Should I go for a complete remote team, a mix, or 100% local? I see pros and cons, both from the companies and from a personal viewpoint. With a remote team you’re more flexible to work from different places or from home. It can be more cost effective and maybe easier to bring in part-time employees. With a local team, I see a lot of benefits like better collaboration, building a group of people pushing each other, etcetera. It would be good to hear your experience in this area.” So that’s what we’re diving into today. I don’t know that I had many opinions on this a couple of years ago. I think it was kind of like, “I’m building a lifestyle business.” This is four or five years ago. So everyone should always be remote and this gives me the most flexibility. And then as I dug into Drip and realized, ‘Boy, to really do this right I actually think you do need people to be able to see each other face-to-face, and not just once every three to six months at a company retreat or whatever. So, we’re going to dive into the pros and cons of being remote versus local, and then I want to dig in and talk about kind of the hybrid approach that we used with Drip that I think is by far better than remote or local. Ready to dig in?
Mike [06:17]: Yeah. Let’s get started. Why don’t we cover remote first?
Rob [06:20]: Yeah. Let’s talk about a couple of the pros of having a remote team. The first, and probably the biggest, advantage to it is that you can hire the best people no matter the location. This relieves you from having to live near a bunch of good software developers, and sales people, and customer success people, and HR people. It means that you can basically look worldwide and probably find better people than you can in your locale.
Mike [06:46]: I think there’s another advantage here which is also the cost of being able to hire people who are at the skill levels that you need and you don’t necessarily have to pay local rates for them. So whether that means going overseas, or just going to parts of your home country where it’s on the outskirts, it’s outside of a major city and you don’t need to basically outbid larger companies for the same level of talent. If you can give people that freedom to work remotely then it works well for them, and it also helps you because you don’t have to pay as much for the people who are just as talented as you would get assuming that you lived in a large city.
Rob [07:22]: Yeah. It’s a good point. And I think that’s the second advantage of going remote is that you don’t have to pay the wages of a major city – if that’s where you live – and you still have the advantage of being able to get people on your team. In essence, if you think about it it’s just like arbitrage. It’s like you might be able to live in a major city and then hire in a less expensive area. I’ve seen companies do it the other way, though, where they’re in a really inexpensive area and then they’re hiring out of San Francisco. I was always thinking to myself, “Why would you do that? I know there’s good talent there, but you can find talent outside of the Silicon Valley.” It was a really funny kind of almost reversal of how you shouldn’t do this. They turned the pro of going remote into a con.
Mike [08:02]: Yeah. That is odd. But sometimes, depending on the talent that you’re looking for, you may need to do that. It just kind of depends on who you’re looking for and where those people are located. You can’t always find specific types of people that you’re looking for in remote areas.
Rob [08:18]: I think the third and final advantage of remote that we’ll talk about briefly is this gives you as the founder a lot of freedom. You don’t have to go into an office every day. You can travel and it doesn’t matter. It doesn’t impact the business any more than if you were to be at home, or wanted to work from a coffee shop, or wanted to work from Europe for a month. Aside from the time zone, no one is going to notice the difference. So it really gives you the most flexibility and, I think, kind of the most freedom as a founder if that’s something that you’re looking for.
Mike [08:47]: I think there’s actually another pro here which is it gives freedom to the people that you’re hiring, so that – depending on what they’re circumstances are – they may want to — let’s say that they already have a fulltime job and they want to work part-time because they’re saving for a wedding, or they’re trying to go on a trip next year, or something along those lines. It gives them the flexibility to work a full-time job, and then, in addition, work on your things, or be a consultant and work on your stuff part time. There’s a lot of advantages to being able to hire somebody for part of their time, not necessarily all of their time. That’s, obviously, much more on a contractor basis, or a limited basis, but a lot of times it’s very difficult to build your business and then you happen to have an extra $10K coming in every single month and you say, “Okay, now I can hire somebody.” It doesn’t usually work out that way. You usually end up in a situation where you need some additional help and you might have a couple thousand dollars extra a month, but it’s obviously not enough to hire somebody fulltime. So you have to decide, “Am I going to hire somebody part time, or am I going to hire in advance of the revenue in anticipation of that?” And that’s obviously a little bit dangerous, but it gives those people some flexibility as well.
Rob [09:54]: Yep. That’s a good point. Let’s talk about the negatives, the cons of hiring remote. I think the first one, and the one that I noticed the most when we were remote, and then when we switched to a more localized approach, is that it’s hard to collaborate. Period. Even with the software and webcams and all the cool technology. The Slack. All that stuff. The digital whiteboards. It’s just harder to collaborate. There’s nothing better than being able to look face to face. Especially on the really hard problems where it’ll take you three, four, five hours of going back and forth in discussion, and these hardcore meetings, and these chance encounters, and overhearing a discussion. Those things just aren’t replicated the same way when you’re remote.
Mike [10:33]: Yeah. It’s hard to put your finger on exactly what the problem here is, because if you could then it would be a lot easier to say, “Okay. Well, let’s solve this in this particular way.” But there’s a lot of subtleties here to that collaboration problem which are not easily pinpointed. You talked about some of them where – the digital whiteboard, and SKYPE and headsets and cameras, and stuff like that. It helps to some extent, but I don’t think that it’s quite the same. You don’t get the same feel working remotely with somebody as you do if you’re working five feet away from them, or even 25 feet away if you’re in a larger office space. It’s not quite the same feeling when you’re trying to collaborate on particular problems. It’s also hard to get on a SKYPE call for several hours, to be honest. It’s difficult to maintain your focus on a particular problem, because there’s usually so many other things going on, and you’re at your computer so naturally there are other distractions that will come up like email. And if you are just at a whiteboard, for example, then there’s no popups coming up. There’s no additional notifications. There’s no other people pinging you on SKYPE or Slack or anything. You can kind of get away from that if you’re physically located next to each other, but you can’t do that when you’re collaborating over a computer.
Rob [11:45]: Yeah. I believe that, hands down, you will build a better product, and you will solve problems faster and better, if you’re all in the same location. I just don’t think there’s any way to argue with that. Now there are other pros and cons of both of these, but that one has just become ingrained in my mind over and over and over, in terms of being able to collaborate with people. This is not something you can schedule. You can’t say, “Well, every quarter we’ll get through and then we’ll get together and we’ll plan the next 90 days. Or every month we’ll get together for two days.” It isn’t the same. It’s not the same as being able to interact and collaborate on a day-to-day basis on an ad hoc basis where you’re hammering out a bunch of stuff. Especially in a startup, with as frequently as things change. I can imagine being in a fortune 500 where you have this waterfall approach, and you probably could plan out months at a time and things move so slowly that there’s no need for those ongoing conversations. But when you’re remote, it makes it harder. The second con, or negative, of remote is – it’s a subtle thing – but it’s this lack of comradery, or lack of team unity. I know you can get together every three to six months and all hang out in a house and it’s really cool, and the buzz you feel from that does carry over for the next week or two. But you’ll notice that it fades, and that being together every day – like we were in Fresno with the Drip team – it really was like that kind of all the time. It’s weird to say, but we went out to lunch once a week. That was staff meeting. We hung out outside of work because we liked working together so much. We developed friendships. And there was just this thing of everyone being on board with the mission of the company, and doing the best for the team, and it meant there was a lot of cohesiveness in our thought, and a lot of unity and everyone trying to help each other out a lot and getting things done very quickly. Going out of our way to help each other in a way that when you’re remote, yeah, you’re totally – you’re friends, you’re colleagues, you’re cordial. But, again, there’s that unspoken – that thing that you just can’t get when you’re not around folks in person every day.
Mike [13:45]: The next thing is a little bit country specific, and this pertains specifically to the United States, but it you have people that are located in multiple states, then you are considered to have what’s called a tax nexus. And a nexus is essentially every place where you have an employee working for you, you are considered to have a nexus there, and you are supposed to be collecting taxes from people who order your software in those locations. Now there’s a lot of subtleties here that you have to deal with in terms of whether or not you’re offering software as a subscription or it’s a downloadable product. But that said, it complicates the issue when you have contractors and employees working in different locations, whether it’s in your country or in foreign countries, and sometimes, these tax nexuses can be established even if you just have an employee who’s working in another country, for example, and then you are then subject potentially to collecting taxes for people who order your software in that country. It becomes a complicated headache to some extent, and governments certainly don’t make this any easier. They want their money, to be perfectly honest. But they don’t really consider the ramifications for much smaller businesses, or ones that operate entirely online because, quite frankly, that’s not really their concern. Their concern is the retailers, and they’ve never really quite caught up with the times in terms of being able to make an easy way for you to collect taxes based on sales over the internet.
Rob [15:09]: Yeah. This is something that most people don’t talk about, but if you start hiring people randomly, especially in the U.S., if you hire 10 people across 10 states, your tax nexus becomes very large, and it becomes very complicated. It’s not just the amount of money you’re paying. It’s a tremendous accounting headache just to track all of that. So really be, I would say, be careful before hiring new employees in just any random state, because it will get complicated on you quick. The fourth negative, also relates to this, is the additional administration time for every state that you run payroll in. I know that with paychecks, as I even tried to add states, it was a nightmare. With Gusto it was a little easier, but someone on my team had to go out and get the unemployment number from the state which is some random website. Then there was the disability number. And then there was the actual state income tax number. There’s all these numbers and each of them took 30 to 40 minutes of filling stuff out just to get some type of approval. And then it took three weeks to get it. And then I couldn’t run payroll while we were waiting on that. It was just this whole project that I wasn’t counting on. So as you add states, count on four to eight hours of killed admin time right at the start. And then plan on dealing with a bunch of kind of bureaucracy, in essence. Then they screwed one of them up and it didn’t work. Again, it’s just one more thing that really isn’t moving your business forward. And it sounds like a small thing of like, “Oh, I’ll just kill a day doing that.” But it’s a lot more of a pain in the butt than I think you realize. And then every time you run payroll now you’re paying all these multiple states – Gusto does that for you – but anytime there’s confusion, or a dispute, or whatever it’s more manual interaction that you’re dealing with. It’s just that added accounting complexity.
Mike [16:50]: I’m just going to point out that every time something goes wrong, which it inevitably will, it chews through several more hours of your time. Let’s say that you chew through four to eight hours just setting things up, and then you have to wait for three weeks for things to go through with the state, they might not have been correct. Or they may have left out something. I remember having to go just to the Department of Motor Vehicles here in Massachusetts to get my license when I transferred it over. I ended up going back four times because they said, “Oh, you just need this and this.” And I’d have to go back and they’d say, “Oh, you need this other thing.” I’m like, “Well, why didn’t you tell me that last time I was here?” Finally, by the third time, I just said, “Is there anything else I need? Is there a list of everything that I need?” And they said, “Oh, yeah. Here it is.” And there were two other things that they didn’t tell me about. It’s the exact same thing when you’re trying to pay payroll taxes, because there’s all these things that they’re not going to tell you about, and every single state has a different mechanism for getting all that stuff done. Some of them require certain things. Some of them don’t. It’s just a mess. And, like you said, if any little thing goes wrong, or if one state changes rules a little bit, or requires a sign-off, or a signature, or a new piece of paperwork filed. Sometimes it’s quarterly, sometimes it’s annual, they expect you to know what those things are and they won’t tell you in advance. There’s no mailing list or whatever you can sign up for that says, “Hey, here’s all the things that you need to know about running a business in such and such state.” None of them do that. It’s kind of a fighting against the machine at that point. It’s just awful.
Rob [18:11]: Yep. I’ve run into it. Another negative of remote is that it does take a unique employee to make it work. Not everyone is able to work remotely for sustained periods. A, it can be isolating, even when you’re working remotely with a team. B, folks get distracted – and especially over long periods of time. Like, you hire somebody, six months they’ll be good, a year they’ll be good. Two or three years into it a lot of people really run into challenges of just being able to stay focused, stay motivated without folks around them. Because it’s the norm to be in an office. As sad as that might be, or as disturbing as that might be, that’s how we’ve done it for the past 80 years since offices were invented, or 100 years or whatever. So people are used to having that interaction with other folks and, as a result, I’ve known founders who have hired people and they’ve worked out really well on the technical side, but they haven’t been able to be productive and to really produce long term as a remote employee in essence.
Mike [19:06]: I think part of that goes back to what you said before about one of the cons being a lack of unity. It’s just that comfortability that you get, the socialness of working with other people. Because as you said working remotely is very isolating and if you don’t have a mechanism in place, or a system in place, for getting out – whether that’s you or the people who are working for you – then it can be very easy to fall into this trap where you basically fire up your laptop every day and you work for eight hours and you don’t leave the house for days or weeks on end. Long term that’s going to be detrimental, and that’s part of why offices work so well, is because you get that social aspect that, as humans, we kind of need that. Whether that is social engagement at work or outside of work. But if you don’t leave the house to go to work then it isolates you that much more. Especially if you’re sitting there for long hours working on code, or different things, and you’re not really talking to a lot of people. It can be very difficult both for the founder and for the people who are working for them.
Rob [20:03]: And then the last couple cons for going remote or having a remote team. The first is time zone complexities, and this depends on how remote you are. If you hire someone in Europe or in Asia and you’re in the States, you’re talking nine to 12 hours’ difference, if you’re on Pacific time versus Asia. I think it’s even 14 hours’ difference. That becomes kind of a pain in the butt when you have this day or two-day delay because everything’s asynchronous. We’re trying to hire within three time zones, three hours’ difference of Pacific when we were in Fresno, and I felt like that was a pretty good way to manage it. I think trying to do an eight or nine hours off reduces even more of the ability to collaborate, and the team unity, and that kind of stuff. So depending on how you arrange it, this may or may not be a major con for you. And lastly, this kind of plays into needing unique employees, or unique team members, to be able to pull it off. But, unless you’re on top of things, some people will naturally start to slack off. It may not happen in the first week, it may not happen in the first month but over time things will come up, and they realize that they don’t need to, necessarily, clock in and clock out, because I imagine you’re not running a startup like that. I think that you can see people start to become less and less productive over time unless you do hire people that are really able to stay focused, or there’s some other thing that’s motivating them, because if they look at it as a job, there’s always something else that they can be doing. They really need to be bought into whether it’s working with the team, or the vision that you have, or loyalty to you. Because if you don’t have that, people will inevitably try to find ways to basically not put in the full-time work.
Mike [21:42]: Yeah. I don’t think that that’s necessarily intentional. It’s just a matter of how things tend to work out, in terms of the workloads and the ways that people put time in. So, if you’re working remotely it’s very easy to get up a little bit later and then call it a day early, for example, and you don’t think very much of it because sometimes you’re just thinking about things after work or you start including that extra time. It’s difficult to track it as well. Most of the time the founder’s got other things going on that they’re not going to track that. For them, their sole focus is working on the business and trying to get things up and running and, quite frankly, micromanaging employees or contractors is not at the top of the priority list. You don’t want to have to do that. This can be a problem longer term. I think in the early days it’s much easier – and by early days, like early on working with somebody – you tend to not see this very much. But as time goes on it can become a problem, and then it becomes difficult to address because you don’t have the clarity of when they’re working in the office, and not that them being in the office equates to productive time, but it’s difficult to judge how much people are actually working or how much time people are putting in.
Rob [22:52]: Yeah. I like that thought. I agree with you. The sentiment is that most people won’t do this intentionally, but it can happen pretty easily unintentionally.
Mike [23:00]: Yeah. And then it becomes uncomfortable to bring up.
Rob [23:03]: Right. And that’s the thing. If you’re going to build an organization and you’re like, “Boy, we’re a startup and we’re going to be cranking on this for a good solid two years, and then we’re going to sell, or then we’re going to IPO” or whatever it is. Then a lot of these things don’t matter. These are longer term things that if you want to build a business that’s sustainable, and that is actually generating revenue, and you’re thinking out two, three, four, five years, some of these things will creep in. And these are not often talked about because so many of the startups that we see remote workers and how all that works just haven’t been around that long. There are a few. There are a couple. Like Basecamp comes to mind and Buffer. But most of the big high profile ones, or even just the ones that we hear about in our circles are like, these are like one and two-year-old companies, and there’s a lot of stuff that’s going to creep in after that. Let’s switch over to talking about local, and just doing the traditional having an office, you hire everybody in the same locale. When I say everybody, I mean almost everybody. Sometimes there’s a really specific position that you may need to hire remote for. But imagine it’s like someone who’s kind of an independent contributor and they don’t need to work with the rest of the team on a day to day basis. So, I’m saying mostly local here. The pros to this are kind of the cons of being remote is the ability to collaborate, look eye to eye, work on hard problems. The comradery and the unity of being able to go out to lunch with people, of being able to be in the room and have conversations and plan things. And number three, I’ve found that that all builds into the team basically being more invested in the business outcome, or in the outcome of the startup, than if you were to build a completely remote team. I do think there are ways to work around these and to, even if you are remote, to try to get as much benefit as you can from these. But I don’t see that there’s any way that if you’re remote that you can possibly nail these three as good as being local in the same office.
Mike [24:48]: I think some of that has to do with the fact that you’re not getting the feedback from the business, or the founder, when you are working remote. For example, if you added some code to the product that really made a difference for a particular piece of it, and you work in the same office, it’s much easier – and probably much more common – for somebody to say, “Hey, great job doing that. I really appreciate that you did that.” Versus if you’re remote, then those people have to make it a point to kind of go out of their way to provide that feedback to the people who are working remotely. So, as you said it’s not that it can’t be done, it’s just that it’s more difficult and you have to put forth a conscious effort to do it. In those cases, it’s more likely to get swept under the rug, or just not addressed, or you’re not giving that feedback to people because you’ve got other things that you’re thinking about that are probably overtaking a lot of the other things that come to mind including that feedback to the people who are working on stuff.
Rob [25:39]: Right. And, of course, you can do this in Slack or via email or something, but it doesn’t have the same impact as looking someone in the eye and, in front of everybody else, being like, “You totally rocked this. Nice job.” Something we did at Drip when we were coming up, and we still do, is have stuff we call “launch juice”. It’s fire cider. It’s a nonalcoholic, very strong – I think it’s like habanero and honey and apple cider vinegar. And we do a shot of that when we do a big launch of anything. So, major features. So maybe we’ll do a shot once every month or two. And that’s just a really cool thing that you technically could ship bottles and shot glasses out to everybody and then all get together on video, SKYPE and then do it together. But there’s just something about being in that room, pouring them, and being like, “Cheers team! We totally rocked this.” And doing it together that you just can’t quite get with a remote team. All right. So let’s talk about some of the drawbacks of being local. The first one is that it can be really expensive. You can higher salaries, especially if you live in a major city. The second is the talent pool may be thin if you don’t live in a major city. If you need to hire six developers and several support people over the course of a year or two as you’re growing, if you don’t live in a major city that’s actually a lot harder than it sounds to find people who can all make it to the same office that are of the quality that you’ll want. And I think the third one that comes to mind is just the expense of having an office and of having to manage all that. And maybe there’s even the admin costs of having to find that and sign a lease, and the commitment, and how all that shakes out. Again, referring back to my experience with Drip, we were in a good position that we were able to find really inexpensive office space in a little local tech hub called Bitwise Industries in downtown Fresno. It was a revitalized warehouse building, in essence, and so our lease term was not very long. Our lease cost was exceptionally low compared to other founder friends who I talked to. But I would have done a co-working space, and just rented out more and more desks, or rented out more and more office space, rather than sign some big three to five-year lease, because that would never have felt comfortable to me. But this is another thing that you have to think about if you’re going to be local that is not even on your radar if you’re going to be remote.
Mike [27:49]: The other thing is that you have probably a lot more competition for the types of people that you’re looking for. Even if you are in a smaller area, the pickings are thin in terms of trying to find those employees or local workers. But at the same time you’re also competing against other companies that have open job listings. I remember when I had an office over in Hudson, Massachusetts here, because we were in the same region as Monster.com, all of our job listings that went out to Monster.com inevitably got pushed down by, quite frankly, them, and several other large companies that were in the area. And it was very difficult to get noticed by people who were out there actually looking for jobs. Then once you did get noticed you tended to get a lot of people coming from the recruiters saying, “Hey, let me try and help you fill this position.” which just drastically increases the cost for that position to just find somebody. So there’s a lot of things that go into it that just increase the costs overall. The other thing I’d probably mention here is that you’ll find that there’s probably less flexibility for the people who are coming into your office and saying, “Yeah, I’ll come in for a couple of hours to actually do an interview.” And those people are looking for the type of 9-to-5 job that they’re willing to come in the door and spend eight hours there and then go home at the end of the day, versus the types of people that are looking for a remote position. Maybe they’re looking for it because they can only work a couple of hours in the morning and then a couple of hours in the evening. And the scheduling flexibility that those people are looking for is different than the type of scheduling the people who are local are looking for.
Rob [29:27]: Yeah. I think that’s actually a really good point and something I left out. Another pro of going remote is that people look at being able to work remote as a big perk, and so you may be able to find people who think differently about work, or just who are more willing to come work for you and wouldn’t necessarily – there’d be too much completion if they were only local. So, that remote ability allows you to basically land folks who you otherwise wouldn’t be able to. Cool. I think those are kind of the pros and cons as we see them. The approach that I want to lay out that we stumbled upon with Drip was this hybrid approach. It’s where we spent about 40% to 50% of our time in the office and then the remainder of the other 50% to 60% remote. And by remote, I just mean we worked from home or from coffee shops, but we found that it was crazy in terms of our ability to collaborate. We would all come in on let’s say Tuesday and Thursdays, and so we had all the touch points, we had the unity because we did the lunches, we had the comradery. The team was invested in the business outcome. We were all in one state. It’s like the Goldie Locks zone is what we found. It eliminates the time zone complexities, the tax complexities, and it allowed us to solve really hard problems when we needed too on a recurring basis. But we also were able to go home and do maker time. And that was a big deal for developers especially to be able to two and a half to three days a week – depending on what they wanted to do – and be able to basically be on their own. Of course, we were all communicating via Slack and stuff, but it really helped them get stuff done on the days they weren’t in the office, and then to use the office days as the days to have the interpersonal and the collaboration time. I think that if I were ever going to grow another business – which presently I have absolutely zero plans of ever doing it again – but if that were ever the case, I would strive really hard for this in-between, hybrid approach of having people that are local enough that a couple of days a week together is a possibility.
Mike [31:26]: I think with the hybrid approach you’re kind of trading certain cons for pros in some situations, and then trading certain pros for cons in other situations. For example, if you have that situation where you’re coming into the office a couple of days a week, yes, you get the pros of being able to collaborate with people, and getting the team unity, and lots of other things that you wouldn’t get from a remote team. But then you’re also accepting the responsibility that you still need to hire people who are reasonably remote. You can’t just expect them to commute for four or five hours or whatever. So, you’ve still somewhat limited yourself in terms of the geographic region that you’re hiring in. But there are a lot of benefits to, what you said, that hybrid approach. Some of it has to do with concentration and being able to just take a couple of days and focus on the problems, and then revisit it and come back to a physical meeting place where everybody’s working together and get all that comradery that we had previously talked about.
Rob [32:17]: And I’ve got to be honest. I think before really building the team at Drip, and at our peak – I shouldn’t say at our peak, because we’re actually higher than that now in terms of employee count – but when we were acquired we were at about 10 people, and there were two contractors, eight employees, and five of us were there in Fresno and five were remote. But before growing that team, I hadn’t realized the value of this collaboration and the comradery/team unity piece, but it became very apparent to me as we grew the team, the value of those things. And that’s why I think we landed on the whole hybrid approach.
Mike [33:52]: Well, Johannes, I hope that answers your question. If you have a question for us, you can call it into our voicemail number at 1-888-801-9690 or email it to us at questions@startupsfortherestofus.com. Our theme music is an excerpt from ‘We’re Outta Control’ by MoOt used under creative comments. Subscribe to us in iTunes by searching for “startups” and visit startupsfortherestofus.com for a full transcript of each episode. Thanks for listening and well see you next time.
Episode 325 | Building a Killer Email Launch Sequence
Show Notes
In this episode of Startups For The Rest Of us, Rob and Mike talk about building a killer email launch sequence. Drawing from their collective experiences launching various books, software products, SaaS apps, and membership websites they discuss their thoughts and framework on the topic. Some of the points discussed in detail include elements of a sale letter, how many emails to send, and things to do on launch day.
Items mentioned in this episode:
- Metrics Watch
- FounderCafe
- Product Hunt
- Dan Kennedy’s Ultimate Sales Letter
- Rob’s Book: Start Small Stay Small
Transcript
Rob: In this episode of Startups for the Rest of Us, Mike and I talk about building a killer email launch sequence. This is Startups for the Rest of Us episode 325.
Welcome to ‘Startups for the Rest of Us,’ the podcast that helps developers, designers, and entrepreneurs be awesome at launching 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 our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, sir?
Mike: Well, I’m doing some ongoing work to polish up my Zapier integration, and it turned out to be a lot more troublesome than I had originally expected. There are certain requirements that they have about data that they expect back, so I had to go in and make a bunch more changes on top of the ones I already made to the API, and their documentation isn’t very clear on some of the things that you need to do. It’s technically correct, and I talked to someone about this over there, but not very helpful.
Rob: Yeah, that’s a bummer. I think I mentioned last time- because did you mention last time you were working on it?
Mike: Yeah. Especially getting our V1 Zapier integration. We ran into some struggles with it which is surprising because they have so many people integrating with it I would think it would be more of a well-honed process. I know that when I’ve done the V2, and I think we may even have the V3 out now, it got easier. There are still some tricky areas, but overall, once you have something that works it’s a lot easier to iterate on that.
Yeah, I think the issue is just when you go in you don’t even have a baseline and so you’ve done things your own way so you have your way of interfacing with the world and it doesn’t necessarily match up with what their expectation is of their way of interfacing with the world or with all the different APIs so they essentially set the standard that everybody else has to follow at this point.
Rob: Right. Yep, cool. On my end, we are hiring two more developers at Drip: front end and [?] developer, so that’s always fun ramping up those efforts. As you know, it’s very time-consuming to find good people. I think we’ll be pretty much constantly hiring throughout this year just with the trial and customer growth since [?] acquired us. We just have more and more needs to scale and to build more features and just everything that comes with that. I used to marvel- I don’t understand how these teams get so big. Why do you need fifteen people to run a software product? Why do you need twenty people? But I see it now that you get so many systems and then when you’re growing it at double-digit percentage every month, those systems every 4-6 months, they run out of capacity. Whether it’s a database or whether it’s a queue, whatever it is, that code is not built to basically double in usage every, whatever it is, six months. So you have to circle back and in the early days there’s almost none of it so you’re just doing features. But as you start to circle back to all these systems you’re maintaining, we’re finding we need a full-time developer on just one sub-system now just to keep it going, and that’s not even really improving it that much, it’s just to kind of keep up with the needs of the customer base as it grows.
Mike: Yeah, I was going to point out that there gets to a point where some of the different subsystems must need somebody full-time to work on just that. And those pieces get complicated, and as they get more complicated, it makes it more difficult to move from one subsystem to another because it is so complicated and it takes you so long to get back to a base level of understanding how did we write this and what were the different [etch-cases?] that we ran into so when I’m making changes I don’t break other things? And having that one person responsible for that one piece of it makes things a lot easier because then you don’t have to do that context switching all the time.
Rob: Yeah, totally. Other thing on my radar is Sherry and I are heading to Los Angeles this weekend for a quick getaway. I’m leaving Friday, I think my plane leaves at 5 or something, and we’re back by Sunday afternoon. It’s so cool to be in the city. We live in Minneapolis, and we’re twenty minutes from a major airport, and it’s a nonstop flight, less than four hours to LA from here. It’s crazy to have that flexibility, and I think it was like $210 to do it. I’ve really enjoyed that part about being in a larger city because Fresno was always a hop. Basically you always had a stop somewhere, and that stop just adds complexity. Your luggage gets lost more often, that stop always takes an hour or two hours and there’s just so much that can go wrong and you’re up and down and doing all this stuff, and I find that a nonstop flight now, that’s what I strive for. So the fact I would never do like 6 or 8 hour travel day. To get from Fresno to Minneapolis is like seven hours or something because it’s not nonstop, but I would never do that for a weekend because then you lose Sunday and you lose basically all day Friday, but in this case I can get there, especially with the time change around dinner time or a little later on Friday, and then we head back early afternoon on Sunday. I’m kind of marveling at the time efficiency of that.
Mike: You know, I just looked it up while you were talking, and the temperature difference between Minneapolis and Los Angeles is about twenty degrees, so that’s about $10 per degree.
Rob: I know, I know. We’re going for a friend’s birthday party and we’re hanging out with a bunch of people on Redondo Beach. It’s gonna be a blast. But Minneapolis — the polar vortex is coming through — so we’ve been subzero temperatures or 5 degrees has been the high, and all this time in LA it’s been 60s and 70s and we go to show up and suddenly this week Minneapolis is all in the 30s and 40s which is crazy for this time of year, and LA is in the 50s and 60s. It’s like they are meeting in the middle. It’s not the right week to go, but I guess we’ll take what we can get.
Mike: Yeah, I was just going to say turn the heat up a little bit. Whatever.
Rob: That’s what I should do.
So in today’s episode it’s about building a killer email launch sequence, and it was prompted by an email sent to us by [JP Boley?] at metrics.watch, that’s their website. And he says, “Hey guys, love the show and all the stuff you put out there. I’m about to launch a new product in about 2-3 weeks, and I want to have a great launch. I have some things planned, but I fear I might miss some of the basics and really want to get it as right as possible. Do you have any resources that suggest how to successfully launch and what a launch sequence might look like in 2017? The tool we’re launching is the third product of my business Metrics Watch, which is email reports and real time alerts for Google Analytics, and the next one is a freemium tool that scans Google Analytics accounts and tells people if they have spam or fake traffic in Google Analytics and how to fix it.”
So thanks for the question, JP. We’re going to take the next 20 or 30 minutes to talk through how we would craft a launch sequence and this is based on experience launching- between the two of us- books, software products, SaaS apps, info products, [?] Academy, Founder Cafe, which are online membership models- so really kind of the gamut.
Mike: MicroConf too.
Rob: MicroConf as well, right? We have a launch sequence there, an in-person event as well. So we’ve done this a lot, and there are a lot of way to do it, but I want to put out maybe a concrete framework that shows like step by step if you want to take this and run with it, go do that. And we also want to talk through how we think about it and why we get to the conclusion on which emails we send on which days. I also cover this in my book, Start Small, Stay Small in quite a bit of detail. Little bit different conclusion that I come to here because it was 5-6 years ago that I published that and some things have changed. I think the best way to get a sense of how to do a launch sequence is to basically get on someone else’s launch list and see how it feels to receive the quantity and the tone and the style of their emails.
One example is a friend of mine a couple months ago did a launch for kind of a training product, and I was on his list, and it was like irritating as hell. It was a really overbearing launch, and it was very much not in line with his personality. It was odd. I could tell he didn’t write the copy, it wasn’t in his voice, there were way too many emails. He was just hammering us, and if you’re not on the receiving end of those and you’re just sending them, you don’t know how it feels. I think getting on a couple launch sequences from people and seeing I like the feel of this or I didn’t like the feel of that can help you decide what feels right to you and what feels like it is in your voice and what feels like it is probably the right approach within the guidelines and within the layout today.
So we’re gonna give some ranges here. You can send 2 emails, you can send 10 emails. But which one’s right? A lot of it depends on your own personal taste and your relationship with your audience.
Mike: One thing to mention about places you can find products to get on to the different launch sequences because that might be an initial hangup that you have- how do I find some of those products where they have a launch sequence going?
I would head over to Product Hunt to start out with. And then from there you should be able to find a bunch of different products that people are launching, and then I would sign up for several of them, not just one or two because you are very likely to find somewhere they don’t have a very good launch sequence or they don’t even have one. They just basically put the product out there and get a bunch of sign ups on their page, but they don’t necessarily follow up with them and follow through with a full-blown launch sequence, so you’ll probably have to try out a hand full of them, I would probably say 6-12 of them. And then what you can do is take those and throw them into a folder, use them essentially as a Swipe file, and then look through to see how they go through the process of pitching the product or the offering they have.
Another thing you can do is you can go out to, I’ll say some rather well-known entrepreneurs in the software space, and identify what products they have available and get on to their email lists. Another option is looking specifically for book authors or information or training products of authors. So those tend to be dialed in pretty well. Obviously, they are not perfect, but a lot of different people are doing those types of things. Those are places you can start to find examples of what you can do that are very specific to a particular product as opposed to talking about it generally, which is what we’re going to do.
Rob: And my first exposure to a lot of this talk around launch sequences was Jeff Walker’s product launch formula, and I never actually bought that. It was about $2000 and it was at a time when it wasn’t really worth it to me, but in essence he kind of lays a bunch of stuff out anyways, so I kind of took the model that he laid out in his free content and used it to develop early launch sequences for products I was launching. And then I’ve slowly adapted those over time based on the audience and the product that was launching. In essence, what he talks about is doing something called the sideways sales letter. A lot of folks do this these days, but it’s still really [rarely?] effective. The concept of a sales letter, if you haven’t heard of that, in essence, if you think of a long form home page where it’s really just text, it’s almost a big long essay or blog post- the point of the letter is to essentially show you the value of a product and get someone to hit the buy now button. And there are ways to write really good sales letters. I would say that the old Jerk homepage- you can look at that on archive.org, maybe six months ago, that was a really solid SaaS sales letter. I spent a lot of time crafting it. It got good results, it made a statement, it used a lot of you words, it talked to the reader. Then you can write really crappy cheesy [?], and those I’m sure you can find on clickbank or something like that. But there are really six components of the sales letter. First is the opener, and you want something really good, really engaging because otherwise, someone’s not going to keep reading. You want to identify the problem, and during this time you’re using a lot of “you” language. Talking directly to the reader saying you’re a developer, you feel this. You want to launch a product but… you’re kind of putting words in their mouth, and if they’re not that person, they are going to leave, but if they are, it’s going to captivate, and they’re going to feel like, “Whoa, this person is talking exactly to me.” And then you present the solution. That’s the thing you’re selling. Then you want to add on social proof, a moneyback guarantee — that’s the fourth element. The fifth is essentially the stick, and this is up to you, but the penalty if you don’t do this. If you don’t do this, you’re going to be circling around, you’re never going to launch your product, you’re never going to market, or whatever. And the sixth is, in essence, the close, you ask for the sale. Those are the elements, and they can be in different orders and there are different variations of them but those are the fundamental six areas of a sales letter.
If you want more information on that, I would go read Dan Kennedy’s ultimate sales letter. It’s available in Kindle and Print. It’s probably the first book I read on sales letters, and as much as I don’t like a lot of Dan Kennedy’s teachings — I think he crosses the line in terms of … he’s just really old-school internet marketing in a way that is really irritating to me, but with that said, this book is a really good overview of how to write a sales letter and the components that you should think about and the ways to write them.
Mike: Let’s talk a little bit more about the sales letters. Just keep in mind that the entire intent of the sales letter is to help move somebody from where they are today into a position where they are going to take the next step and become a customer. That’s the whole purpose of the sales letter. You can do that in different ways, as Rob said. You can move things out of order, you can change, for example, your presenting this solution, social proof and guarantee. You can change up the order of some of those thing a little bit or mix and match them a little bit. Say here’s the problem and here’s the solution and throw some social proof in there and provide a little bit of a stick or a penalty and say this is what will happen if you don’t and you alternate back and go back to the solution and say by the way, this other problem over here is also taken care of. So you don’t have to go directly in that order, but again, the purpose of those is really to help somebody move their mindset from one place to another.
Rob: That’s a good point. Circling back to Jeff Walker, again, he has this product launch formula, and it’s about writing a sideways sales letter. So it’s taking a sales letter and instead of having it be this long thing of text, you basically break it up and send it out over time. You might send the first three sections in the first email and the second two in the next one. You don’t do that exactly, but you get the idea that each email has a particular point during the launch, and you’re basically covering these same topics: you need an opener, you identify the problem, you present the solution, you have social proof and a guarantee, perhaps you have a stick, and then you have a close, and then you just do those in a sequence of emails however you break it up. In my experience, the optimal number of emails is between 3 and 7 over the course of sometimes one, sometimes two weeks. That’s how I think about it. I personally tend toward 5-email launches, meaning that the launch has 5 emails in it, but it depends on how much your list loves you, and how much of a pain in the butt you want to be. To be honest, the more emails you send in a launch almost without exception the more sales you will make. But the tradeoff is that the more emails you send, the more unsubscribes and then ultimately complaints you will receive, so you have to find that balance depending on your niche. Like stock-picking sites, they send a ton of email. 9, 10, 11 emails, just crazy volume. Twice a day, all that stuff versus if you’re sending to developers, if you send twice a day, you’re going to get people starting to mark stuff as spam. So you have to figure out the relationship you have with your audience as well as the niche you’re in. That’s why I give out the range of 3 to 7. If you’re not sending 3, you’re probably not sending enough, and when you start creeping up in the 6, 7, 8 range you better have some really good content you’re sending out or else people are going to bail.
Mike: The other thing to keep in mind is the timeline has a lot to do with that, so Rob was just talking there about 3-7 over the course of a week, but if you’re going to start putting yourself in front of people 2-3 weeks out or 5 weeks out, you have a lot more flexibility to start sending more emails because there’s more space in between them. But as you get closer to that launch date, you’re probably going to want to ramp them out so instead of sending 1 a week, for example, for 3-4 weeks, you’d send one every couple of days. And it’s really that last week where you send that 3-7 emails in an effort to get up to the point where you’re building that anticipation, and that’s part of what these emails are about: building anticipation for the product launch. And the people who are interested in it are going to be looking forward to those emails, but as Rob said, there are people who are going to be turned off by it or not ready yet or they’re not in a position where they can take advantage of it. And if you start inundating those people with those email, they will walk away. They will unsubscribe. So it is a balancing act. Sometimes you can balance that out by giving them an option: hey, if you’re not ready right now, just click here, and we’ll follow up with you in 3-4 months, so you can sort of head those things off, but at the same time you don’t want to put too many things on your plate if you don’t have time to start implementing things or trying to think of ways to handle too many [edge?] cases. It really depends on the size of your list and what it is you’re going for.
Rob: In terms of the overall launch, a good launch has some type of reward you’re able to offer that people won’t get at another time. So like some epic course you’ve created, a sequence of interviews, something that is valuable to people that could be a discount on the product itself that you only discount for the first few days, or if it’s a SaaS app maybe you get a lifetime discount for the whole time or you get maybe it’s not even a discount, like with Drip we still charge the $49, but we doubled everyone’s- what they got for that $49 because I didn’t want to be selling things for $24.50 a month. I wanted to hit that price point. So you can get creative with it.
So number 1 it has a reward and number 2: it’s time limited. And without both of those components, you don’t create the impetus for people to do it now and people will procrastinate and not do it. So there’s the two things you’re going to be communicating through this process as you step through those six elements I said above.
Mike: The reward itself I’m not particularly a big fan of offering lifetime discounts or anything like that- I think there’s a lot of ways you can put yourself in a position to be providing more value as opposed to capturing less value from a customer for the entire life of that customer. As Rob said, with Drip what they did is they gave away, the ability to send more emails, but there are other ways you can do similar ways as well. You can do personalized onboarding or coaching sessions for example on how to get the best use of the product or help them integrate it into their systems, and that actually serves two different purposes. One: it helps get them into your software and it also allows you to have those direct one-to-one conversations with them to help you learn more information about how they’re going to use the product, when they’re going to use it, how often, and help you to better craft your future marketing messages. So yes, it’s time out of your day you’re going to be spending with them, and it will probably chew through at least a month if not several months worth of the “profit margin” for that, but it does give you the additional benefit of learning from that experience to be able to apply it to the future for the product.
Rob: So let’s talk through this five email sequence, and again, you can adapt this to be three emails, you can adapt to be seven emails, but we’ll just talk through these five and kind of when they’re sent. And I should say the first time I used this kind of structure I was kind of flying blind and I didn’t know what would come of it. It was 2007 or 2008, and then over the years it wasn’t exactly the structure. I’ve honed it based on feedback and results. A lot of people use this formula these days, but there’s kind of been a lot of us for 10 years now trying to hone this thing and get it better. So I will say that this type of sequence tends to convert better than it did in the old days just because we’ve been able to improve it so much over the years. It depends a lot on your copywriting as well.
Let me get into the first one. Typically about a week before the launch day- so the launch window starts on the launch day, I’m going to use that term. And then I like to think of the launch window being 48-72 hours. With MicroConf we do a full week because people- it’s a big ticket item, they’re thinking about making travel plans, they have to check schedules, there’s all types of stuff, but somewhere in between that- I don’t like to go longer than a week. So about a week before the launch day, you’re going to send a teaser email. This is information, a screenshot, maybe a short screencast. You’re kind of being vague about the release date but you say next week we’re going to be launching this thing and here’s what it is and here’s the problem it solves. And you really get into starting to build anticipation. At this point you want to let them know since they’re on the list, they’re going to receive a special price available only to people who are there but that it is going to be time-limited. And this can really dig into the problem the person reading the email has, and kind of show that your product is the answer or at least start doing that.
Mike: One thing to keep in mind before you start going down this process of laying out these different emails is make sure you have an outline of all the different emails so you know exactly what needs to be written and write it as far in advance as possible. The last thing you want to do is be crafting these emails through your launch sequence. If you decide you’re going to launch on the 7th, and you start them on the 1st, don’t wait until the day before to start writing some of those emails because it will either not get done or you’ll not be happy with it that you won’t have the time to go through them. So it’s kind of a preface to all these emails that we’re going to talk about. make sure you do those things well in advance so you’re not waiting to the last minute so that if something goes wrong you have time to tweak it.
Rob: One other thing I forgot to mention about a good launch when I was talking about it above is if it makes sense, scarcity is the third thing that’s really cool. So you have that reward, you have that timeline, but if you add scarcity as well- don’t do fake scarcity. If you’re selling ebooks there’s no scarcity, but if you’re selling tickets to a conference, there is scarcity because there’s only so many tickets that you can sell. So that is what you’re building towards with these emails, so the second email goes out typically 1 day before the launch, and this is where you provide social proof, you’ve mentioned the money back guarantee- you’re trying to remove all objections so that someone’s already thought through the whole purchase and by the time they get that email on launch day, all they are doing is basically clicking the buy button. So you build anticipation and excitement and you try to remove all the roadblocks. So you may need to touch base again on the problem your product solves, but you’re going tell them, especially if there’s scarcity, you’re going to tell them the exact day and exact time they’re going to receive that email and let them know that you imagine you will sell out, assuming you do. You want to say stuff that’s true. You’re going to sell out and if they want to get in, they need to get in early. Again, do true scarcity. If you don’t have real scarcity, then don’t do it. But I like to send this email out 1 day before because it’s long enough that most people will open it before the launch, but it’s close enough that most people will remember. If you send it out two days, it can get a little tricky with people 48 hours later forgetting that this launch is going on. Also, I like to start my launches on Tuesday and so if you go two days before they’re getting it on a Sunday, and I prefer to be in their inbox on Monday morning.
So the third email is your actual launch email, and like I said, I like to do Tuesdays. I’ve also done some launches on Wednesdays. And when we do the full week long launches with MicroConf we have done a few of them on Thursdays. I don’t like to do launches over weekends because people just aren’t on their computers as much. On launch day you’re going to email the list, you’re going to see sales rolling in, and you’re probably going to have your best sales day at least for a while. That’s the whole goal of this is to kind of make your first several months of revenue on that first day to really kickstart your motivation. I’ve seen conversion rates on this launch sequence well about 20% of the list buying. And I’ve seen as low as 5% and I’ve seen even 30% which is just insane. It depends on the relationship you have with your audience, it depends on how big and warm the list is, openers play a big part in that and your price point. But it’s pretty interesting. If you can sell a few hundred customers on $20-$30 a month, not a bad way to kickstart a little bootstrap startup project that you’ve been working on for a few months.
Mike: One thing that Rob just mentioned about having that launch day on Tuesday or Wednesday and then not sending out an email two days before because then it would come out on a Sunday- the other thing to keep in mind is when your launch sequence is going to end and when you’re going to stop making that special offer. So the reason Tuesday works so well is because you can send an email the day before and then you can have that launch sequence last for two days so that people have that opportunity to get in until Thursday. One of the issues you can run into is if you extend that by another day what ends up happening is that now your deals are going to end on Friday afternoon or evening, and by the time 4 or 5 o’clock rolls around on a Friday people have lost interest, their minds are elsewhere, and if you have a launch ending at midnight on a Friday night it is not going to work out so well. I have seen that happen where something goes out for a launch and it ends on a Friday or Saturday night at midnight, and those don’t go very well. So you have to be careful not only to avoid starting it over a weekend but also ending it over a weekend, you don’t want to do that either.
Rob: So the fourth email is the 24-48 hours after the initial launch email. And it depends obviously if your launch is only 48 hours then this kind of has to be at 24. But if you’re doing a 3-day launch, maybe it’s 24-36-48. Basically, this is another excuse to communicate with them, and so you want to provide some value. Probably a good model for this is send out an FAQ email like hey, we’ve gotten some questions and these are the questions and these are the answers. Because you’re almost certainly going to get questions via email and so you can compile those up and just be like, I wanted everyone to have those, and it’s really just an excuse to get in touch again. Remember, email open rates are not 100%, so maybe if you’re getting a 40% open rate on your sequence, emailing multiple times will hit different segments of that, and you can make sure that everyone at least gets some of your emails into their inbox.
Another thing you can do with this one is to add some social proof again, add quotes from people who got in and are really excited, and if you’re selling any quantity you are going to get feedback pretty quick of like, “man, this is a really cool product.” You can include more screenshots. Again, it’s just another touch point, but you also don’t want it to be cheesy and feel like another touchpoint. You want to be genuine with it and have folks feel like your emails are providing value because at this point if they haven’t bought and you keep emailing them, you’re going to start getting complaints and unsubscribes if you’re not providing value with the emails you’re sending.
Mike: That’s why it’s kind of important to make sure that you have an idea of what should go into that FAQ and if you don’t then have the email itself written and then kind of stump that piece of it out and then fill in the details of the FAQ with what people are actually asking. One thing to be careful of especially when a product is very early on, a lot of times — and I’ve done this myself — is you don’t necessarily know the questions people are going to ask so you kind of make some of those questions up, and depending on what it is, it can be obvious from the other side that that those questions were probably not real questions that people were asking and you were using it as an excuse to put something in the FAQ, so do be careful to make sure you’re paying attention to what it is that people are actually asking about, and some of those questions can even come from demos you’ve done previously before the launch to offer beta customers. You can reuse those, but if you’re just making things up completely it can be a little bit forced, I’ll say.
Rob: Yeah, that’s one thing. Like if you’re faking it, people can tell that the days of these kind of cheesy internet marketer stuff working- they’ are rapidly coming to a close if they’re not already gone. There are certain subsections of people who are not as web savvy or not as technical or whatever and you can say things and they’ll believe it, but the folks you’ll likely going to be dealing with are going to be savvier than that. The bar is just raised in terms of transparency and in terms of people recognizing who you are and being able to recognize what’s legitimate and what’s not. So the fifth email in this sequence is the 24 hours before the time limited deal ends. You could do one 12 hours before as well. Not in addition. That would be starting to get quite a few, but either 24 or 12 hours before saying there’s only a few hours left. Sometimes this day has almost as many as the initial launch in terms of sales. Other times it’s just a trickle. The thing to keep in mind is like I said, there are more complex variations than just this whole 5 email sequence, but this is definitely a pretty simple way to do it. It ‘s a proven approach, and if you don’t do this you either don’t send emails or you just send one email- it’s a 5 or a 10 x difference. It’s a huge, huge variation. So I would recommend if you feel like 5 is too many, it’s pretty easy to cut the FAQ email and you’re at four or you can the week before email altogether or the day before. There’s different ways you can vary it to what your comfort level is and the relationship you feel like you have with your audience.
Mike: And you can also go in the other direction where you send more emails so instead of just sending one 24 hours before the deal ends, I’ve also seen a lot of people who send something 4 hours before something ends and then 2 hours before it ends and then 1 hour before it ends. Again, you do have to be careful with how many times you’re hitting that list and whether that list is considered burned after that. There are lists out there where people will build the list and do a launch of some kind to it, and after that there’s not even a point in having the list anymore. Maybe it’s because it’s an in-person event or something like that but again, you will increase sales at the expense of the signups you have.
Rob: Last thing to keep in mind is email open rates, are not 100%. No list is that good. So a solid list should be between 20-60% open rate. So think about that when you’re calculating conversion rates. Let’s say you have 1,000 people on your list. You think my goal is to convert 20% of those. That’s good. That’s a really hard thing to do if your open rates are only 20%. But if you’re at 60% then converting 1/3 of the people who receive the email is actually much more in line with reality. So think about that and check out your list. Maybe even prune your list before doing this. If this is an ongoing list, try to get a more realistic view and higher open rates and making a more realistic concept of how many people you might convert during the launch.
Mike: One thing that can be a little difficult to figure out is when you’re looking at the open rate whether or not you’re looking at a single email or whether you’re looking at aggregate across them. You’re going to have people who open up every single email and then you’re going to have other people who open up one. That’s something else to factor into what your calculations are as well. I don’t think it’s worth getting too worked up over whether or not you reached a particular milestone or conversion rate in your head, but I do think it is worth paying attention to what your expectations were. And how you can improve what that process looks like in the future- what things worked, what things didn’t. And then being able to analyze those so that you can use them in the future for other either mini launches or other marketing copy you can look at some of the different emails you sent right after the launch when it’s done, and find out whether or not certain things probably resonated with people more than others.
Well, JP, I hope that answers your question. 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 for ‘We’re Outta Control’ by MoOt used under creative comments. Subscribe to us in 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 324 | Idea Validation & Risk Avoidance
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about idea validation and risk avoidance. They list 10 fundamental questions that need to be answered when starting a new product.
Items in this mentioned in this episode:
Transcript
Mike [00:00]: In this episode of ‘Startups for the Rest of Us’ Rob and I are going to be talking about idea validation and risk avoidance. This is ‘Startups for the Rest of Us,’ episode 324.
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 [00:25]: And I’m Rob.
Mike [00:26]: 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 [00:30]: Just nailing down the last few speakers for MicroConf Las Vegas coming up here in April. So rounding out that lineup. It’s shaping up to be a really interesting lineup this year. I mean, every year is good in its own way but this year you and I were really deliberate about almost setting up – especially with starter – setting up a curriculum where we want each talk to be all the way from idea validation to launch and everything in between. We’ve chosen speakers that are either experts or they are founders who have done it, each of these stages, and have done it successfully and have a framework. It’s pretty exciting.
Mike [01:01]: It’s also nice to be able to kind of niche down the audience a little bit so that we can target those speakers so that you don’t have people sitting next to each other that are just in vastly different worlds. We’ve got the people who are just starting out versus people who are making several million dollars a year. And they’re at different places in their business so it’s hard for the speakers to talk to both of them at the same time. It really helps to have that separation between them so that those talks are more targeted directly to where their business is at.
Rob [01:28]: Yeah. Just as an example with Starter Edition, Jordan Gal is talking about going from zero to 15K MRR and they’re definitely past that now. But I think his talk goes through there. And Ryan Battle is talking about how to gain traction in a crowded market. Justin Jackson. You’re speaking about idea validation. Sherry Walling is talking about staying sane. And on the growth side, in addition to me speaking about the Drip acquisition, Lars Lofgren, Joanna Wiebe, Russ from Digital Market. We’ve really got a nice lineup shaping up here.
So, if you’re interested, we do still have a few tickets left. I think we have maybe 10 or 15 to each conference. It’s like the perfect amount to have right now. So head over to MicroConf.com if you are interested in hanging out with a couple hundred of your closest bootstrapped founder friends.
Mike [02:14]: Talking about bootstrapped, let’s go in the opposite direction. Did you see that Trello was acquired for $425 million by Atlassian?
Rob [02:21]: Isn’t that insane? I read somewhere – and it was debatable because they didn’t release revenue numbers, but it was kind of numbers have been implied and it was May of 2016. So it was about seven months ago that they were doing around $10 million in revenue.
Mike [02:35]: Yeah.
Rob [02:37]: That’s a hell of a multiple. Forty-two times revenue. Assuming that’s correct. Let’s say they were at 20 or 30 million. It’s still a 10 to 15 times revenue multiple. That’s not net profit like if you were to go to a broker and sell for financial. This is tremendously expensive.
Mike [02:53]: Yeah. I think the interesting thing is that they said that they had 19 million users. I also read that they had over 100 people working on it at this point. So, I think that those things factor in as well. Didn’t they get funding for Trello?
Rob [03:07]: I think they did. They spun it out and raised money. It must have been bleeding cash if they had that many people working on it with that little revenue. It’s a good exit for them. I’ve always liked Joel Spolsky and Mike Pryor. They built something pretty amazing with FogBugz and Stack Overflow and Trello. They got in early and they made a good product. I use it every day and I think they really captured a market. I totally don’t begrudge them any type of success. I feel happy for them to have had a big exit. As far as I know this is their first exit, right? Because FogBugz wasn’t an exit. It’s still running and turning – I mean Fog Creek. I’m sorry – still turning out FogBugz. And then Stack Overflow is just churning along at this point.
Mike [03:47]: Yeah. Spolsky is the CEO of Stack Overflow so it’s its own separate entity. All three of them are separate entities. It’s interesting to watch definitely.
Rob [03:55]: Yeah. They’ve done a lot to impact our community both of software entrepreneurs and then now with Trello and Stack Overflow kind of the rest of the world. They just really done a lot. It’s pretty impressive. Anything else for you before we dive in?
Mike [04:10]: I’m experimenting with going to a three and possibly a four monitor set up. I’ve got my main desktop. It’s a 30-inch monitor. And then I’ve had a 20-inch monitor next to it for a while. And I’ve always been thinking to myself it would be really nice to have a third monitor up above that so that I can have something else up there and use it for reference if I’m working on stuff that I need a lot of screen space. And I’ll say it’s a little dicey. It’s a little rough at the moment trying to get used to having that third monitor. I have the ability to have a fourth monitor. I just haven’t done it yet. I’ve seen people on Twitter recommend that I go to a 55-inch 4K TV setup instead. I think Andrew Culver had showed a screenshot of what his looked like and he was able to put the equivalent of nine screens on the TV all at once. My TV in my living room is 55 inches so I think that I’d have a hard time with that.
Rob [04:59]: And you’d need it to be 4K because the resolution of TV’s is so different. Because HD, or 1080P I should say, is not actually that great a resolution these days now that we’re looking at retina screens. So you’d have to do the 4K in order not to see the pixels and be really irritated by it. You’d also need really good window management because I don’t want to be manually resizing windows. I want to snap it into a grid. You’d have to some app that manages that where you’d say I want basically a 2×2 grid because I only want four and I just want to be able to snap it there and have it expand.
Mike [05:32]: Yeah. There’s a few different options for that because I have it hooked to my desktop on Windows and there’s a few different options which I’m still running Windows 7 but I think that Windows 10 they do a little bit better job with that. I’m not real sure how that would shake out. I don’t know, we’ll see. I might consider doing a single larger screen at some point but I’m just kind of experimenting with it to see how the third screen works out for now.
Rob [05:53]: So I think you’re first problem started with the sentence, “I’m still running Windows.”
Mike [06:01]: One of many problems I’m sure.
Rob [06:03]: Anyways, let’s dive in. What are we talking about today?
Mike [06:05]: Well, today we have a listener question from Simon over at Small Farm Central. He called it into our voicemail number and here is the message. “Hi, Mike and Rob. It’s Simon from Small Farm Central. I came to your conference last year and I just had one question that I thought you might be able to answer. I’m considering doing something new. A big new project and I’ve been talking to customers over the last couple of months and I’ve got them actually to prepay and sort of buy it ahead of time and do things the right way there. I think I really have something that could work. My question is: you do all this validation ahead of time and at a certain point you still need to make a leap and say, yes, I’m going to do this and I’m going to commit the next three to five years of my time to making this work. What do you look at as you make that final leap and make that final decision to really go for something new? Thanks.”
Rob [07:03]: Cool. So that’s a good question. Let’s dive into this.
Mike [07:06]: I think one of the things that I pulled out of this was: how do you evaluate something where you’re trying to make that leap from the validation stage where you’ve put in the time and effort; you’ve talked to customers; you’ve got some prepaying customers and you’re looking at spending the next three to five years working on it? What sorts of factors do you take into account and what are some of the questions that you ask yourself in order to help avoid the risks of taking that leap and spending whether it’s six months or two years working on something only to have it either not work out or just not be something that you want to work on?
I think there’s a number of fundamental questions that you have to ask yourself when you’re going through this. Some of them relate directly to that validation process, but some of those questions also pertain to down the road once you’re past the three month, six month, nine month window of getting started working on that product because you have to look at this a little bit long term.
Rob [07:55]: There’s a bunch of questions that you need to think through in order to be able to “A”: reduce risk, but also, I think convince yourself that it’s a good idea to move forward. The thing is you’re never going to be sure and that’s the unfortunate part. I feel like trying to get 100% confirmation where you totally know everything is going to work, I just don’t think that exists. I think the best you could get is – I don’t even know – 50%, 60% sure. I’ve never felt 100% sure about anything. I think even after I had 11 people committed to paying $99 a month for the original idea behind Drip, I was maybe two-thirds sure that it was going to work. I knew that we would figure it out eventually and, in fact, what we wound up building originally was not the end product. We just kept kind of moving around and adding features and doing stuff until we became a marketing automation platform. But I think that’s a thing you have to think about is entering a space a being willing to pivot or to adjust or to add stuff that makes it not equivalent to your original vision. If you’re not willing to do that then you have a much lower chance of success. No matter if you say yes to all of these questions that we’re going to run through. But if you are willing to be flexible and potentially do stuff that’s outside of your initial product vision, I think you have a good chance of finding a slot that you’re able to fit into in the market and that can lead to success.
Mike [09:11]: So what we’re going to do is we’re going to run down some of the fundamental questions that we’ve probably discussed quite a few times on this show. The first one is: are you going to be solving a problem that people actually have? And, if you’re not, then obviously you’re not going to get to that point where people are paying you money for it. If you’ve got prospects who have already prepaid you money, then you’re sort of past this point.
The second one is: who is it solving a problem for and who would pay for it? These are actually two different questions because not it’s not always the same person. You might be selling to the business owner, for example. But they might have a marketing person who is actually going to be using the software. So you have to just be at least aware of who it is that’s actually paying for it versus who’s problem it is that you are solving.
And then the third one is: are they willing to pay for it? And, again, this is something that Simon seems to have gotten past. He’s figured out, yes, they’re willing to pay for it; how much it is that they are willing to pay for it. Whether you charge somebodies credit card or not, I think, is a question to be asked of yourself depending on how long you think it’s actually going to take, what your comfortability is and whether or not these people are known to you or unknown to you. And whether or not you’re going to be able to deliver what the terms are for that. Are you going to refund their money if you don’t do it, etcetera? There’s a lot of things that kind of factor into that. Those are the three questions you ask up front before you get to the point of having those paying customers.
Rob [10:25]: And it sounds like Simon has this part dialed in. He’s talked to folks, got them to prepay. There are a bunch of different ways to validate this. It depends on the market and who the customers are and stuff. Sometimes it’s face-to-face conversations, getting them to write you a check that you won’t cash until it’s up and running. Sometimes it’s SKYPE conversations, email conversations and getting them to give you their credit card number or even charging it and keeping the money for now. And other times it’s having a landing page and getting a bunch of emails and seeing that you have 2,000 people on an email list who are clamoring for this solution. It depends on what lengths you want to go to but I think that these are fundamental and I think that a lot of folks listening to this show will have heard these before. But that’s where you want to start certainly before diving into a market.
Mike [11:07]: Once you’re at that point where you’ve got at least the basics carved out, I think the next question you have to ask is: are these people searching for a solution to the problem? And if they are, who is doing the searching? How are they solving this problem today? I think that those questions are not necessarily things that people always ask themselves because it seems to me like when you’ve got those people who you’re talking to and you say, “Hey, I’ve got this solution for your problem over here.” It’s very easy to talk yourself into the idea that, “Oh, these people have each given me $50 and I know that I’m going to be able to solve this problem for them.” You can certainly sell somebody on the idea or the vision of a solution to a problem. But does that mean that they were searching for it already? Sometimes the answer to that is no and you may not find that out unless you ask yourself or ask that question of the situation until you’re much further down the road. And at that point you end up with this issue or this situation where you’ve got a solution to a problem but nobody’s searching for it. Then you have to figure out how it is that you’re going to get in front of those people and educate them about a solution you have to problem that they’re not, quite frankly, all that interested in solving because they haven’t gone out and looked for solutions for it.
Rob [12:18]: Right. And if you don’t have in mind how you are going to reach your prospects, you’d better have a lot of money or a lot of experience because this is not for the faint of heart and this is why some companies raise buckets of funding is purely to go into a market where people are not searching. So there’s market education and the outreach is super expensive. Especially if you’re early, if you’re more of a beginner entrepreneur this is a real danger sign to watch out for. If you can find five or 10 people who are willing to pay for it, that is one step. Then the next one is, “How am I going to find hundred’s more in a scalable fashion?”
Mike [12:52]: Something else that kind of comes into that is how quickly and easily you were able to find that initial group of people to begin with. If you’ve done idea validation on a bunch of different ideas, then you can see dramatic shifts between one idea and the next in terms of how interested people were; how quickly they were willing to say, “Yeah, I’d absolutely pay for that” or “I’m using this other thing and it doesn’t work” and they have questions that will help lead you in the right direction for the design of the product and how it’s going to be implemented and how it factors into their business and how it’s used. But if you have a hard time finding those things, then it’s going to be much more challenging to be able to market and sell that product just because it’s harder to get in front of those people. Then your cost of acquisition goes up as a result of that. And cost of acquisition can be your advertising dollars but it also could just be a factor of how much resources you have to put into it in order to acquire those customers. It’s not always a direct correlation between advertising dollars and cost of acquisition. There’s lots of other things that go into it.
Rob [13:51]: The fifth question you’ll want to think about is: what roadblocks are there to customers implementing your solution once it’s built? Because prepayments can be a mixed bag. Buying into an idea and me writing you a check for $100 to get access to the product isn’t the same thing as being willing to follow through and implement it even if you do build the software. If it adds a bunch of items to my to do list as the potential customer or it takes me 20 hours of development time to implement and integrate with you in order for me to get value out of it, then the check I wrote you for $100 really isn’t my commitment. The commitment is I have to carve out all that time to be able to integrate with you. So give some thought to how hard is it to basically get to that point where you’re getting value from your product.
Mike [14:37]: I think this is a really important one especially if somebody is actively ripping out an existing solution that they have in place and they need to put yours in. There’s definitely ways around that piece of the problem. You could go in and let’s say that in the case of Drip, for example, you offered to go in and move people’s data and information over for them from one account to another and you handled that for free in the early days. But, at the same time, your customers were probably not willing to do that themselves because it was just such a colossal headache for them to have to do that. And that’s how you overcame that. But there’s other situations where that might not be as easy to do. Maybe there’s other integrations that they have or there’s other pieces that their existing software integrates into and you have to be able to support those things and if you don’t they literally can’t move over. Even if they’ve bought into the idea and they like it and they want to, if it doesn’t do those certain things, they can’t move and there’s almost nothing that you can do to change that unless you’re able to implement those pieces. And knowing what those roadblocks are in advance is going to be a huge factor in whether or not you’re going to be able to avoid some of this risk of building something, putting it out there and giving it to these prepaid customers and then having them not be able to use it or implement it because those roadblocks are in the way. So asking what those roadblocks are up front is another step you should probably go through before you get to the point of trying to roll it out to a larger audience or pursue it.
Rob [15:58]: The sixth question you’ll want to think about is: how will you acquire customers and do you have the ability and the resources to do so? It helps to think about this maybe in terms of three phases. The first one is your initial alpha/beta/early access customers who are early adopters and they’re going to give you a lot of feedback and making a lot of money from them is not as important as the input you’re going to get. So you have to choose them carefully because certain people want to give you a lot of feedback and expect you to do everything and their feedback may not necessarily be helpful.
The second phase is launch customers. This is the tried and true page out of “How to Start Small, Stay Small” which is build the landing page, build up that big list and get as many people on it – whether it’s paid acquisition, whether it’s writing blog posts. Whatever it takes – all the marketing approaches – to build up that list so that launch day is your big revenue day. It should be the biggest revenue day of your first six to 12 months if you’re doing things really well.
The third phase is long term customer acquisition. And this is the stuff that’s long term sustainable. It’s getting the fly wheels going whether it’s paid acquisition, a webinar funnel, just getting your SCO going, content marketing, all that stuff that we talk about is that third phase. And that’s how you’re really going to scale something up once you have product market fed. Keep in mind that after launch you’re probably not totally not going to have product market fed and you’re going to still be fumbling around a little bit to find it.
Mike [17:14]: The next thing to think about is the feasibility of the product itself. And there’s, I think, three different aspects of this. The first one is the technical side of it which, for developers, the answer is almost always yes, it is going to be technically possible. The real question at that point is: how long is it going to take you to get something that is minimally usable and solves the core problem that you’re trying to address in a way that people are willing to pay for it. That’s kind of the MVP philosophy.
Moving on from that, the second one is the dependencies. Are there any dependencies or things that are outside of your control that you need to execute on? Those might include things like having delivery partners or if you’re running a productized service of any kind of and you have to plug people into different phases of a workflow, are you going to be able to plug people in at a price point that you’re going to be able to support and customers are going to be able to pay for to deliver on whatever it is that the final product is. So there’s things that are outside of your immediate control. What are the risks associated with those things?
The third one is: what does the road to profitability look like? Are you going to be able to make the product profitable in a short enough timeframe that you have the runway to get through that? Because if you don’t, you’re going to stall out somewhere along the way and you’re not going to be able to finish it and whether that constitutes non-delivery to the initial people or getting to the point where you’ve got three months left of runway but you know that you’re going to need at least nine in order to make it profitable. That’s a bad situation to be in but there’s plenty of people who end up in that situation and some of it’s just being able to evaluate what that is going to look like in terms of your launch process getting the product itself built and then having that marketing engine that is built up at approximately the same level as the product is moving forward.
Rob [18:54]: The eighth question you’ll want to ask yourself is: do you have the capability to execute on both the marketing and on development? This depends a lot on the market you’re entering into. If it’s really crowded or not. It depends on your experience level with marketing. And then on the development side, it depends on how complex the product is. How much experience you have either writing code or managing people who do it.
It’s something to think through because let’s say you wanted to build a competitor to Kissmetrics or Mixpanel. That’s an insane development and scaling effort. If you’ve never built something that’s big and complicated and you don’t have a technical cofounder who can handle that for you, this is not something that I would recommend trying. It’s also really expensive. You’d need to raise buckets of money just for the server costs alone. But that’s something to think about. Do you have the capability to execute on both marketing and development?
Mike [19:41]: That also plays into does it fit within the runway that you have available because some of the marketing activities can’t really be done until after the development is finished. You don’t want to be in a situation where you’re just barely finishing up the code and, oh by the way, you’ve got all these marketing things that you need to do almost in parallel. And if you could clone yourself easily with a 3D printer it would be great, but that’s really hard to do. So being able to bookend those things together so that you know that you have the time available to do both of them or to alternate back and forth between them in a way that is conducive to getting the product out the door and doing those marketing efforts. Sometimes that’s not just about ability it’s just able how many hours you have available in a day to be able to get things done.
Rob [20:24]: You said that cloning yourself with a 3D printer is hard to do?
Mike [20:28]: That wasn’t quite what I meant.
Rob [20:30]: You didn’t say it’s impossible.
Mike [20:30]: I didn’t say it’s –
Rob [20:31]: I thought you were going to say that’s impossible but you’re like, “That’s really hard to do.”
Mike [20:34]: That’s really hard to do. I’ve done it before. It’s just that that little model sits there and does nothing. He’s totally worthless. Haven’t you done this?
Rob [20:42]: Kind of like the human he’s based on?
Mike [20:44]: Yes.
Rob [20:44]: Oh, boom!
Mike [20:47]: Should we just end the episode right there?
Rob [20:49]: You [?] for that one, dude, I’m sorry. Alright. What’s our ninth question?
Mike [20:54]: So our ninth one is: can you find examples of similar offerings or products that have succeeded and failed? What this will do is this will give you a general sense of how those other products are doing? How they’re acquiring customers? Especially for the successful ones. And if you find examples of failed ones, you can see what sorts of things they did and try to reverse engineer why it didn’t work for them and whether or not there’s tweaks to their process or to their launches that you can do that are going to make it beneficial for you.
The other thing that it does is it gives you an idea of the competitive landscape and whether or not you’re going to have to take customers from them. Because when you’re launching a new product there’s two types of people that you’re going to end up with. One is people who don’t have an existing solution in place and they’re signing up for your product. And then there’s another group of people that you’re going to try to pull away from other products that are in the space. If you can analyze those existing products that are being successful, see what they’re doing and try to replicate it to some extent but, obviously, put your own spin on it. Then look at the ones that failed and try to avoid the mistakes that they made. It puts you in a much better position as opposed to having this greenfield opportunity that nobody’s ever done or tried before. And, I think, we both know that when you’re trying to do something like that and it’s a brand new thing, it’s really difficult to explain it to people and make them understand what the value is that it provides.
Rob [22:12]: Yep. It’s easier to enter a market and find a position than it is to invent a whole new market.
Our tenth and final question that we think you should consider when you’re validating an idea and trying to avoid risk is: do you want to work with this customer base for the next three, five or more years? This is a questions that Ruben Gomez actually asked me several years ago. It was pre-Drip and I had a bunch of different product ideas and I was going to acquire one in a particular space where my customers would be very particular occupation and type of person. He said, “Are you interested in really getting to know that group and going to their conferences and that being your focus for the next several years?” And in the long term my answer was like, “You know, it really isn’t.” It was something that I hadn’t thought about before in that way. But you really are committing to an industry and you’d better like both talking to folks in that industry because they’re going to be your customers whom you’re supporting. And you should like hanging around and being around that industry. I think if it’s something that’s not exciting to you I think it could get really boring over the course of years of going to these trade shows and interacting with folks that you don’t have interest in being around.
Mike [23:17]: So beyond the questions that we’ve already asked, we came up with some other questions or thoughts that you might want to consider when you’re going through that validation process and you’re trying to figure out whether or not it’s worth it to make the leap or whether you should make that leap. The first one is: has the validation that you’ve done thus far uncovered any new and meaningful information or was it simply confirming what you already knew? If you’re looking at that and thinking to yourself, “I didn’t really actually confirm anything. All it did was told me stuff that I already thought to be true.” I think when you find out that that’s the case from your validation efforts, you’ve got to try and prove the opposite. That’s really difficult to do because you’re suffering from what’s essentially a confirmation bias. You want it to be true and what you’re really trying to do is prove the opposite. And that’s not an easy thing to do. It’s more of a mental challenge than anything else but try and find ways to disprove your idea. What can you do to prove that it’s going to be false or that things are not going to work? If you still can’t do it from when you’re taking a look at it from that perspective, then you’re probably on the right track.
Rob [24:20]: Another thing to think about is: are there assumptions you’re making that are potentially invalid? Do they need to be tested? If so, how would you test those? I think it’s really easy to make assumptions and not even realize it. Whether you can get an external sanity check or whether you can go and take an entire day and really get your mind thinking about what assumptions you could potentially be making and where you might have a blind side. I think there’s value in that.
Mike [24:46]: A lot of those you could probably pull out from a marketing plan that you put together in advance and almost everything in that marketing plan is going to be either a fact that you believe to be true or an action that you need to take. If it’s a place where there’s a fact of any kind – let’s say, for example, your ideal customer is a dental assistant. How do you know that those are the right people to be talking to? Is it them that’s going to be paying for it or is it going to be their boss? Those are the types of assumptions that you need to make sure that you’re validating because if they’re not true, then you could run into problems down the road.
The last thing that I think you need to ask yourself is: how far can you get before actually building something that requires a meaningful commitment of time and resources? And that goes to the idea of building mockups; having those customer discussions; getting prepayments from people; doing prototypes. You could go so far as to build a prototype with Balsamiq Mockups or with Power Point, for example, and show people what it’s going to look like without actually building it. It is a fairly hefty amount of time to put effort into building something like that so that when you click on a button it actually goes to a different screen or shows different information. But at the same time, if you put that in front of somebody and they look at it and they say, “Yeah, this actually won’t work for me because I need to do this, this or this.” Or, “How would I do X, Y or Z?” If those things aren’t in there then it means you haven’t designed for them and what will happen is you build it, you show it to them and then down the road they’re going to say, “Well, this doesn’t actually do what I need.” If you can design that up front, then it eliminates that risk downstream that you’re going to run into anyway.
Rob [26:19]: Thanks, again, for the question, Simon. I hope that was helpful. If you have a question for us, call our voicemail number at 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 comments. 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 323 | Funding, Acquisitions, Firing and More Listener Questions
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about getting funding or acquisition offers, when to fire someone, and more listener questions.
Items mentioned in this episode:
Transcript
Rob [00:00]: In this episode of ‘Startups for the Rest of Us,’ Mike and I talk about options for finding funding or an acquisition offer, setting up a U.S. company as a non-U.S. citizen, and when to think about letting someone go. This is ‘Startups for the Rest of Us’ episode 323.
Welcome to ‘Startups for the Rest of Us,’ the podcast that helps developers, designers, and entrepreneurs be awesome at launching software products whether you’ve built your first product or you’re just thinking about it. I’m Rob.
Mike [00:31]: And I’m Mike.
Rob [00:32]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, sir?
Mike [00:36]: Well, I wanted to say congratulations to Sherry Walling for ZenFounder being selected for Entrepreneur.com’s list of 24 Exceptional Women-hosted Podcasts for Entrepreneurs in 2017. Obviously, you are the co-host of that show but definitely wanted to send congratulations to her for being mentioned on that list. I think that’s quite an accomplishment.
Rob [00:54]: Yeah. It was a big deal. It seemed to get a bit of notice. People were taking notice and I know we got a big bump in ZenFounder email subscribers as well as some more podcast downloads. It’s always fun to be recognized for something like that.
Mike [01:09]: Yeah and after a short period too. The podcast hasn’t been around for very long so it’s nice to see that kind of attraction.
Rob [01:15]: I’m kind of mellow this morning. I’m still getting back onto time zone because I was in California for eight or nine days. In Santa Cruz hanging out with family, friends, reconnecting with people. It was a really nice time. It’s a lot warmer there so I still was wearing sweatshirts and stuff but a 50 or 60-degree difference depending on the day. I’m still, like I said, an hour or two off time zones so I’m getting going this morning.
It was good and it just reminded me how important it is to take some time off and recharge now and again. And depending on your level of exhaustion or burn-out, maybe you need to take a little time off every month. At other times you can take a little time off every quarter or every six months. It’s really important to come back, and I just feel a lot more motivated and like I have clarity of thought because I had this time to step away from work and stop thinking about it.
Mike [02:07]: Cool. On my end, I added another paying customer for Bluetick in advance of my public launch. I also integrated Zapier into the equation so –
Rob [02:17]: You got Zapier done, huh? That’s cool.
Mike [02:18]: Yeah. There’s a couple of things left with triggers to be able to send data outside of it and allow Zapier to kind of natively subscribe to different events that happen inside of Bluetick. I would say all but one piece of being able to trigger different things inside of Bluetick is done in Zapier. Then there’s this last piece of being able to allow them to subscribe to events. Once those are done I should be able to start rolling that out a little bit more.
I’ve got a couple of people using those Zaps right now. Most of them are actually going into my Zapier account, and I’m just piping them through Zapier back into Bluetick because when you create that Zapier integration obviously it’s create a personal, private one first and then you can share it. So I’m slowly going in that direction just because I don’t fully understand all of the implications of the decisions I’m making in Zapier. So I’m trying to be a little cautious about putting that out there in a way that makes it difficult for me to modify it later.
Rob [03:09]: Right. Yeah, for sure. That’s the nice part when you have that private Zap then you can, like you said, share it with other people. I think they want you to have like ten active users before they will move it to production. That’s kind of their rule of thumb. They want to make sure that it’s tested because once it’s out there it’s really kind of a pain. You have to version if you want to fix bugs.
Mike [03:30]: Yeah, and that’s the issue. The whole versioning thing is like, “Okay, well how do we do this and not screw things up?” I actually started going down the road of building a custom API end point specifically for Zapier so that if we need to make changes to our API for things that happen inside of our interface, we can do that and it won’t affect the things that are going on through Zapier. That’s kind of a work-around that is pretty helpful just because our API is still in flux and there’s lots of other stuff going on.
And in terms of the public launch that I’m working towards, one thing – I’ll get your feedback on this – but I’m considering going more down the route of having multiple small launches as opposed to one large one. The idea would be that I’ll gear up more towards a launch where I have a set number of people that I want to put into the system and I’m thinking in my head about twenty right now. Then go for the launch and basically tell people up front, “Hey, I’m only letting twenty people in the door at the moment.” And I could lay out my reasons why. Some of them are just to make sure that everybody’s getting the attention they need but also to make sure that if anything happens or if any bugs come up or if anyone has any specific needs as they come into it, then we have the time available to be able to address those. Whereas if I let in 100 or however many additional people, it would be difficult to do that. It’s hard to give everybody the attention that they need.
What are your thoughts on that?
Rob [04:51]: I think that’s a good idea. That’s why I did the slow launch with Drip was exactly this reason. We just didn’t have the staff to let hundreds of people in and I knew that we would bleed out trials that we couldn’t respond to quickly enough in terms of developing features or even fixing bugs. It can get really complicated and be a big rush of people. I think that’s a good way to go.
I don’t know if they need to be monthly. I think they could be every two weeks or three weeks depending on how long your trial is. Do you know how long your trial should be yet? Or do you still have to figure that out? Are you going to take a guess and then see how it goes?
Mike [05:22]: I’m not actually at the point where I’m at the point where I’m even considering offering a trial. What I’m doing now – and this is kind of hybrid pricing model where instead of offering an annual plan and a monthly plan, what I’m doing is I’m offering a quarterly plan. Because the value from the product does not surface itself for at least a couple of months. It could be several weeks or a month or even two or three months before you start to see the value just because of the pipeline of emails that you are sending through it and how long it can take people to respond. You might get responses immediately, but you might not get them for several weeks after a couple of emails.
I have a hard time believing that people would get value on day one or day five or something like that.
Rob [06:01]: No trial? Do they pay upfront for a quarter?
Mike [06:03]: Yes.
Rob [06:04]: They pay upfront for a quarter at a time? Got it. And you haven’t had any issues so far. I don’t think charging upfront is a bad way to go at all. If you realize that you get a bunch of pushback on that then maybe it’s something, you’ll want to change. It’s a judgement call at this point because you just don’t have any data so you have to make a call one way or another.
Mike [06:20]: I haven’t gotten any pushback so far. The people I’ve been putting on this past month or so where I’ve just said, “It’s charged quarterly and we charge upfront.” Not one person has said, “Are you sure? Or can we do this or that?” Nobody’s had any questions or pushback on it.
Rob [06:34]: You’ll have to see if you’re able to sell it enough upfront for someone to enter their card without talking to you. Because these people have all talked to you. And that’ll just be an experiment. You’ll have to do that first round and figure out what you think you’re going to get from it. And then since you are charging upfront, you need to prove that there’s going to be a lot of value to someone upfront so your marketing has to be really on point. And your pitch of what the product does and how it’s going to do it for them needs to be on point because if you fumble that at all there’s friction. There’s friction of that quarterly payment that you’re going to have to overcome. And that’s not impossible to overcome. I don’t think it’s a bad call. You just don’t have enough data at this point to know if it’s going to work.
The only thing I’ve heard people do quarterly with is membership sites. I’ve never heard a SaaS app do it. I think it was Andrew Culver who was saying that quarterly is the worst of both worlds in terms of accidental credit card churn. I forget what it is. If it’s that not monthly so that banks are suspicious of it so it will get blocked more often or something like that. There’s something about quarterly and how it’s not a great way to bill in terms of involuntary churn. I think you’ll want to keep your eye on that and if you switch to monthly later – you could always make it a quarterly payment and then let people switch to monthly down the line.
Mike [07:45]: That was probably what I was going to do longer term. The idea with the quarterly is one: it puts people in a position where they don’t get to the end of the first 30-days and they say, “I haven’t used this yet.” And they just want to cancel because they’re not using it. And it gives me an opportunity to reach out to them. I can see their usage and say, “You’re not using this. Let me help you get started with it. Or let me help do things because I am so early.”
The other thing that it does is that it gives me the revenue for that upfront. So if I do a monthly launch then I need a third of the number of people signing up to get the same amount of revenue that I would get three months down the road.
It helps from a cash flow perspective and it also helps from the perspective of being able to put people on it and be confident that the system is not going to fall apart. And then also making sure that they’re getting the value. I don’t anticipate doing quarterly long term. Maybe the data will prove me wrong, but as a starting point I think that it has a lot of benefits.
Rob [08:39]: I think if you do it and it works, I would not stop doing it. The cash flow is just too good. If you can pull this off without a trial, get the money upfront, obviously, offer a 30-day money back guarantee or whatever you want to offer because that’s going to be a sticking point for people as well. The question is, “What if I get it and I don’t like it?” And you want to be able to answer that. I think if you can make this work and the numbers work, it’s not a bad way to go.
Mike [09:04]: I definitely hear what Andrew Culver was saying about it’s the worst of both worlds. I hadn’t thought about it in those terms but I think that right now the benefits of it outweigh the negatives especially since it’s so early on. I just don’t have any data to work with and I may as well just try something.
Rob [09:19]: That’s right. The other thing I like about doing smaller launches and having “X” spots is you can justify it. You can say, “Look, I just can’t onboard more than twenty people. I don’t think we can support more than twenty people in terms of answering all of your questions.” It’s easy enough to justify because you are a small shop. But it also adds a little bit of that scarcity so that if you email the list, then you can build that up and say, “Look, there’s only twenty spots and if you really want to get in then you have to do it now” type thing. I think there’s a benefit on both sides in terms of making it more manageable for you and also being a nice little bit of marketing help.
Mike [09:55]: I’ll keep you guys posted on how that goes and we’ll see how it shakes out.
Rob [09:59]: Do you have a date for the initial launch?
Mike [10:01]: Right now I’m targeting January 31st. I’ve got some emails that I plan on sending out tomorrow and I’ll prime the launch queue so to speak. We’ll see how that goes.
So what are we talking about today?
Rob [10:11]: We have a few listener questions I wanted to run through. The first is from Matt Visk and he says, “Hey guys. Love the show. I’ve created a SaaS company myself and would love your input on it. It’s called PortfolioLounge.com. It helps people create their online portfolio. It has quite a few members with a handful of paid subscribers. I was wondering if you had any advice as to finding funding or interesting acquisition offers. I’m a developer at a large company but I’d love to go fulltime on Portfolio Lounge if I could.” Do you have thoughts on this?
Mike [10:39]: Not really. I’m not really in a position to figure out what an acquisition offer would look like for something like that. And I’m not real familiar with portfolio websites to be honest. You’d have more insight on this one.
Rob [10:51]: Matt, acquisition offers at this point, if you have a handful of paid subscribers, they’re going to be nonexistent. There’s just no – unless you have some unique technology patent that somebody wants or you have some Google algorithm or something like that. Just having a handful of paid subscribers, even if you’ve spent years working on the code launching and everything, it’s all about revenue. It’s actually all about net profit or it’s about strategic value. Net profit would be used in acquisitions that FEInternational would handle. If you were doing 20K or 30K a year, which is not a tremendous amount, but if you’re in that range then you can approach someone like FEInternational or Quiet Light, Latonas – there’s several brokers out there and they can get you acquisition offers. But if you want the maximum purchase price where it’s not three and a half or four times net profit but you might get five times annual revenue typically between three to seven “X” annual revenue – then that’s where you’re getting a strategic acquisition. That’s the kind of thing where you would really need to have a place in the market where a big strategic would want to acquire you. It doesn’t sound like you have that so I don’t think an acquisition offer is something you want to entertain. I just don’t think you’re going to find any.
In terms of finding funding, that’s the kind of thing where you’re going to go on AngelList. You may want to consider talking to someone like Bryce over at Indie.vc – he was on the show eight episodes ago – he funds smaller apps like this. Or if you live in the Bay area – my guess is you don’t – but if you lived in the Bay area there’s going to be a bunch of options for you. There are accelerators, there’s a lot of options. If you go to Google and talk about how to find startup funding, there’s going to be options. The question is: do you want to do that? Funding is not necessarily going to be the answer to what you’re looking for. I think it’s figuring out what your goals are and then finding the right options to line up with that.
Thanks for the question, Matt. I hope that’s helpful. Our next question is about setting up a U.S. company as a non-U.S. citizen. It’s from Justin and he says, “Long time listener from Taiwan. We’re experiencing some tremendous growth on Amazon and we’ll be building some ecommerce-related SaaS apps in the near future. Our team members are scattered around the world but our main market is in the U.S. We’d like to hear your opinion of where to set up a company in the U.S. as a noncitizen and a nonresident.” What do you think, Mike?
Mike [13:06]: I think that there’s kind of an underlying assumption here that you have to set up a company in the U.S. The situation is he’s a noncitizen and nonresident, and I would question whether or not he has to set up a company inside the U.S. in order to do business. My thought here is that if your growth is coming from Amazon, then maybe that’s a requirement, but I don’t know for sure if it is. And if it’s not, there’s obviously a lot of different options for you to create a company whether it’s in Taiwan or it is based in some other country. I was listening to The Tropical MBA podcast a couple of days ago and one of the episodes they had on was about an e-residency program in Estonia which I think was $100 to get into, and then you could base your company out of Estonia. That gives you essentially a European address that allows you to use a lot of your SaaS services. I’m not positive of this. I think that Stripe would also be an option there as well. But you have to figure out where you’re going to be able to get your services from, where your bank accounts are going to be, what the different tax implications are based on where your company is. Some of that comes back to how your taxed in your home country versus how your business would be taxed in a foreign country.
Something else you need to consider is that once you start crossing international borders, it can get much more complicated. If you’re a U.S. citizen, you’re going to get taxed no matter where you are and no matter where you’re making your money because the United States government wants their money. There’s a – I forget how much it is – but there’s a cut off number where above that amount I think that they do not charge you taxes on anything below that certain amount.
Rob [14:37]: That’s right: 90K.
Mike [14:37]: Yeah.
Rob [14:38]: I’m pretty sure it’s 90K or 180K for a couple.
Mike [14:40]: Right. But that only applies if you’re paying tax to a foreign government. They’ll basically give you credit for it. But anything above that they say, “You owe us taxes.”
Rob [14:49]: It’s pretty crazy. It’s the only country in the world that does that. Where if you live outside their borders they still collect tax which is – there have been people who basically get residency somewhere else and then they give up their U.S. passport purely because of that.
Mike [15:01]: Yeah. I guess I would just question the underlying assumption that you absolutely have to set up your business in the United States but because it’s Amazon, you may need to. But I would look into that. I think you have a lot of other options if you don’t have to do that.
Rob, I know that we talked offline a little bit about other options. You had some thoughts as well.
Rob [15:19]: Yeah. And this is purely from hanging out with folks in the D.C. and they are digital nomads and they have the option of setting up anywhere in the world. Most of them are U.S. citizens and none of them have their companies in the U.S. Almost none of them. They tend to go to New Zealand and Hong Kong. There’s a bunch of reasons for that. If you want, I’m sure The Tropical MBA or the D.C. would be a better place to go find out why.
You can even Google the Five Flags theory and I think it’s Simon Black from Sovereign Man. He talks a lot about this stuff. He talks specifically about which countries are set up to be which flag and such. All that to say, unless you need to have a U.S. company, I wouldn’t do it. If you do, it’s typical to do it in Delaware. A Delaware corp is one of the most common setups here in the states. Even companies that aren’t located in Delaware tend to do that, and it’s because they have very favorable business laws and a bunch of other stuff. That would be the most common. You’ll want to either talk to LegalZoom or talk to a lawyer and have then set that up for you.
Mike [16:14]: The other option for setting it up in the United States would be using Stripe’s Atlas program where it’s $500 to get set up and they will create a business account for you, you’ll get incorporated, you can start accepting payments through Stripe. There’s also options for getting tax and legal advice. I don’t know the details of that. Patrick McKenzie would probably be a good person to reach out to about that because he does work for Stripe now under their Atlas program. That’s another option if you had to do it in the United States.
Rob [16:43]: I’m glad you brought that up. I would probably do that over the recommendation I just said of LegalZoom or finding a lawyer because I bet Stripe has this dialed in and you’re going to probably want a Stripe account anyways, I would guess. And if it sets up a bank account and all that stuff, that’s a big win and for $500 kind of a no-brainer.
Mike [16:58]: Yeah. I think that they also have this set up when you do that they have this partnership with Amazon to get you $15,000 in AWS credits. If you need a hosted infrastructure of any kind they can certainly help out there as well.
Rob [17:11]: Awesome. Thanks for the question. I hope that’s helpful. Our next question is from Steven Lieberman at SkillsDBPro.com. He says, “Love the podcast. I have a fast growing business. I’ve made about 1,000 mistakes so far. But without your podcast and one or two others, I’m pretty sure that number would be 3,000. I’m a developer and I just had to fire a developer. He’s a contractor who knows his stuff, started out great. His first piece of work with me was outstanding. Though as the assignments progressed he got slower and was billing more time for less work. I’m working on similar items and getting them done in half the time. There may have been a combination of issues. One big thing is that he started working in two-hour spurts which, obviously, makes it hard to really get up to speed. I tried to address this with him and he kept ignoring those parts of the text. After he finished his last assignment I let him go. Letting someone go is hard to do because on-boarding someone else is a lot of work and a lot of my time, as you know. So here’s my question: what are the breaking points when you choose to let someone go? I really struggle on how much time I should spend to fix the situation or just cut my losses and move on. So, other than the obvious (i.e. they’re stealing from you) what are your thoughts? Not only for developers but for all positions.”
Mike [18:18]: I think for this it comes down to your personal feelings on what the future looks like. If you are feeling like whenever they do work you have to go in and double check it to make sure that it’s right or the directions and stuff, the course corrections that you try to put in place and you tell them, for example in this case, you sent them texts and said, “This is what I need to happen,” and those pieces of the texts where ignored, the next step may be to send them a single standalone message that says, “This is incorrect or this is a problem and we need to resolve it.” And if as a standalone message, it’s still ignored or not corrected then, at that point, you need to pull the plug.
For me, it’s more of a personal feeling that I get to a certain point and there’s this nagging sense in the back of my mind that says, “You have to go double check this. Or you have to keep following up.” And it’s almost like there’s this weight hanging over you that you have to stay on top of whoever that person is and make sure that they’re doing their job right. And essentially you’re becoming a micromanager. As soon as that happens, they’re no longer helping you in the business. It’s actually hurting you because then it’s distracting you. It’s taking time away from doing other things. It’s taking your mental energy away from other things. And it’s just a nightmare to deal with at that point. It’s more hassle than it’s worth. And that’s really the breaking point.
But there’s not, I wouldn’t say, a set thing that if “X” happens or “X” or “Y” happens. Obviously, if they’re stealing from you – those obvious things, sure, pull the plug immediately. I feel like it’s more of a general sense of being aware of how you feel about moving forward with a person. If it’s not something that is able to be corrected, then you have to pull the plug.
Rob [19:53]: Yeah. I feel like Steve handled this pretty well. If he was trying to address it and was bringing it up and the guy was ignoring it, that’s a big red flag. I think the question is different if they’re a contractor or W-2 employee. I would definitely spend more time if someone were W-2. I’d also do a lot more vetting upfront. But if their performance went down – let’s say you hired someone who was good, easy to work with and then their performance is going down over time – I would definitely bring it up and try to help them and find out what’s going on and how you can turn it around. Do they need to take some time off? Are they burned out? Are they trying to do another job? You’ve got to try to figure out are they screwing your and overbilling you and not actually working the hours? Or are they running into personal issues or something?
That’s for an employee. With a contractor, I would tend to – I’ll say give them warnings – but it wouldn’t be things like, “I’m going to fire you if you don’t do this.” It would be more like Steve did where you reach out and be like, “Look, your performance at this point – you’re not delivering nearly what you used to and we really need to talk about this. It’s an issue.” If I brought that up a couple times and they ignored me, then they’d be done because there’s no excuse for that. If you can’t communicate with me then there is no relationship that’s going to come out of that. It’s just too hard to try to manage someone who’s going to not be able to communicate or have a conversation with you.
All of that to say, I think I have a little bit less tolerance for contractors because you don’t have as much of a relationship with them. You’re not as invested in them. They’re never as invested in you or your company, so if it’s not working out it is a bummer to have to onboard someone new but it sounds to me like you made the right choice. Thanks for the question, Steve. I hope that was helpful.
Our next one is from Michael. He says, “I love your podcast. It’s my favorite by far so please keep up the good work. I’m what you might call a “wantapreneur.” I dream about getting out of the rat race, being my own boss, etcetera. I have a few average ideas but don’t think any of them are worth pursuing. My desired entrepreneurial destination is a B2B biz with $10,000 a month in revenue. I have the will to work hard but I already make decent money at my job, which I think is part of what’s keeping me from ideating more. I also have a wife and kid so my time is not limitless, but I make time when I really want to. I get up a couple of hours early most mornings to read and study. Perhaps I’m too much of a learner and analyzer and not enough of a doer. Recently, I’ve split my time tracking into three parts. Part one is family and fun, part two is the day job, and part three is the side business which is currently only imaginary plus learning. I’ve been consistently filling up one and two but I feel hopeless with number three except for learning. I beat myself up constantly for not making more progress there and that affects my mood which in turn hurts my family’s wellbeing too. What would advise as I continue to strive towards entrepreneurship?”
I think the first question you want to ask yourself is: do you really want this? Do you really, really want it? Because if you haven’t pushed forward on it yet and you have a comfy job, it’s not for everybody and, in fact, it’s a long road where you’re going to be making a lot less than your current job for years. I remember Harry Hollander’s talk – or maybe it was Ted Pitts from Moraware Software – at MicroConf a couple of years ago and they looked back at what they would have been making at their jobs had they stayed. And they were like seven or eight years into their business and it was doing multiple seven figures, and they had just broken even at that point in terms of what they would have made. If it’s purely a monetary decision, then stick with the job. It’s an easier path, it’s less distracting, and it’s more straight-forward.
But if you really do want to get out of it, then you have to take some strides towards doing and really cut out the learning at this point. I would guess that you know enough that you need to take the plunge and actually start putting code to paper, as they say, and really get something out there. Just launching something at this point and whether you give yourself a challenge of launching something small every month for six months – not a bad way to go. Force yourself to do it. Or whether you want to launch a blog or launch a little WordPress plugin – pick something small and get it out into the wild. Because without experience, you have no idea how to put the learnings into action.
I would pick a small project that is not a SaaS app. Like I’ve often said with the stair step approach here, pick an ebook or a video course or a WP plugin or an add-on to Photoshop or an add-on to Shopify. Something small that you can charge a bit of money for and see what that feels like to do it and ship something. It’s probably a lot harder than you think, and it’s also probably going to give you more experience in that one month of doing it than you can learn in two years of listening to podcasts and reading blogs.
Mike [24:27]: I think Rob’s on the right track with asking if it’s something that you really want to do. I’d had a conversation – it was either last year or the year before – with somebody. We were actually discussing my sleep habits, to be honest, which is kind of slight tangent. The question that we were trying to discuss was: why can’t I get up earlier? I’ll be honest, I’ve always had a hard time getting up early. It’s never been something that is wired in my DNA. I do not like mornings. If I were president of the United States, I would abolish mornings and there would be nothing before noon. That said, the question that was posed to me was: what are the punitive damages of you not getting up early? What are the downsides of you not getting up early? I’m like, “I own my own business so I can get up at any time I want.” And he’s like, “Exactly. That’s the problem. Your issue is that there’s no downside, there’s no negative consequences to not getting up early so you just don’t have to.” You really have to have this external force of some kind in certain situations to push you in that direction. It sounds to me like there’s no external force that’s really pushing you to the point that says, “Hey, you have to build this business.” And it doesn’t sound to me like it’s something that you want hard enough. There’s no driving passion for it. You’ve got a job, you don’t find it exciting, but it’s not like you’re going to get fired or let go in three months and you know that that’s coming. So there’s no drive behind that to say you have to buckle down, you have to put this time aside.
You see that with various studies about people in college, for example, where they are given six weeks to do a project and then there’s another group of people that are given one week to do the project. The people who are given one week, they get it done. The people who are given six weeks, they wait until week four or five and then start it. It goes back to Parkinson’s law which basically says that work expands so as to fill the time available for its completion. This is a prime example of that where you’ve got this side business that you want to work long term but there’s nothing really forcing your hand to make it work. If it’s fun to you and it’s interesting and you enjoy doing it then it’s much easier to spend the time on it. But if you like doing it and you have this longer term vision where you want to do it at some point in the future but there’s nothing really pushing you hard towards it, then you’re probably just not going to. I think that that’s probably the fundamental problem here. It’s not so much that you can’t do it, it’s that you don’t need to. You have to ask yourself, is that something that you really want or is it just something that you would like to have at some point but isn’t really a passion of yours.
Rob [26:54]: And our last question for the day is from Adam Kelso. He says, “Hey guys. Thanks so much for the tons of great advice and experience you give in each episode. I know you target the show ‘Startup Founders’ but I was wondering if you had any thoughts on evaluating startups as an employee? I live in Austin which has a huge tech community and there are a lot of startups to choose from. Some have good reputations; most are too new for anyone to know much about. If you were considering working at a startup as an employee knowing what you know now, what would you look for and what would you avoid?” Interesting question.
Mike [27:23]: Yeah, I think that’s an interesting question. I think that I’d probably look for an environment where you could be very collaborative with people. If it’s a small company, if it’s a startup then your expectation is probably going to be that you’re going to be working closely with the founder or founders of the company so you want to make sure that you’re able to work well with them, and rather than jumping in and trying to provide value and skip from one job to another, I might offer them, for example, the opportunity to do some contractor consulting work for them. That does a couple of different things. One is it makes sure that they have money available. You’ll kind of get the inside scoop on how things are really going. Because the last thing that the last thing you want to do is quit your job to go work for one of these companies and then find out that they don’t have revenue to support you and they have to let you go in a month or three months or something like that. I think that that’s one side of it.
Being able to offer that is going to be attractive to them as well because you are going to be able to show your value and your worth to the company. If you are able to put in the time outside of your current working hours, then it gives them an opportunity to understand who you are and how your work. If you decide at the end of a couple of weeks or a month or two of working for them part time that you don’t like what they’re working on or you don’t see a future in it or you just don’t like the people that you’re working with then you can move on and go to something else. That’s really just hedging your bets more than anything else.
In terms of specific things to watch out for or red flags, I’m not sure because most of these companies, as you said, they’re going to be too new and you’re not going to really have anything to go on. There’s not going to be a whole lot of public information about them. You could ask people who you know about them but chances are good that, unless those people have been active in the community, you’re not going to get any information out of it and you’re not going to know people who know them. That would just be a difficult situation to be in.
Rob [29:12]: I think I would step back and ask yourself the question: why do you want to work for a startup? Because working for startups, you’re going to do it for, most likely, less pay than you would if you went to work at a larger company. And you’re going to get this promise of some eventual payout in the form of stock options. That’s the traditional way it’s done.
You’re putting a lot of risk there. You’re basically not making as much money as you otherwise could in order to perhaps have a more exciting job. Maybe that’s what you’re looking for. Could be less boring. Or maybe you are looking for the payout. I probably wouldn’t do it for that unless you’re joining as employee number one, two, or three. If you’re joining later it’s probably going to be trivial amounts of options.
I think with that stuff in mind, something I would look out for or really vet is “A”: how much funding have they raised? When did they raise it? How viable are they financially? Do I believe in the business idea? Do I think it’s kind of a dumb idea? Because there’s a lot of ideas that I think are stupid. I would not enjoy working on them. I would sit down, and if you have this list of startups and there’s some that sound really interesting, see what you can find out about their financial situation in terms of burn rate, in terms of getting their next round of funding. Because stuff can go sideways really quickly, and if a company has only raised an angel round or whatever, if you have no problem finding a job then maybe you do take a fly around one of these. But if you’re concerned about them going under and you being unemployed for a few months or something if there is an economic downturn, then you’ll just want to be more mindful of that.
I think that’s the thought process I would go through. I know that working at a startup – I worked for a credit card startup, and I think I was developer number three or four that was hired there. When I left we were at twenty-five or thirty developers. It was a lot of fun in the early days. Then, as we got bigger, it became less fun as companies do. One reason that I went to work for them is they did have buckets of funding and I needed stability at the time. This is ten, twelve years ago so I had the mortgage, was married and that kind of stuff. I was much more risk adverse than I am today in terms of being willing to risk employment and all that. It turned out to be a good decision. I did make a little bit of money off the options and things can work out. But the vast majority of time, it doesn’t. The vast majority of time they do go under. The vast majority of startups fail. Keep that in mind. Think to yourself, “If I come to work for these guys for six months, my options are worth nothing at the end of that and I don’t have a job, am I still okay with it?” If you are then cool do it because it will probably be a fun ride.
I’ve also heard of folks who go and work and they grind out these seventy-hour weeks for two years then everything goes south and then they really regret it because they’re now burned out and they have no job, their options aren’t worth anything and the opportunity costs of all the money that they could have made doing another job is a bummer. I guess that’s the last factor I would think of is: how many hours are these folks going to expect you to work? Because some startups really are a forty-hour week startups. That’s how we were at Drip. We didn’t expect everybody to work fifty, sixty hours. I think that’s definitely a more sustainable way to do it. Some are sixty, seventy-hour startups. That’s probably something to think about asking about upfront.
Mike [32:20]: I didn’t even think to mention it but my question was geared more towards working for a self-funded startup, not necessarily –
Rob [32:26]: Oh, got it.
Mike [32:27]: I don’t think that that strategy would work at all for a funded startup because they’re probably hiring because they need somebody and they need a body, to be honest. I’ve seen a lot of companies where they’re a startup company and they’ve got funding and they’re just like, “We need somebody to handle this.” They will take whoever they can get. And they’re not willing to wait six months to find the right person. They need somebody in the next three to four weeks. I don’t think that working for a company like that part-time is even going to be an option. It depends on who you’re talking to but – I had it more in mind of doing that for a self-funded startup as opposed to a funded startup.
Rob [33:04]: Cool. So there’s two perspectives. Hope that was helpful.
Mike [33:07]: 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 for ‘We’re Outta Control’ by MoOt used under creative comments. Subscribe to us in 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 322 | Sex & Software (An Interview with Brianna Wu)
Show Notes
In this episode of Startups For The Rest Of Us, Mike interviews Brianna Wu, founder of Giant Spacekat, about sex and software. They discuss many racial and gender issues that face the software community.
Items mentioned in this episode:
Transcript
Mike [00:00]: In this episode of ‘Startups for the Rest of Us,’ we’re going to be talking about sex and software. This is ‘Startups for the Rest of Us’, episode 322. 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 project or you’re just thinking about it. I’m Mike, and today we’re going to be sharing our experiences to help you avoid the same mistakes we’ve made. Today’s episode is going to be a little bit different. Today we’re going to be talking about sex and software, and today’s episode starts with a listener question. This listener question comes from [Simmore?], and he says, “Hi. I was wondering if you could do a show on what we can all do to reduce the amount of straight-up misogyny female coders and founders face. Last week I followed a tweet from Justin Jackson – and we’ll link that tweet up in the show notes. He says, “That led me to a presentation by Jenn Shiffer at the XOXO Festival. I also watched the Talia Jane presentation at the same festival. The amount of vitriol these women suffer is incredible, and I just don’t understand why it has to be that way. Where does all this anger from men in tech come from? What have you guys seen in your experience? My experience is as a consultant, and there’s an incredible amount of sexism in IT consulting, but I don’t think I’ve seen all this anger – or at least this level of anger – played out in front of me as a past manager. I love the show, of course, and it would be nice to hear what your own goals are in terms of women and female coders in the new year. Also, since I am black, what has been your personal experience in goal-making around diversity in general? Thanks, and I’ll see you at MicroConf.” I think that there’s two different pieces to Simmore’s email. The first one is that there’s two different questions in there. The first one was: “Where does all the anger from men in tech come from?” And the second one is: “What are your goals in terms of female coders and founders in the new year? Also, since I am black, what has been your personal experience in goal making around diversity in general?” I do want to touch on that just a little bit from the perspective of running MicroConf. For a little bit of perspective, we don’t ask this question outright to our attendees. We don’t ask them, “What’s your racial makeup? What is your gender?” It’s just not something that one, we feel comfortable asking. And two, it’s really just not relevant to people coming to the conference. I talked to Zander a little bit about what we kind of believe that the makeup of female to male attendees is. It seems to be that it’s about 15%, but obviously that is based off of names, so it’s a little bit difficult to get exact numbers. In terms of what we do at MicroConf, one of the things we do is we do some active outreach to female entrepreneurs to make sure that they’re able to attend if they want to. I’ll say that we do take some liberties with the waiting list to make sure that people are able to get tickets if they need them, or if they want them, to help with that diversity, to make sure that females have a chance to get to MicroConf. In the past, MicroConf has traditionally sold out extremely quickly. To help out with that just – because if you’re not sitting there at the button it can be difficult to get a ticket. That’s one of the things that we do. Another thing that we’ve done is we implemented a code of conduct at the request of an attendee a few years ago. If you go out to the MicroConf website there is a code of conduct. It’s based on a publicly available standard for codes of conduct that are out there. Another thing that we do is we actively recruit female speakers. What we’ve found is that there is a tendency for female founders to not apply to speak at MicroConf. We do have an application process, but it seems like we do not get as many who come forward and say, “Hey, I would like to speak.”, so we actually go out and actively approach them and ask them. Another thing we’ve done is we have actively set aside pools of tickets for female entrepreneurial groups. So we’ve gone out, we’re approached those groups and said, “Hey, here’s a pool of tickets that is kind of separate.” It helps to bypass, I’ll say, the tickets going off the shelves very quickly, so that there are opportunities for female founders in those groups to purchase MicroConf tickets if they would like to attend. The last thing is we also have MicroConf scholarships. The past two years we had a couple of scholarships that have been given out. One went to Francesca, and another one went to Shannon. Both of those scholarships were actually given by MicroConf attendees. The MicroConf attendees said, “Hey, I’d like to do a scholarship.” It’s not something that we made a big deal about, and it’s not something that we talked heavily about, but those are the types of things that we have done at MicroConf. In terms of the question itself about where this anger comes from, my best guess is probably that it’s rooted in history. Humanity has thousands of years of history illustrating that people in positions of power are going to do whatever it takes to maintain that power. And, quite frankly, if you look at the balance of power over the past few thousand years white men have largely been at the top of that power structure. And, by extension, other white men have benefited from that arrangement. If you look at that historically, those people tend to be afraid of change. They’re genuinely afraid of women, or anyone who’s different than they are, from having those types of power, or perceived power, over them. I don’t think it’s just a gender issue, but it is also, to some extent, a racial issue. The bottom line of this is that Rob and I don’t necessarily feel qualified to answer the first question which Simmore posted, which was, “Where does all this anger come from?” Because, one, it’s not something that we really feel, but it’s also not directed at us. So, what I did was I went out and I decided to find somebody who I would see as an expert in this particular space, and I want to introduce you to Brianna Wu who is the founder of Spacekat games. Brianna, how are you doing today?
Brianna [05:00]: I’m doing excellent. I’m doing fine. It’s a pleasure to be on.
Mike [05:03]: Excellent.
Brianna [05:04]: I do want to say my company’s name is Giant Spacekat.
Mike [05:08]: Oh, I’m sorry.
Brianna [05:08]: Not Spacekat games. No worries about that.
Mike [05:10]: I apologize.
Brianna [05:12]: Can we go back to some of your answers to that previous question a little bit?
Mike [05:15]: Sure.
Brianna [05:16]: I am a software engineer, so something I think about a lot when I’m trying to solve problems is I ask myself if my underlying assumptions are correct. I assume you kind of do the same thing, right? I want to go back to what you were saying at the very beginning of this, where you said you didn’t feel comfortable asking attendees about their race and gender, because you didn’t feel comfortable with it and you didn’t think that was relevant. Is that an accurate assumption of how you feel?
Mike [05:48]: I’ll be honest, it’s not something that we feel is necessarily important to us asking the question.
Brianna [05:54]: Right. To us.
Mike [05:56]: Let me rephrase that, because I know how maybe that sounds. It’s more of a question of: Do we need this information? I guess, in retrospect, in even asking that question, maybe we do. I’ve never really considered that before, to be honest.
Brianna [06:09]: One of my first jobs was in politics, and I used to use the term “African American” when I was talking of racial issues, until someone that was black came up to me and said, “You know what? Black people, we don’t use that term so much. It’s kind of one that’s more about white comfort in discussing racial issues, and I very much prefer to be called “black”.” That was a real eye-opening moment for me, so I want to give you the other side of what it’s like to attend the conference if you’re a woman. This is a conversation I have several times a week. A friend is thinking about going to X, Y or Z Conf, and women in the tech industry have our own secret spaces to talk to each other. And the first thing we ask is, “Hey, I’ve just been invited to speak at “X” Conf. Is this safe? Does anyone have good experiences with this? How many women are there?” Then we’ve kind of had to form our own groups to give feedback about that, because you’re thinking like, “Oh my gosh! I could be uncomfortable by asking a question for a second.” The woman on the other side of that is asking really difficult questions like, “Am I going to be sexually harassed if I’m at bar with alcohol? Am I going to be treated fairly and equally?” Something I would really encourage, not just you but anyone out there that is in a position of privilege, to push past that and realize it’s not comfortable for me to be on your podcast today talking about this stuff, but it’s absolutely necessary, because women leave the software industry at a rate over three times of what men do. I would also say, you used the term “female coder” repeatedly when you were discussing this. I would just be honest and say most women I know prefer to be called “women”. Female coder signs like [Ferengi?]. It’s kind of demeaning way to talk about women. That would be my feedback about that.
Mike [08:00]: Got it. Okay. A lot of that makes sense. So, I huess, going back to your question of me about why we don’t ask that. In some ways it seems like there’s almost a boundary that I’m stepping over as the host of a conference, where I’m asking somewhat personal information about like, “Okay, are you male or female? What’s your racial makeup?” Stuff like that seems like why would I need to know that? How is that perceived from the other side?
Brianna [08:26]: I would say this, I’m an engineer. I can’t fix a bug in software right if I don’t have error reports, right? So you’ve got to measure data to figure out where you’re going wrong and fix it. I think it’s wholly relevant, if even internally you’re not putting together numbers about your number of women speakers. By the way, when we talk about this stuff, far too often people of color are left off this list. For me, in the things I do, I am very, very aware of how many people of color I hire, how many women I hire. Frankly because we’re such a company that is heavy with women working there, we have to go the other way and make sure we hire men enough. That would just be my feedback about that. You can’t fix something if you don’t measure it, or even understand if you have a problem in the first place.
Mike [09:18]: I think that also goes to how you ask the questions as well. You can’t just drop a question in somebody’s email box and say, “Hey, are you male or female?” I would at least say preface it by some meaningful information, or at least a couple of sentences about why it is that you’re asking that kind of stuff.
Brianna [09:35]: Sure.
Mike [09:36]: Okay. What are your initial thoughts on Simmore’s question itself about where some of the misogyny itself comes from?
Brianna [09:43]: I think it comes from a very predictable place. I was a child in the ‘80’s and the ‘90’s. This was a time where you really were punished for being a nerd. I remember liking Final Fantasy as a child and getting picked on mercilessly about that at school. I think it’s really true that a lot of geeks grew up and they kind of have a little bit of a chip on their shoulder. They feel like the underdog, and I think especially with women there is definitely a culture where a lot of software people maybe are kind of sensitive around women, or sometimes have some animosity against us that maybe they don’t understand. What you’re dealing with, at its core, is a culture filled with men who genuinely believe they are too smart to be sexist, but they have these really aggressive tendencies that they may not understand. It makes them uncomfortable. They’re very, very, very quick to reframe things to protect their privilege. I’ll give you an example. Oculus, which is a company that makes some technology we’re very interested in – virtual reality – they had yet another terrible scandal that broke two days ago, where one of their software people has been alleged of soliciting an underage girl for sex, a very serious crime. If you put this in context of their crisis of leadership of, A, not hiring women, B, having a founder that’s literally spending tens of thousands of dollars funding hate speech, it’s a really troubling pattern. I was discussing this on Twitter and I was instantly besieged by someone that believes he’s an ally to women in tech, but is instantly minimizing it, is excusing it, and is just throwing every argument there to say this isn’t a problem. That man believes that he is an ally, but, on an unconscious level, he is derailing and minimizing the conversation about structural bias, and that is everywhere in our industry. The way you will be able to know if you’re on the wrong track is if you’re looking at this problem of women in tech, or people of color in tech, and you’re say, “I know what the problem is. It’s those other guys.” No. You need to be saying, “I know what the problem is. That’s me.” I’m not just telling people to practice what I preach, yet for, me as a white person, I realize that I have tremendous advantages in our field, even as a woman. So I’m constantly asking myself, “Am I hiring enough people of color? Am I interviewing enough people of color? Am I networking with enough people of color? When journalists call me and say, “I’m looking for references.” Am I passing off enough people of color to them?” It’s that kind of constructive engagement that really makes you part of the solution, instead of pointing fingers.
Mike [12:42]: Going back to one of the things that you had said earlier, which was a lot of people feel like they are too smart to be sexist, for example. I’ve had conversations with people along that lines like, “Oh, I have two daughters. I can’t possibly be sexist.” You can almost find political memes around that too. It’s not hard to look for that type of thing. Are there specific signs that somebody can look for? I think a lot of the listeners to this podcast are more of the truth seeking variety. They’re really looking for validation of their ideas and thoughts and beliefs, and mostly that deals with marketing, but I feel like that applies in this particular situation as well. How is it that you identify the things that would say, “You know what? You aren’t too smart for this?” What are the canaries in the coal mine, so to speak?
Brianna [13:30]: Yeah. One of the things I said is imagine if you had a friend that was going through a divorce, and that friend was talking, and they’re like, “It’s just so hard. I’m not sure if I’m going to be able to see my kids again. I’m really upset about losing my partner. I’m not sure if I’ll ever find love again.” Imagine if, while you were talking to that person, you turn the conversation to yourself, and said, “Well, yeah, but how’s that going to affect me? Are we going to be able to hang out and goes see movies all the same?” It would be really obnoxious, right? In the same way, very, very, very often when women start talking about what our lived experiences are, men are so quick to turn the conversation to themselves, and talk about how this affects them, and I’m trying to think of a constructive way to say this, but I can’t. It’s just obnoxious. A really good hint that you’re on the wrong path is if you’re saying, “Well, you just feel this way because there aren’t enough women applying.” Or, “Well, what if I’m trying to apply to a job and I don’t get a fair shake? What if I don’t get into this conference because they’ve got a quota system?” This is all a good sign that you’re more concerned about your privilege than the problem. We all have work to do. I really want to emphasize this. I think something feminism could do a lot better, and I think “outrage culture” has a lot to contribute to this, but we’ve built this culture where everyone is one mistake away from being a villain for life, and I don’t think it’s a very good way to go forward. I myself, if I’m a half way decent ally to people of color these days, it’s because I’ve made so many mistakes along the way, and I’ve learned from them. We need to have a culture where men can make these kinds of mistakes and we can have an honest dialogue about it, and they’re not branded as villains for life. I think that we’re really missing a more constructive way to move forward on it.
Mike [15:32]: I guess going back a little bit, where you had said that one of those tell-tell signs is saying, “How does this affect me?” or interjecting your own thoughts on it. Previously you had come out with a couple of examples there of what those red flags look like, and I have friends who have said, “I have two daughters. I can’t possibly be like this.” Is that along those lines as well? Is that perceived as sexist? Because, really, I was trying to contribute to the conversation and say, “Look. This has been my experience.” Does that overshadow what we were talking about? Or is that perceived in a good light or a negative light?
Brianna [16:06]: I would take this in two parts. First, I want to check my own privilege and say I’m a non-parent, so I’ve never raised children, but I would say this, when a guy starts talking about how he’s raising daughters, a red flag that goes up for me right away is a lot of men bring sexist attitudes into their role as father. I think we see a lot of controlling things with that. We see a real culture of violence, sometimes, and ownership over their daughters. To me, I don’t read that as good or bad either way. I’ve certainly met a lot of sexist fathers throughout my career. As far as your own fears about that –
Mike [16:49]: What I was referring to is really the fact that I was bringing that up as an addition to the conversation.
Brianna [16:56]: Don’t stress it.
Mike [16:56]: No. Well, I think that it’s important to figure out what are your motivations for bringing up a particular point, because I’ve been in situations – and seen conversations go – where somebody will bring up something, and there is almost a sense of one-upmanship about, “Let me tell you this story.” And I can see that playing into this type of conversation, and how people portray themselves to each other, and how people talk to one another. That’s what I was more getting at.
Brianna [17:22]: No. I think that’s dead on. I want to step out and take a little bit of a meta view for a second. At my studio, Giant Spacekat, for our last game we had all women working on our team. It’s not a format that I’d have going forward, but it was how we shook out. I was really stunned by how different our culture was. It was hyper-collaborative. In other engineering environments, where I’ve worked with a lot of men, there does tend to be that sense of one-upmanship of, “I’m right here.” And, I hope this is okay to say, but it just seems like it’s boys with toys almost. At my studio, where it was all women, it was hyper-collaborative, and it was awesome. It was us validating each other, and trying to get input, and working on things together. It was just an entirely different culture. I do think that a little bit of that culture of one-upmanship, I don’t think it’s a particularly healthy trait of the software industry, and I think one of the reasons that teams with better gender balance tend to be more productive. I do believe when all genders are represented it brings a kind of stability, and a diversity of viewpoints, to the table. I think that’s very valuable.
Mike [18:34]: Yeah. We’ve noticed at MicroConf, when we started out back in 2011, the conference has always been very collaborative. Everyone is really comfortable sharing, for example, revenue numbers, and discussing specifics of how their business is doing. But one of the things that comes to mind is that most of these people come to MicroConf and then they leave and then they’re working in their own world and they may have a team, they may not. They’re usually only one or two people working on a particular product or project, and then they go out, they do their thing, and they come to MicroConf and they collaborate. But when they’re out working on their products, and in their business, they tend to be alone, or they tend to be working with very, very small teams. I wonder how those two things play together, because it seems odd that those types of people would go out and be as aggressive as they need to be to run their business and then come to a place like MicroConf where there is this community – or in the Founder Café – and then they’re very collaborative. It seems like those two things are very much opposed to one another.
Brianna [19:31]: Yeah. That makes a lot of sense. I want to touch on, for a second, that kind of bias that when we start companies we tend to seek out people around us that kind of mirror our values. I think a really big bias of this in the startup world this is this is why such a tiny sliver of startups have women or people of color on the board, because it is a culture that really pushes women and people of color away in ways we’re not willing to think about. I would use my own experience at Giant Spacekat and say I did this the other way, being a woman founder. When I started my company I looked for people, unconsciously, that looked like me. We had way, way, way too many white women on my team, and I realized that that was my own bias. We’ve got to get past this point where our own comfort is our highest priority, because it is right now. It leads to use cases that are just terrible. We’re talking about VR right now. If you look at the VR marketplace right now, for Oculus games or Friv games, most of these are made by teams of two or three people, always men. There are so many sexist assumptions built into these games as you play it that make it really damage VR from being able to pick up the mainstream. A lot of these games assume you’re a certain height. Most of them don’t contain female avatar options. All of them assume that you’re a man as you play it. It’s just really insulting in ways that I think these teams haven’t really thought about.
Mike [21:05]: Is that a function of the fact that it’s only two or three developing it, and so they tend towards doing things that are comfortable for them, and are also easy access to them, and more a lack of resources as well? I mean, if you’re going to create 30, 40, 50 avatars, I would imagine that that’s a lot more work than it is to create one or two. Is it a function of time and resources? Or is it a combination of that and the fact that they just say, “Oh well, I only have time for this, so I’m going to concentrate on getting something out the door.”?
Brianna [21:34]: This is what I would call an excuse. You and I both know the features that get into a product are the ones your team cares about. We all know this. GSX, the way we do it is we list every single feature as a gold, silver or bronze tier. Gold must be done; silver can be done; bronze is nice if we get around to it. The features that are on that top priority list make it into the game. So the answer to this is simple: the men making these products don’t consider it a priority, and by everything you just said, it’s not a priority. A guy can certainly do this well. I’ve seen it done, but it’s just not important to them, and that’s reflected in the software we use.
Mike [22:15]: Right. It’s more of a matter of paying attention to that kind of thing and making it a priority, as opposed to just saying, “This is on the feature list and one or two is good enough.”
Brianna [22:24]: Yeah.
Mike [22:25]: We’ve talked a little bit about some of the subtle things that go on. What are some overt examples? I don’t think that this is something that is front and center for most men in the industry, but what are the more overt things that you’ve seen?
Brianna [22:38]: This is such a good question. We have a real tendency in software development to network in a way that was created by men for men. I could not even count how many times I’ve been at a bar at night alone – been the only woman there – with a bunch of men that are drinking alcohol. This is something I think dudes don’t even think about. I have had so many friends in that situation that have been sexually harassed. In two examples I’ve had friends who have been sexually assaulted. In one example I had a pretty close friend of mine have her boss basically force himself onto her at night while everyone was drinking. There was some really inappropriate contact that was made. This is something that is much more of a problem than men realize. Our setup here is built in a way that networking is very difficult for, say, women over 30 with children. You’re not going to find many moms that are going to be out drinking at 11 o’clock at night at a bar to work on their career. But this is like where 99% of the stuff happens in the game industry. There’s overt things. A lot of men tend to treat women they run into in professional circles as someone to date. I want to take a step back and say I realize that feminism and women are sometimes – I think there’s a little bit of a lack of empathy for what it must be like for a male geek when he’s just lonely and looking for someone to be a partner. He’s looking for romance. And I realize there’s a sense of maybe sometimes it’s a sensitive spot for them. I have empathy for that. But it is so wildly inappropriate at the same time to treat a woman that’s coming in to network with you professionally as a potential partner. It sends every single signal out there that you’re not valued for your skills, or who you are. You’re just a potential date. I think we’ve really got to change the culture where women and people of color are treated as the professionals we are, rather than just women.
Mike [24:48]: I don’t necessarily think that that’s just a software industry thing though. Because there’s –
Brianna [24:51]: No.
Mike [24:52]: – that’s definitely a problem. Obviously, sexual assault is an issue regardless of what industry it is. But I’ve also talked to female founders who have just said, “Yeah. I don’t go to evening events, or after-conference activities, because I don’t want to put myself in a situation where people are drinking and going to get out of control, and I just don’t want to have to deal with that.” I guess it can effectively minimize their opportunities for networking just by virtue of them not being willing to put themselves in situations like that. Whether it happens or not, if they’re uncomfortable attending those networking events then it puts them at a disadvantage outright.
Brianna [25:28]: Yeah. That’s dead on. And I would say look at the outcomes, right? I hear this a lot. It’s not just software. My husband is in biotech, who is head of IP for a company that’s listed on the NASDAQ that just had their IPO. There are plenty of women that work at his company. So why is it so many other industries their rate of women might be lower, but it’s not as embarrassing as software is? Why is this? Well, it’s the culture, stupid. So I think we need to own these problems rather than minimizing them.
Mike [26:00]: What sorts of things can be done to help change the landscape, so to speak? How do we go through and start enacting some changes?
Brianna [26:08]: I would say, for me, I hire a lot of people. Something I make a lot of personal efforts to do in my career is to network with people of color, because I realize without effort on my part I’m going to only be talking to white people, which is unconscious racism. I would say to anyone out there, when you see a woman that seems smart and accomplished on Twitter, follow her so you’re getting that voice in their feed. Make a deliberate effort to go out there and network with people of color, so you’re hearing that perspective and adding it to your own. I never hire for any position without thinking about who my candidates are ,and asking myself if they’re diverse. That’s very much a constructive thing you can do. If you don’t hire, and you’re just on a team, I think you’ve really got to check your own unconscious double standards. What is beyond frustrating to me, as a woman engineer, is it doesn’t matter what I say, or what I do, or what I have a technical opinion on, it gets challenged and bullied and just really hyper-questioned in a way that my male colleagues do not. I was at WWDC a few years ago, and I was talking about Apple’s metal API’s that were announced at a party. I’m sitting there talking to a guy, and he was like, “I was giving opinions on it, I write Unreal for a living and this is literally my field of hyper-expertise.” And this man just starts talking over me, and lecturing me, and “mansplaining” things. I had to take a step back and say, “Hey, you know the article you’re talking about right now? I wrote that.” He just blinked at me twice and kept going. There’s this culture of – it seems like it’s just something in a dude’s mind where if a woman questions a guy on something it gets just doubled-down on, or there’s this defensiveness that comes up. So I would get on my knees and beg anyone out there to really think through those unconscious double standards you might be holding women and people of color in your life to.
Mike [28:16]: Could you talk a little bit more – because it’s the second time you’ve used that phrase “unconscious double standards”. I’d like to know what other ones are there that we might have?
Brianna [28:25]: Sure. I think you can look at the last election and see very clearly there were double standards that Hillary was held to, with her ethical behavior, versus the dudes. This is all the way. It’s with when you’re applying for positions, I think womens’ experience is judged in a different way than a man’s is. I think all too often female communication styles are discounted. A really good one is, I think, that often women’s voices – you know, some women have kind of a vocal fry, or a higher pitched voice, and I’ve seen the way that they’re not taken seriously. There are all these double standards in what women say and do in our careers where we’re really beaten up about it. There is a great cartoon that came out this year where it was talking about women leaders, and the communication style we have to adopt. For a man, he could say, “I need this done by Tuesday.” If a woman says that she’s going to be considered abrasive. We have to adopt communication styles like, “What do you think about having this done by Tuesday?” It’s all these things where we’re constantly dancing around male ego and it’s absolutely exhausting.
Mike [29:37]: Shouldn’t the question in general be, “What do you think about having this done by Tuesday?” I’m not saying that from a female perspective. I’m saying that from a general project management standpoint, because just because you think that it should be done by Tuesday doesn’t mean that the other person – especially if you’re working with a bunch of contractors, or even employees. It almost doesn’t matter, but there are a lot of things that go on that are not necessarily in your vision at the time when you ask that. There’s a difference between, “Hey, this is deadline. We really need to have it done.” There’s ways of phrasing that stuff anyway that are much more collaborative in nature. Because I’ve worked with contractors who you tell them, “Hey, I really need this done by Tuesday.” and they’ve got a holiday coming up and you don’t know it. For example, if you’ve got people who are working overseas, you’re not in that culture so it’s not on your calendar. It is on theirs. You have to be at least aware of what’s going on and, unless you ask the question, it’s very easy to get into a situation where you say something, say, “Hey, this needs to be done by Tuesday,” and you’re completely neglecting all the other things that that person has going on.
Brianna [30:38]: I would say this with all respect, Mike, but I think the exchange we just had here is a really good example of what can make women sometimes a little frustrated in our careers. I completely agree with you. That’s my management style. I work through consensus and collaboration, and I believe that if someone is good enough to be in the door that they’ve earned a little bit of leeway with that. So we do work that way. But I think we’re so quick in our field to minimize any point that a woman is making about this. I’m going to be really direct with you here, women are held to very harsh double standards whenever we show leadership, or try to draw boundaries, and the things that we talk about are negated, or minimized, or put aside. Ask any woman that is in a position of leadership out there if she has to alter her communication style to not threaten men. She will absolutely, 100%, tell you that she does. I just think that’s really important. These are the realities that we face.
Mike [31:43]: Yeah. I totally agree. I definitely think there is that double standard there, depending on how a woman would phrase that. What are the types of things that communities and community leaders can do to help enact some changes here? We’ve talked a little bit about the stuff, I’ll say, on more of an individual level. But what can communities, like MicroConf and Founder Café and Startups for the Rest of Us do to help with these types of situations?
Brianna [32:08]: Well, always make sure you’re having enough women come in the door. Network with women. Organizationally, you need to create a culture where women are not afraid to speak up. By the way, this is a trait for any good leader. In software development it’s just a reality. We have a lot of introvert engineers. I’ve worked with more than a few engineers who are on the autism spectrum. To me, good leadership is creating an environment where everyone gets a say, not just the loudest voices in the room. I think being very active about having a culture where maybe those people that speak a little too much – and I’m in that group – would kind of be checked a little bit, and you ask for consensus from other people. That’s incredibly important. I would also say when issues come up those need to be taken very seriously. Every woman I know is terrified of HR, because HR very generally speaking, exists to protect the company, not protect the woman. In my entire career I only know one or two women that have had sexual harassment incidents that have had a good outcome by HR. There are standards about that out there for that. Make sure you’re holding yourself to that. I would also say really think through your interviewing process. In the game industry I can’t tell you how many times I’ve heard a story about a woman going to interview for a job and it uses male pronouns, it assumes certain things, or she’s interviewed in a room with posters on the wall of half-naked women. You’ve really got to think about your culture and ask yourself what kind of messages you’re sending.
Mike [33:54]: What would be better ways to – for example, you said job listings or job interviews – what would be better ways of referring to that in a job post, for example. Do you say, “He/She?” Would you say, “He or she?”, or would you try and avoid gender in any way, shape or form?
Brianna [34:09]: I personally try to talk around gender issues. I’d be honest and say I – like a lot of other people – am still kind of trying to figure out how to speak in a way that doesn’t exclude non-binary people. It’s kind of something that only first came up two years ago really in the mainstream. I, myself, try to just leave gender out of it whenever I can. That’s a personal style thing, and I fail at it sometimes.
Mike [34:36]: Going back to the communities, do you have any other recommendations or thoughts on networking events that could be a little bit more collaborative in nature? As I said before, one of the issues that I’ve seen is that female founders tend to shy away from going to evening events, especially ones where there’s alcohol involved in any way, shape, or form. I have talked to people who have said, “I have been sexually harassed at such-and-such conferences. Is MicroConf safe for me to come to?”
Brianna [35:03]: I guarantee women are having a conversation back channel a lot more than to your face.
Mike [35:07]: What sorts of things would you recommend, or could we look at?
Brianna [35:12]: I would say this. I really doubt that my company will ever have events with alcohol at it. I realize that there are some people in our field that kind of need alcohol to feel comfortable, but from my perspective I’m always thinking about my safety, first and foremost, and I just can’t allow something that would compromise that. I think, just to really be honest with you here, the threat of sexual assault is something men don’t ever have to think about, and women think about all the time. I personally don’t do that. I’m also increasingly skeptical about the value of face-to-face networking. I think it definitely has its place. I do most of my networking on Twitter, and in private groups on Facebook, so I’m always looking for those kind of personal relationships. I think lunch networking events, and coffee, are hyper-productive, so I’m always looking for those kinds of places that are just a little bit more congenial.
Mike [36:10]: One of the other things I want to touch on was that I recently read that you’re running for Congress. What prompted that?
Brianna [36:16]: Just to be really open. I try to steer away from politics as much as I can in my technical career, but honestly, on election night I was 30-feet from where Hillary Clinton should have accepted the presidency, and she didn’t. And, like a lot of other marginalized people, I’m really scared about my rights under a Trump administration. It’s something I’ve been thinking about for a long time. There’s really this meta-question of: How can we go further than we are right now. I personally believe that we’ve reached a real asymptote with what writing about sexism, and talking about sexism, is going to accomplish in our field. The truth is I could come on a 1,000 podcasts this year, like this one, and talk about the same thing. I’m not sure it’s going to get us much further than where were are right now. I think the next step is to have women involved in the legislature. The guy I’m going to be running against has spent his entire career crusading against women’s rights. He’s pretty terrible on technology issues. Even stepping beyond being a woman in tech, I think there’s a much larger issue here. Our federal tech policy sucks, and it’s dumb.
Mike [37:30]: I think that’s an understatement, by any stretch of the imagination.
Brianna [37:35]: It really is. I have to say this. One of the women I’m hoping to serve on a technology subcommittee in the House when I run, you know when the Mirai Botnet came out a few months ago, and completely took out parts of the internet in the United States, this woman went on CNN and blamed a botnet, which is it happened because we don’t secure Internet of Things devices and allow them to be rewritten in a way that can attack our technology infrastructure, and she blamed it on freaking SOPA like, you know, pirating movies and software. It’s just like it’s a policy position that was literally written by Verizon. I am angry about that, and our poor technology policy. It’s not just stupid, it’s endangering our national security. So a lot of the reason I’m running is I want to be a voice in the Congress on privacy rights, on the EFF, on all of these policy issues where – with all respect to the politicians in the Baby Boomer generation – I absolutely respect your service, but I think as someone that is kind of native to this technology, I simply understand it better than most people do, and we need people in Congress fighting for privacy rights; people holding companies accountable when their data is breached in horrific ways, and endanger all of the people that have had their information stolen. It’s a very wide array of issues, why I’m running. It’s not just gender equality. To be honest, that SOPA thing really made me mad. I think there’s a certain point where every generation needs to step up and commit ourselves to public service. And again, there are a lot more Baby Boomers in the Congress than there are Gen-Xer’s, and I just think it’s time for us to serve.
Mike [39:24]: Well, again, Brianna, thank you very much for your time. I really appreciate you coming on the show. So this is episode 322, and if you have any comments or thoughts on the show, head over to the website startupsfortherestofus.com and you can leave some comments on the website and talk a little bit more about this episode. If you have a question for us, you can call our voicemail number at 1-888-801-9690 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 episode.
Thanks for listening and we’ll see you next time.
Episode 321 | How to Take Your SaaS Upmarket
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike talk about how to take your SaaS upmarket. Some of the steps they discuss include, raising prices, modifying your pricing page, asking for annual contracts, and how to give demos.
Items mentioned in this episode:
- Drip
- BlueTick
- Better Cater
- Close.io
- Product Demos That Sell Book
- Anna Jacobsen attendee talk from MicroConf 2016
Transcript
Rob [00:00]: In this episode of ‘Startups for the Rest of Us,’ Mike and I discuss how to take your SaaS up market. This is ‘Startups for the Rest of Us’ episode 321.
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 [00:27]: And I’m Mike.
Rob [00:28]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, Mike?
Mike [00:32]: Well, I added another paying customer to Bluetick this past week. It’s been a little bit of a challenge just because the automation pieces are starting to become much more integral and important to the whole thing. I’ve been looking into Zapier Integration and how we can put that in place, and going through the different documentation and stuff that Zapier has out there you can create a private Zap that you can just share with certain people. But in looking through it it seems like there are probably a bunch of places where we need to make these minor tweaks here and there in order to make it easier to use with Zapier and make our API a little bit better.
We’re looking at those things right now. There’s lots of tiny details to iron out but things are looking well so far.
Rob [01:14]: Yeah, adding a new customer is always good. With the Zapier integration, we have rolled at least two different versions – maybe a third – to ours. We ran into some struggles early on with wrestling with Zapier around. It wasn’t as intuitive as we found some other systems to be. I think they’ve done some good things. I don’t know that they’ve corrected it, but they’ve at least improved that over the past year or two since we integrated. It is more complicated than you want it to be. You have to think about a lot of stuff. It’s not just a typical hidden API endpoint. There’s almost like client-end stuff, and your passing [?] back and forth to power their UI. It makes sense, given the tool they’ve built, but it’s a lot more work than the standard integrations that we have done.
Mike [01:56]: Yeah. The other thing I’ve noticed is that when it comes to objects that have lists of things in them then it – I won’t say it completely falls down – but it definitely makes things a lot more challenging when you have situations like that.
Rob [02:08]: Sure. We received a voicemail from someone who wanted to stay anonymous, so I’m not going to play the voicemail but he works at a health insurance company and he also listens to the podcast. He had a comment about your comment from, I think, a couple of episodes ago where you were mentioning insurance premiums and how it seemed like the insurance companies are price testing and just increasing to test to see how much people will pay. He had a good point as an insider at a company, he sees how these things work. He said that the regulation on them is so tight that they have a really tough time. They’re not supposed to make more than X-dollars. They get penalized if they make more than a certain amount of money. I don’t know how that’s all regulated, but it was really interesting. He said that premiums just are going up. But they have been going up for a long time. It’s funny. I was thinking back to when I first became self-employed – right around, I think, it was around 2001 – when I became a consultant. I went and I got Kaiser, which is a U.S. based HMO. I got coverage for myself and my wife and, if I recall, it was like $130 a month, and it was quite good coverage. If you look for the same coverage now I bet it’s like $1,000 a month. So it’s been going up for 16 years, and some folks will blame it on the Affordable Care Act, but it was a disaster before that. Since the late ‘90’s it’s just been – or maybe it’s like 2000, 2001 – it’s been ratcheting up 10%, 20% every couple of years. All that to say, it was kind of cool to hear his perspective in the sense of the costs are going up. Our healthcare system is kind of jacked up, but that, in his experience, he said his company and the people there they really do care about helping people stay healthy and trying to help them. He said that’s the general inside. It’s not this big conspiracy theory that a lot of us think it is, is what he was saying – at least at his company.
Mike [03:53]: Yeah. I can totally see that. My experience with it was really just looking for health insurance over the course of three or four years, where literally every year it was going up by what seemed like massive amounts. I could go out through an insurance broker and the differences between them would be literally $300 or $400 in the same year for the same type of coverage from a different company. It didn’t really make a lot of sense. And because everything’s so obscure it’s really hard to make apples to apples comparisons between some of those companies. I would trust his judgment over mine just because I was totally speculating about it. It is very frustrating to be a business owner and have to spend your time trying to figure those things out.
Rob [04:31]: I agree. It has always been a headache, and I’d say it’s even more of a headache now and costlier than it has been in the past. So the only other tidbit of news I have is that me and my family are heading to California for the holidays, and it’s just in time. We had a day yesterday here in Minneapolis where the “feels-like” was 30 below, and that was really interesting. What’s interesting is the day before it was probably 15 below, I think, 15 to 17, but the sun was out and we were all outside on and off for an hour or two. We just had to gear up, there wasn’t a ton of wind – it was humidity that caused it to be really that cold – and we were building snow forts and doing all that stuff. But the 30 below, that was different. That air temperature was pretty gnarly, so we were only outdoors as much as me absolutely needed to be. I think we’re going to enjoy our seven-day trip out here to Santa Cruz, California.
Mike [05:24]: I think I did warn you about the temperatures there.
Rob [05:28]: Oh, yeah. The weather almanac warned me about the temperatures there. Alright. So today we’re talking about how to take your SaaS app up market. It is a listener question from Anthony Franco, and he’s from bettercater.com. He says, “Thanks for the podcasts and for MicroConf. Looking forward to attending my second one this year. I have a question about enterprise sales. We’ve launched a SaaS and had a good amount of mom-and-pop small businesses sign up, but now we’re looking to expand into more enterprise level customers. What are your tips and suggestions on how to target larger enterprise level customers compared to small businesses? Specifically, what are some changes you’d recommend on the sales side and the sales process, or maybe even general features enterprise companies expect?”
That’s what we’re going to do here. We’re going to take the next 15, 20 minutes to talk through this. A clarification I want to make is this episode is about taking your SaaS up market in general. It’s not about shifting from $20 a month customers to true enterprise customers. When I think of enterprise, I think of fortune 1,000 or fortune 2,000. You know, $50, $100, $200 million companies. And I don’t think that’s relevant to a lot of us, and I actually don’t think that’s probably what Anthony was thinking. But the idea of going up market – so maybe now your selling $20 or $50 a month plans, but you want to also sell to customers who might pay you $200 or $500 or $1,000 a month, I think it’s a really good thought experiment, and I think there’s a lot of questions we can ask about whether you should make that move, things you should be aware of, and then some steps to take to make that shift. Because going up market, there’s a lot of pros to it in terms of your just going to grow faster. You need a lot fewer customers to grow a lot faster.
Mike [07:01]: I think this is a really interesting question, and very cool topic to dive into. Let’s talk about some of the questions you would have before you would even decide to make this move. What are some of the questions that somebody might ask themselves?
Rob [07:11]: Sure. I have a handful of questions here. The first one to ask yourself is, “Can your technology scale to support larger customers?” In a lot of instances this answer will be “yes”. If you have just kind of basic crud app that’s used to manage finances or something, and doesn’t have a lot of external integrations, doesn’t have a lot of queues, doesn’t have a lot of moving parts, you’re going to be fine. But if you run an email marketing app, or you run something that has to do a lot of data crunching, moving from customers who mostly have 100 or 200 records in your database to customers who have 10,000 or a 100,000, it’s going to be a big shift. We’ve seen this as DRIP has grown that our largest customers are the ones that put, by far, the biggest strain, and it’s exponentially more of a strain on everything; all the infrastructure and the queues. This is the first thing to think about as you’re thinking about bringing on larger customers.
Mike [08:00]: I think going along with that you kind of have to have a basic understanding of where the choke points in your app are right now, and what sorts of thing that an enterprise customer would need – or a larger customer would need – that would essentially stress those areas. Are there customizations that could go in there? Are there other integrations that are going to cause places to start to fall down? There’s a very big difference between when you’re displaying data when your customer only has, let’s say, 50 or 100 contacts in there versus a 1,000 or 10,000. Those are two entirely different mechanisms that you need to account for when you’re displaying information to the customer. It’s not even just, “Can the technology itself scale, and can your backend, but also are you able to continue presenting the data from your app back to the customer in a way that’s easy for them to understand and get around. Because if they can’t find what it is that they’re looking for just because they’ve dumped so much data into it, then it’s going to make it difficult for them to even use your app moving forward.
Rob [08:58]: Right. The answer to this one may be, “Well, we don’t know if we can scale. We think we can, and if we get an enterprise customer then we’re going to throw a bunch of money at new servers, and a bunch of time at making sure stuff works once they’re in.” That’s okay, as long as you don’t have weeks or months of work to do once they get in. I don’t want to tell you to over-engineer or go in and gold plate your entire app at the thought that someday you may have an enterprise customer. It’s more about just thinking through, “Where are the places where this is probably going to break, both from a UX perspective and from a performance and scaling perspective.” The second question you should think about – and this one may be the most important actually – is do you have the staff to handle an enterprise sales process, or a process where you’re selling to larger customers? You’re going to need to be doing lots of demos. You’re going to need to be doing phone calls, video chat, and you’re probably going to have additional support burden from selling to larger customers.
Mike [09:52]: I think this stuff that’s extremely challenging when you’re running it just by yourself, or maybe you’ve got a couple of contractors who are either doing development or support. It’s very difficult to scale up to that point and be able to continue juggling all the different things, especially if you’re early on and you’re really not making a fair amount of money from it, and you’re not fulltime on it. If you’re looking to do this before you even get to the point where you are fulltime on it, it’s probably going to be very difficult, because let’s say that a customer has to have a call in the middle of the day. Unless your schedule can allow for that then it’s going to be difficult for you to get away and start scheduling those. In addition, if you have some strict time schedules, in terms of like when you spend on development or marketing, it’s going to be difficult to be able to have your days divided up by those different sales calls or those different support calls. If those are forcing themselves into your schedule, it makes it difficult to give the appropriate amount of tension to all the different things that you need to as well as grow the business.
Rob [10:51]: The third question you should ask yourself before making the move is: Do you want to deal with the negatives of selling to larger companies? Because, obviously, the higher price point and the ability to grow faster are the positives, and the negatives are things like longer sales cycle, a lot more handholding throughout the whole process. Having to convince multiple people to purchase often. Instead of just having a single point of contact, you’ll have a committee who’s trying to make the decision, or it’s two or three people on a team. It’s just more headache to go through. They’re going to have questions about things like your Terms of Service, legal structure, privacy, security and on and on that you never received from small vendors, or from small customers, I should say. People who, again, are paying you $40 or $50 a month, they don’t tend to ask these kinds of questions, and so you’ll have to spend a lot of time up front figuring out the right answers. Again, they expect a lot more handholding, and more calls and meetings that someone is going to need to handle, because this sales process you kind of have to earn these higher price points. They don’t tend to just come and hit your pricing page and self-onboard like a lot of the lower-end customers are used to. The fourth question you should think about is: Do you have any case studies that you can use during this process? You may not be able to jump up to customers who are paying you $2,000 or $3,000 a month if you don’t have anyone paying you more than $59 a month, as an example. So you may want to ratchet your way up and look for customers in the $100 to $500 range, and get one or two that are in there, and then look up from there at $500 to $1,000, or $500 to $1,500. You can gradually move your way up, because if you’re talking to someone who is in essence going to be your biggest customer and they ask you point blank who is your biggest customer now, it’s really tough to tell them it’s someone that’s 1/50th your size, but it’s not as bad to say, “Someone who’s half your size, or three quarter your size.” It’s a lot easier to do.
Mike [12:38]: Even if they don’t ask directly who your largest customer is, they’ll very often have questions about how have other customers who are our size, or have done X, Y and Z, been able to scale the services inside of your product, or accomplish such and such solution to a problem they may particularly have. If you don’t have examples of those types of things based on a larger customer base – and by larger I mean customers who are larger in size – then it’s difficult to answer those questions in a way that you’re not being deceitful. You really don’t want to start stretching the truth or, obviously, outright lying to customers, because that’s just going to put you in a bad situation later on. For whatever reason, it always seems to come back, and you will have to answer questions later on, or there’s going to be misunderstandings. That’s not a position you want to be in. You’d rather be in a position where you’re collaborating with them and being honest and upfront with them, and letting them know exactly what it is that they can expect, and what sorts of things that you’re not going to be able to do for them. The first steps are being about to, kind of, as Rob said, stair-step your way up with some larger customers to help answer questions down the road of those other larger customers.
Rob [13:46]: The fifth question you should ask yourself is: Do you have the cash runway to make this happen? Going through this enterprise, or this large company, sales cycle, these things can take three months, six months, nine months and from a standing stop it can be a lot of manpower and effort and time, which is money, that you’re basically spending before you get that first check. So think about whether you have the runway to make it work.
Mike [14:11]: I think that goes just back to the point that this isn’t something that you want to try and do on day one. I think this is something you gradually grow into when you’re trying to expand the market for your product or your trying to increase the rate of growth, and increase the revenue that’s coming in, and those types of things. This is not something that you want to really tackle on day one, or even day 30, when you really don’t necessary have the app or the marketing itself straightened out, and you can’t go to those customers and have a legitimate face on the business such that it’s going to be able to solve their problems. If you don’t have the cash runway in order to get out three months, six months, nine months where you’re actually landing those customers on a regular basis, then it’s very difficult to make ends meet in between that time, not just beyond that.
Rob [14:55]: The sixth question is: Will you offer phone support to your larger customers? My take has always been that we don’t offer phone support. Sometimes we have a few priority queues where people can get it via email, but this is a tough decision, and it’s going to be to each business owner to decide this. The hard part is if you go through this whole demo sales process, and then you’re handholding, and you’re getting them in and you’re getting them on boarded, then they have another questions and they Skype you, or they, “Hey, could we just jump on a call so you can explain this?” Then it’s really a support thing. You have to be able to make that transition at that point, and have them not feel like you let them down or misled them. At that point you’re like, “You know what? You got email support at myapp.com and they’re going to help you out.” That’s something you need to think about how to handle up front, because people get an expectation if they’ve talked to you three or four times, you’ve answered all their questions, you’ve helped them get set up, that they’re a liaison, and they want to go to you every time they have any questions about the app.
Mike [15:43]: There’s a few different ways I think you can handle this. When you are giving demos, a lot of times the question of support will come up and you can probably just be blunt with them and say, “Look, we don’t offer phone support. At least not a “call in and you can talk directly to somebody”, but there’s the email line and you can send it in. We answer them pretty readily. If we need to get on a phone call with you because it’s warranted then we will, but at the same time – in order to help reduce the cost that our customers are paying – then we start with email and it can be escalated from there.” I think that that’s a good way to at least address that issue but, again, there’s going to be customers out there who, if you don’t have a phone number that they can call then that’s going to be a deal breaker for them. You have to just understand what your customer base looks like, and whether or not that’s going to be acceptable to them.
Rob [16:29]: And our seventh and final question you should think about before the move – and then we’ll dive into some steps of actually making this move – is how do you repeatedly get in front of larger customers? Do you already have a funnel, or already have channels where larger customers are arriving at your site and they’re asking for phone calls? Then you’re golden. This actually was the situation we were in with Drip when I hired Anna about 18 months ago. She became basically sales and customer success. She also did some marketing at the time. She handled the demo and the sales process, and I knew that we were getting – I don’t remember, maybe one a week, two a week – of people who said, “Hey, I’m interested in using it. Can I jump on the phone with somebody?” But if you’re not in that situation, and you’re not already getting inbound interest, it’s probably good to think about how are you going to get in front of these larger buyers?
Mike [17:15]: That brings up another interesting point. If you’re not able to get in front of those people on a repeated basis, or they’re not already coming to you through whatever inbound marketing efforts that you have, then you have to make a decision. One, are you going to shift your business to do more outbound efforts to reach out and directly contact these larger customers? Because that, in itself, can be a fairly large endeavor. Are you trying to pursue something that your marketing campaigns are simply not set up to handle? And if that’s the case then you’re going to have to change a lot of the things that you’re currently doing. I think it’s a very different story if you’re going and trying to move your product to up-market but you’re not getting any sort of interest, versus you already have that inbound interest and you’re essentially just trying to remarket your SaaS app a little bit and tweak some things in order to be able to serve those and not automatically turn them away based on what your marketing collateral on your website says.
Rob [18:09]: All right. Now that we’ve talked through those, let’s look at seven steps for making this move; for taking your SaaS app up market. The first one is to raise your prices, or, at a minimum, have an expensive tier that these larger customers will kind of automatically fall into. With usage based pricing like let’s say CRM, let’s say Close.io, it’s going to be based on the number of logins; the number of sales people, or people who need access. A larger customer should almost, by definition, have a larger team, and they’re going to have 10, 20, 30 people, so if you just price it based on that you’re going to be golden. Similar with if you run support software, anything where the stuff that your users see is different for each user, then it’s a no-brainer to charge based on the number of logins. If you have something where it’s more usage based – let’s think about email service providers or proposal software, or invoicing or whatever – you’re going to want to find what the metric is. An email service provider will charge based on the number of subscribers, and larger customers tend to have bigger lists, so this makes sense. You have to find that level where you can either have that high end tier that they automatically fall into, or, if you’re going to go after this, you have to raise your prices across the board just to be able to afford everything we’ve said above. You can’t be selling to large customers and charging them $30 or $50 a month. There’s just not ROI in it, because the time it takes to work with them is so substantial.
Mike [19:29]: I think it was at last year’s MicroConf – not the one six months ago, but a year and a half ago – when Lars Lofgren had been talking about different ways that people are selling their software and services and how they’re, essentially, packaging together what the different pricing tiers are, and what the different switches are. I think that this is an interesting area to get into, especially if you don’t have a product where there are going to be a lot of people using it and you don’t have that per user pricing that you can toggle. The one that comes to mind that I distinctly remember was something like WebEx, where a large company that wants to use WebEx for their sales team, they are naturally going to have more people on their sales team, but it’s difficult to justify charging, let’s say $150 per person when you have this per user pricing tier and really the sales reps can actually just share a login and share an account. In those situations, it really doesn’t make sense to do a per user pricing model just because a $50 or a $75 a month plan can support three or four or five different people. It makes it very difficult for you to make more money when you’re trying to charge based on that particular feature.
Rob [20:40]: The second step for moving up-market is to modify your pricing page, and to basically add a tier – typically to the far right, depending on how your page is structured – that is the “Call Us.” The high volume tier, where it says, “Call us for pricing.” You can call this enterprise if you want. We’ve found in our space there are people with really large lists that are not enterprises, which is why I’m differentiating that and just talking about larger customers here. So figure out a good name for it, and get a phone number on there, because if you are going to do this you’re going to need to be able to connect with folks, these larger customers, over calls.
Mike [21:13]: I think the interesting point here is to try and figure out how to best guide people towards that. When you have a pricing page, or even just talking a little bit more broadly in general about your website, you have to be a little bit careful about the types of examples you use even. One thing that had come to mind was that if, for example, your pricing, if you have a $9 a month pricing plan, that can immediately turn people away who are large, because they say, “Oh, well, there’s this $9 pricing plan here, and the highest plan is only $35” for example. Those customers are going to look at that say, “We’re far too big for this company to even be able to handle us, so we’re just not even going to bother.” They won’t even talk to you. They won’t reach out for a sales demo or anything, because they look at the pricing page and they say, “This is just obviously not for us.” The opposite of that can actually be true as well. If you have prices that start at $100 a month, then a lot of your customers right now are only really able to afford $30 a month or $40 a month, they’re going to look at that high price and they’re going to say, “This is too expensive for us.” You really have to be a little bit careful about how you’re positioning the product, and how you’re putting your pricing page together, and the types of examples that you’re using inside the images and examples that you have on the website. Those are a couple of different things to keep in mind. You want to appeal to most of them, but at the same time that can be very difficult based on what it is that you’re selling because you don’t want to exclude anyone either. At least not exclude anyone who would be a good fit for using the software.
Rob [22:42]: The third step is to consider adding your phone number to the top of your website. You may want to say, “For sales questions, call this.” and if someone calls and asks for support, you may need to tell them, “We’re not able to do that. You’re going to have to email support queue.” I’ve heard having your phone number at the top of your page is a good thing.
Mike [22:58]: There’s a bunch of different services you can use for this. Skype has its own “Skype In” number, so that’s one option. There’s also a service called Grasshopper, and you can get virtual phone numbers for that as well. People can call those, and you could either route it to a voicemail, for example, during certain hours of the day, or you can route it to different team members depending on how it is that you have your team set up. So there’s a bunch of different ways that you can accomplish this. Another one that you could also use is Kall8.com. You can just purchase a phone number there, and when people call into that number you can just have it go directly to voicemail, take the number, and then have it sent over to you via email. Then you can call the person back at your own time. I think that in some cases, just having a phone number there, even if nobody calls it, that can help with sales. But there is the opposite of that scenario, as well, where somebody might call that and then be turned off by the fact that nobody ever answers. You do have to be a little bit careful about that but, again, there are options for having a phone number there if you don’t want to use your own cellphone number or your home line or business line or whatever.
Rob [24:03]: Right. The idea here is you’re trying to generate this inbound interest. It’s trying to get people on the phone, because that’s the way that you are going to sell these larger priced plans. The fourth step for going up-market is adding a “requested demo” button all over the place. You’re going to ask for some basic contact information, then you’re going to ask one or two qualifying questions, such as, “How many users do you expect? How many subscribers are in your email list?” Something that can define that they’re in that top tier, because if they request a demo and they’re not in that top tier, it very well is not worth, in essence, the time investment to give a demo to people who are going to pay you $30 or $50 a month. You want to have something in there to qualify them, otherwise you’re not going to know which of these demo requests to respond to. The way that we’ve scaled this at Drip is if people are below a certain number of subscribers then they do see a demo but it’s a prerecorded demo. It walks through the app and then it offers to bring them in for a trial. Of course, if they’re above a certain subscriber rate then they get a call from us, or they get an email with a Calendly link, and it sends them into the demo flow. We have this link on our homepage, we have it in the global top nav and that’s what I’d recommend for you as well if you’re going to go after these types of customers. Our fifth step is to learn how to give demos if you haven’t already. I have two recommendations for this. There’s a lot of good information on this, but I’d recommend you read Steli Efti’s book. He’s the founder of Close.io and he knows a lot about how to give demos. His book is called ‘Product Demos That Sell.’ We will link that up in our show notes. I think the book is very inexpensive. It might even be free; somewhere between zero and $10. It’s a complete no-brainer, and it’s one of the best books I’ve seen on this topic. The other recommendation I would say is to watch Anna’s video. Anna’s on my Drip team. She did an attendee talk just about six, seven months ago here in MicroConf 2016 in Las Vegas. We’re going to link that video link up in the show notes. She basically walked through how we developed the Drip demo process. I think it went through four or five different versions. She talks about why we made certain changes at certain points. It’s a short watch, about 12 minutes. She gave us a lot of thoughts about how we structured things and why.
Mike [26:13]: There’s two different types of demos. Going back the previous step in this which was step four, adding the “Request a Demo” all over the place. There are the demos that you give that are simply prerecorded, and then there’s demos that you give in person. When you’re giving a demo in person a lot of times you will have these questions that come up either at the end of the demo or in the middle of it. Those are the types of things that you probably want to write down, so that when those questions come up you can have a better answer for them. When you’re at the end of the call, if you’ve hopefully recorded it so you can get better at them over time, you write down the questions that were asked of you and then come up with, essentially, standard, boilerplate answers that you will give to those that will improve over time as your offering gets better, and as you give more of the demos. You don’t want to start making up answers to people’s questions on the fly and have them sound like they’re unrehearsed or like you’ve never been asked before. You have to answer every questions and you have to think of answer on the spot then it becomes a little bit less believable and less, obviously like you have answered that question before. If you write them down you can come up with those answers and it sounds like it’s off the cuff, even though it’s not, even though you’ve actually heavily thought about those things before.
Rob [27:27]: And just to clarify, when you said video versus in person, you meant video versus live, right?
Mike [27:32]: Oh, yes.
Rob [27:33]: Yeah.
Mike [27:34]: Yes. That is what I meant. That’s correct.
Rob [27:35]: Both of them are over video, but one is prerecorded, in essence.
Mike [27:39]: Yeah, that’s what I meant. It was prerecorded versus live and not in person but yes.
Rob [27:44]: Cool. So step six is to ask large customers for annual contracts. As you’re doing this sales process it’s pretty standard to get 12 months’ payment up front. This is great for your cash flow. You’re going to get a really big check. Typically, they won’t balk at it. Sometimes they’ll say, “Let’s do six months, or let’s do a quarter.” You can work with them on that. But since it is something that’s somewhat standard with these guys it’s kind of a no-brainer to do this, because the worst thing you can do is go through this whole process, you invest a lot of time, you get them signed up, and then they cancel a month or two later. That’s unlikely to happen, but it’s a real bummer to do that. If you can get that whole year of cash up front, it’s really something to consider with your larger customers. Our seventh and final step for moving your SaaS up market is not a hard and fast rule, but it’s something that I would recommend, because it’s going to be super tempting to do, and it’s: don’t do custom work, because pretty much every call you get on is going to be a company asking for something custom for them. They’re going to say, “This looks great, and we would just use it if you could wire up some code to hit our API and put it into our custom CRM system.” You know that that’s like eight hours of work, and you know that you could pull it off but it really, really is a danger zone to do this, because then you’re on the hook for a lot of stuff. You’re on someone else’s timeline, and you need a consulting contract, so you’re going to have to go spend time to do that. Then you’re going to find out their API is really buggy, and they’re going to blame you, and you’re going to blame their developers. Everything goes wrong and it’s a huge waste of time. I’ll just say that. So don’t do custom one off work that is really more like consulting stuff. Again, not a totally hard and fast rule, but I think probably more than half the calls you get on someone’s going to ask you for something like this. If you’re building a product company, you want to stay away from this. The other thing that is kind of on the fence we hear a lot is, “Yeah, if you’d just build this one feature, and all your customers could use it, then we would become customers.” For the most part, we don’t do this. We sometimes, if they actually are requesting something that is already on our roadmap, we will tell them that. We will say, “We could bump it up a little bit for you. If you’re willing to, in essence, sign a contract and not send us the check yet, but that you’ve agreed to do it we will,” move up the priority. Move it sooner in the roadmap. Again, if we were going to build it already. But if it’s something that someone suggests that really no other customer is going to use, you’re a product company now. It’s just not something that I would recommend, unless – and here are the exceptions, right, and this is where it depends – unless you’re in very early stage and you’re trying to get a big name customer on who you think can do a lot for your brand and they’re going to pay you buckets of money, then I would consider building a one-off feature and probably “feature gating” it, so that you have a checkbox in an admin console somewhere where only that customer sees it, because you don’t want to support that for everybody. You have to make a call at a certain point. Is it worth this however many hours of work to get this customer on board based on the amount of money they’re going to pay you and perhaps the amount of prestige they can lend to your brand. You have other thoughts on doing custom work?
Mike [30:45]: I think I agree with you in general. You really want to avoid the custom work if at all possible, and I think that it’s probably a good realization to have that even if somebody says that they will sign up for something, if you build that one feature and it sounds like something that a lot of your customers could use, then you have to heavily weight that on whether or not you do it. It’s up to you as to which way you go on that. One thing I would say to keep in mind about all of this though is that there are some questions that companies will ask solely because they want to hear an answer, and not because they actually care about what the answer is, or whether you do that. For example, they might ask, “Can you implement feature X, Y, Z?” And they don’t actually care if you can implement that but it’s hard to tell just from the conversation without directly asking them is that something they really need or is that a deal breaker. You can turn that back around and the question you can ask is, “Is that important to you?” From there that’s where you take the conversation. Sometimes it’s just curiosity. They just want to know, “Hey, can you do this?” And it doesn’t matter what the answer. They just wanted to know. I’ve had this conversation with people before, and I’ve had them ask me stuff like that and I’ve asked, “Is that important to you?” “No. I was just curious if you could do that.” In your mind, it’s very easy to go down the path of, “Okay, well they asked me this question. How would I go about doing this? How would I implement this?” Then you start talking, essentially, you’re talking yourself into implementing it for them, and they didn’t even care. That’s a very fine line that you have to ride and just keep in mind that sometimes the customers actually don’t care. They’re just asking because they want to ask, or because it was something that came up in some other meeting.
Rob [32:21]: Thanks for the question, Anthony. I hope that helps give you some ideas on how you can go after larger customers.
Mike [32:27]: 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 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. We’ll see you next time.
Episode 320 | Business Model Breakdown of Amazon Go
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike do a business model breakdown of Amazon Go. They talk about the biggest challenges the store may face including security and delivery logistics. They also explore the technical and social impact of the idea.
Items mentioned in this episode:
Transcript
Mike [00:00]: In this episode of ‘Startups for the Rest of Us,’ Rob and I are going to do a business model breakdown of Amazon Go. This is ‘Startups for the Rest of Us’ episode 320.
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 [00:26]: And I’m Rob.
Mike [00:26]: 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 [00:31]: Well, as soon as our predictions episode went live a couple of weeks ago, we had a few comments to get posted into that thread. It looks like at least one, and perhaps two, of my predictions literally came true within weeks of us making them.
The predictions episode went live on the sixth or seventh of December, but we actually recorded it two weeks prior to that. One of my predictions was that there would be at least one more high profile bootstrapped startup self-funded acquisition. And I’d specified that by “high profile” I mean it’s a big company. It’s not some sale of technology. I was thinking it was actually going to be a much larger funded company acquiring somebody, and, sure enough, big congrats to Dan Norris and his team, because WP Curve looks like they were acquired. I think they announced it on maybe around December seventh.
Mike [01:17]: That’s awesome. Congratulations to Dan and the entire team for that. I also want to point out here that acquisitions were one of my predictions from the previous year. So, technically we’re both right on this one, I think.
Rob [01:29]: That is really funny. So you predicted for 2016 – which technically we’re still in – that there would be more acquisitions than IPO’s or something. And then my prediction really is for 2017, but I think it counts. As soon as we make the prediction –
Mike [01:41]: I think it counts.
Rob [01:42]: As soon as you make it, I think if it happens after that then you’re correct.
Mike [01:45]: Right.
Rob [01:46]: It was pretty cool. It was cool to hear that news, not because it made the prediction correct, but just because of all the work Dan’s done building his businesses and sharing with the world his experience in writing ‘Seven Day Startup’, and his content marketing engine book. He’s just done a lot of stuff. And now he’s doing Black Hops Brewing. He started an entire beer brand, like a microbrew, in Australia.
Mike [02:07]: Yeah. He started that a while ago, actually while he was running WP Curve. It’s been interesting to follow those things. One of the other predictions somebody pointed out was that I had a wearables prediction for last year and, apparently, Pebble decided to shut down and sell off all their IP’s. I think at the time that we recorded the episode we hadn’t been aware of the, but that’s another one. Then you also had an unmanned drone delivery previously happened as well. That happened about two weeks or so after we recorded the episode.
Rob [02:35]: It looks like on December 14th or something. So right there in time. They’re talking in New Zealand about how Domino’s Pizza’s going to start doing unmanned drone deliveries, and then Amazon did one in the UK. It was literally December 14th, Amazon completes its first drone powered delivery. I think this was yesterday. It’s kind of interesting timing. I guess these things are, I don’t know. I wouldn’t call them obvious. It’s funny, our predictions in the past, a lot of them never come true, and then we make a few predictions here and two or three of them come true within two weeks. It’s really odd.
Mike [03:05]: I do want to say congratulations to Cristoff and Benedict for selling out FEMTO Conf in Germany. This was on my list of predictions as well that more of these types of things would be popping up. But, to be fair, I knew about this one in advance, so I don’t know if we can really count that as part of a valid prediction.
Rob [03:22]: Very cool. So what are we talking about today.
Mike [03:24]: Today we’re going to do a business model breakdown of Amazon Go. If you’re not familiar with this we’ll link it up in the show notes, but you can go watch a video from Amazon that talks about their Amazon Go store. Essentially, it’s a new type of convenience store that doesn’t have any cashiers. There’s no checkout lines. There’s not even a self-checkout aisle. You just walk in, pick up your stuff, and it recognizes who you are based on when you checked into the store, and it keeps a virtual shopping cart for you while you walk through the store and pick things up. If you put something back it takes it off your shopping cart. Then when you leave it just bills your Amazon account and automatically charges you through that account so that they don’t have to swipe credit cards or anything like that. First reason I wanted to talk about this was because it’s a little bit different than something that we typically talk about. Typically, we talk about things in the self-funded, or bootstrapped, entrepreneur space. I thought it would be interesting to talk a little bit about a business that doesn’t necessarily directly relate to the things that we do on a day-to-day basis, but the other piece of it is being able to objectively look at business ideas. Part of that is when you’re evaluating your own business ideas, or your own products, and trying to get it into different markets, being objective about those instead of — obviously you want to be optimistic about the things that you can accomplish and achieve but, at the same time, you also need to maintain a certain amount of objectivity, and be able to recognize where problem areas are. I thought that by digging into some of the pros and cons in areas where Amazon Go might have some issues getting to market, or where things will work out in their favor or not based on the advantages and disadvantages, that they have that you can kind of extrapolate those things and be able to more objectively look at the things that you’re working on in your day-to-day or month-to-month.
Rob [05:08]: Yeah. I think it’s a good exercise to run through a business model like this – something that someone who’s trying to innovate on the model, in essence. I also think that it’s just a nice way to kind of wrap the year up. It’s a fun little diversion to talk about something as interesting as this, that is essentially a big company really trying to turn retail on its head; a big company that, while we think of them as a retailer in quotes because they’re ecommerce, they really don’t do much in terms of brick and mortar, and they’re trying to figure out how to automate all the things, and I think that’s a pretty admirable goal. So let’s dig in. By the way, if you haven’t watched the video – it’s a two-minute video – I really do recommend that you go check it out, because I was blown away by just the coolness factor of walking into this thing. You walk in, you push a button on your phone – which I’m sure it’s an Amazon Go app or whatever – push a button to let it know you’re in the store, then you just walk around, grab some stuff, and you put it in your bag or whatever. Then you just walk out and it charges you. This is where Amazon has innovated in such an incredible way. Online is the one-click checkout in Amazon Prime, where you only have to think about shipping. I spend so much at Amazon that I imagine that they’re going to name an entire building after the Walling family here pretty soon. It’s because of that innovation, right? It’s the one-click, no think, “I just know that it’s going to come, and it’s going to arrive from them.” And I think it’s the same thinking going into here. They’re just trying to remove all friction for buying stuff. Anytime I think about going to the store I think, “Ugh! Am I going to have to wait in line?” You have to whip out this archaic piece of plastic that’s been around for 30 years, and it’s slow. It works most of the time, and on and on and on, whereas it’s like if I can just be in and out I think it’s a really cool idea.
Mike [06:46]: Yeah. So to give a little bit more background about this. There’s one pilot store for the Amazon Go idea that’s currently located in Seattle, Washington. It’s only open to Amazon employees, and there’s not really any public information about a wider rollout. They’ve talked a little bit about possibly having as many as a couple thousands of these throughout the United States between 2017 and 2020, but they’re real sketchy on the details, and it’s not really clear when this pilot program rolled out. The idea is that it’s a small store. It’s only about 1,800 square feet, which is larger than the typical convenience store in the United States, but it’s also much smaller than a regular grocery store, which is anywhere from 45,000 to 60,000 square feet. So it really fits into that convenience store market. As we go through these we wanted to talk about a bunch of different areas, but the first question that I think we wanted to ask was, “Why would Amazon want to do this? Is this just a PR stunt, or is this something that’s really viable?” And as we talked about very early on, if you looked at their advertisements for the drone technology three years ago, you would have looked at it and said, “Well, it’s been three years. It’s just a PR stunt.” We talked about that right at the beginning of the episode. They just did their first unmanned commercial flight. So it’s interesting to look at this and say, “Well, they’ve got this idea. They know it’s going to take them several years, and that’s why they’re working on this pilot store.” I think that that’s a fascinating way to start, and I think that it’s very analogous to the way that entrepreneurs will start rolling out products, and work with a few individuals or trusted people that they can rely on for feedback, and get that feedback that they need, innovate, figure out what the kinks are, work those things out, and then roll it out to a wider audience. It really seems to me like that’s what Amazon is doing. I don’t think that this is a PR stunt. I think that they really believe in this. Now, will it actually work out in the end? Who knows. We’ll see. But it looks to me all indications are that they fully believe in this and they’re trying to work out the kinks right now. That’s why they’re using their employees to do that.
Rob [08:45]: Right. I don’t see it as a PR stunt as much as proof of concept, right? A MVP, where I bet they’ve been in labs working on this for a while – for a year or two – trying to figure out the technology. They say that they’re using visual recognition and all this other stuff. I’m thinking couldn’t you just use NFC base from your phone, or Bluetooth or something like that, but maybe that’s just impractical. I’m obviously not super up to speed on all that stuff. But why wouldn’t this be viable I think? What’s the biggest concern that you’d have in building this? It’s someone’s going to come in and steal a bunch of stuff. That’s the big thing. That’s why you have someone in the stores to make sure people don’t just come in and walk away with the stuff. And the question is do we think Amazon has the engineering prowess, and the money, to fund this to make that not happen. I think they do. I think that in order to get into the store, if you have to push this button on your phone or it doesn’t let you in the store, then now they know who you are, and if you went and stole a bunch of stuff, why can’t they just charge it? You know? That’s the whole point. I guess if someone snuck into the store, you snuck a friend in – I think they’re going to be able to figure ways around this, and that’s why they’re only rolling one out. They’re going to just see, and if that does happen I bet they’ll figure out, “Well, we do need a person on site at every store just to make sure people don’t steal stuff.” And at that point, they’ve figured out a lot of stuff. So do I think this is viable? Absolutely. I don’t think it’s a PR stunt. I think that Amazon has – they’ve come from shipping normal ecommerce sites, where you think back 10 years how long it used to take to get a book from Amazon, and it was whatever it was; a week, 10 days. Then they said, “We’re going to do everything two day, as long as you pay for Amazon Prime.” Then they have same day in a bunch of places. Now they want to go to basically instant. They want to go to where they can either deliver it directly to you, or you can just be walking down the street and Amazon is everywhere. It’s interesting when you talk about it being a convenience store, because that’s technically correct, but when I think of convenience store I think of like Circle K or Seven Eleven, which is kind of a – I don’t know – I’ll just say a crappy convenience store. I don’t tend to buy stuff at convenience stores. But the pictures they’re showing here is of – it’s almost like Whole Foods level quality stuff. It’s a convenient store with a lot of more higher-end stuff that you or I would probably be more likely to purchase, rather than hot dogs that have been sitting on a spinner for six hours, and Slurpies.
Mike [11:04]: Yeah. I think that goes into the types of products that they’re offering into the stores a little bit. But I kind of want to step back a little bit to one of the things you talked about was just the security of the place, and dealing with things like hacking attempts and theft. As you said, having that pilot store, doing that as a proof of concept, and using Amazon employees. Those people aren’t going to be stealing from the store. They’re going to be exercising the system. They’re going to be trying to identify the edge cases so that they can work them out. I worked at Wegmans Food Markets back in the year 200,0 and we actually rolled out an online shopping project for Wegmans. It was only available in one store, it was a pilot program, and you could order your groceries online, and you would show up, and you would pick the stuff up. It was, I think, seven dollars, but it would save you an hour and a half to two hours of weekly food shopping. So if you had that extra seven dollars to spare, or you just want to throw it at it, you could just place your order completely online and you just show up at a designated time. You tell them when you’re going to show up. They’ll bring it out. They’ll put it in your car. I don’t even think you sign for it. They knew who you were, so you would just basically walk away with it, which was fantastic because your information was tracked. I think they verified who you were, but that was it.
Rob [12:15]: Sign me up. That sounds great.
Mike [12:18]: It was fantastic. It was different than some of the other online services where you would order it and then it would be delivered to you. This you actually had to go to a store, but you literally told them when you were going to show up and they would have everything all ready. And they would have people go out and do your food shopping for you. So, going back to the security of it though, because they’re having those people who are Amazon employees work in there and use the service itself, it kind of mitigates that particular problem. At least for now. It delays them having to solve that.
Rob [12:46]: You have to bet that they have already tested, and are going to have their employees test, “Try to steal something.” Like go, do it. Like the white hat penetration testers. Even though their employees aren’t going to do it intentionally, they’re going to probably try to game the system and figure out where the weaknesses are before they let real people in.
Mike [13:06]: One of the other things that you had brought up was the types of goods there. You had mentioned – this kind of played back into your thoughts of what a convenience store was. You mapped it back to Seven Eleven and various other types of stores. I had a little bit of a conversation about this with my wife, and after about five minutes or so she totally tuned out, which is why we’re having the conversation on the podcast, so that I can talk about it with somebody else.
Rob [13:33]: So that our listeners can completely tune out?
Mike [13:34]: So that our listeners can tune out. Of course. But in this particular case, if you look at the different types of stores out there… You’d mentioned that you probably don’t want to go there and buy a hot dog, for example. Is that something that they would offer? My guess is probably not. It seems to me like they’re positioning it more as something that you go in, you pop in there after work or something like that because you need something for dinner. You can buy pre-prepared meals and stuff like that and then just take them home and cook them — not pre-prepared, but everything’s pre put together and you just basically take it home and cook it. I feel like that’s the type of arrangement that they’re going for. One of the things they wouldn’t do, for example, is they wouldn’t couple it with a gas station, because there’s lots of other things that go along with that. You have to have people there manning it in case something goes wrong. In terms of the workers on site, I really feel like one of the challenges that they will have is that you still need to deliver stuff to the store. You still need to have the shelves restocked. You still have to have things get pushed to the front. There are some mechanical ways to do that, but you still have to have somebody on the back end kind of fulfilling some of those needs. Logistics don’t just take care of themselves. You can automate a lot of that stuff with Robots, but there’s only so far that you can go with that kind of stuff. You still have to have somebody there doing something.
Rob [14:48]: Right. I don’t see this as being a store with zero people in it. It’s probably a store with maybe 10% of the staff that you would normally need, or 20%. You know, some drastically reduced numbers. Because if you think about what Amazon does they do a really good job of cutting costs. That’s been their big thing is to drive costs down and get stuff to us very quickly. If you think about maybe the two guiding principles that Amazon has done since they launched in – whatever it was -’94.
I think that’s interesting to think about. You do still need to stock shelves, and eventually I could see them replacing that with some automated shelf stocking mechanism. I’m sure they have those in their big warehouses. But at first I would bet they’re going to have people in there doing it. And maybe at first they’ll have someone at the front door making sure nobody without pushing the button gets in. And maybe they won’t. That’s where it comes with these – they’ll run a pilot, and then it’s like launching an app, right?. You run your pilot, you see what happens, you see what people like and don’t like, you see what breaks, you see what needs to scale. Then I could see them automating things more and more over time, using human automation up front, and then with the big 10X, 100X thinking Amazon has, I can imagine that long-term they could feasibly want to completely automate these stores where there are zero people on site, but I would doubt that they would do that at the start.
Mike [15:59]: Yeah. In terms of the other logistics, you still have to get goods to the store. There’s a difference between shipping things to that location versus taking them in that location and then putting them on the shelves, or making them accessible for the customers. At Wegmans there was a fully automated and robotic warehouse, where – I forget how many thousand square feet it was – but it was just enormous. And they had, I think, two or three people there. And those two or three people were there solely to unload the trucks, put the pallets in certain places, and then machines would come and take everything and then stock it. Then when they needed something – they needed a pallet of whether it was frozen meat or what have you – they would just go over to a computer and hit a few buttons and boom, the Robots would basically go grab everything off of the racks and then pull it down and be able to deploy it so that the trucks could come in and pick that stuff up. It was fascinating that there was this massive warehouse and there was nobody in it. It was like a ghost town. It was very stark contrast to one of the other warehouses that we had in place there. I can see Amazon doing the same type of thing for, not just inside the store putting stuff on the shelves, but longer term. If you look at the way technology is going, you’ve got driverless cars. You could theoretically have a truck pull up and drop a bunch of stuff off, and then other Robots that would move things around inside the store. But I question how soon in the future that’s going to be. In terms of some of the technical considerations I’ve seen in this, there are questions about the item attribution and tracking. You had mentioned these a little bit it terms of the near field techniques for identifying items, or maybe RFID, or something along those lines. I could see a bunch of different ways that they could do that, but the question is how feasible is it to do that at scale? Pilot program will really eliminate a lot of those questions, or at least get answers to them, and it will help them figure out how to do things in the future. I don’t think that they’re really concerned right now on scaling that stuff. They’re just trying to figure out, “How do we fix this problem?” Or, “Where are the biggest problems that we have? Let’s prioritize those, and once we get to a point where we think that those are low enough then we can deploy this out further.” I don’t see that as any different than launching a new application or a new product. You have to figure out where those problems are, and then you get to the point where you say, “Okay, now we can start scaling this up. We don’t need a fulltime support rep, because we’re not getting the tickets that you would if you had launched it with problems.” One of the questions that comes up to me is, “What about the social implications of this?” And you had said with Seven Eleven this seems like a more upscale version of it, and kind of trends more to the Whole Foods type of store. But what are your thoughts on the social implications of a store like this? Is this something that you’re going to be able to make work in urban areas? Or does it have to be in a city? Are people going to be used to that type of thing? Are they going to get themselves used to it? Or is it something people are going to shun and say, “No. I don’t want anything to do with that.”
Rob [18:53]: I think just having the Amazon name on it. This is such a brand recognition thing. I think it will be a novelty at first. And I think if I saw one – the first time you see one, just like the first time you saw an Apple store, it’s like, “I’ve got to go check this thing out.” And if it’s a cool experience, and it delivers on what they say, I don’t see why you wouldn’t go back. But if that first experience is rocky, or maybe you give them two chances or something, I think it could be tough for them to gain traction, which I think is why they probably want to roll it out fairly slowly. I think that socially – this seems like just an urban thing. I can’t imagine rolling this out in a small town or something. But that’s just me. Just based on – it’s probably mostly based on the goods I saw in the ad itself. It just feels like something that that convenience, and that speed, and that transactional nature, I think, fits cities really well. People don’t necessarily want to take time to talk to the shop keeper like they might in a small town, so I do think this would be more urban oriented, and I think there’s plenty of room in terms of room for improvement in the grocery space. I think this could be interesting. There’s another implication here, and it’s of jobs. What about the jobs it will take away from people? I think there’s this whole conversation to be had around the idea of technology in general. It just takes jobs over time. It takes some, and it creates them. It “transforms” is probably a better way to say it. It takes from lower-skilled workers and it tends to create jobs for higher skilled workers. People protested – if you recall – the buggy whip manufacturers protested automobiles, and they said, “There should be no more cars, because they’re bad.” and it was going to put them out of business. And there were a bunch of strikes when automated, I think it was cotton gins, came out. The women who had done that by hand for hundreds of years. There were union strikes and all this type of stuff, and they said, “These things are evil, and it’s going to take jobs and you shouldn’t let them do it.” And so, you have to ask yourself this question is that, “Should we not have those things? Should we not have those advancements?” The same thing with factory Robots that are putting stuff together. They do take jobs, then they create jobs for people who can program and maintain the Robots, and they create other stuff. I think that is a thought process. It’s probably too deep into the weeds for you and I to specifically go back and forth on it in this particular episode, but I do think that’s something that’s going to start entering this conversation as they roll these stores out.
Mike [21:12]: Yeah, but I think that the idea of displacing the jobs, and really just moving those jobs from one place to another, is something to kind of consider here, because it ties directly into where would you put these stores? As you said, you kind of would probably tend towards urban areas, not towards the rural areas, and the urban areas are where those highly skilled workers tend to congregate. Part of the reason for that is that they tend to get paid more. The lower skilled workers don’t tend to live in the cities because it’s expensive to live there, and if you don’t have good marketable skills that demand that you get paid well for them, you can’t afford to live there. You can’t afford to live in New York City if you don’t make at least reasonably decent money, because New York City is way more expensive to live than other cities. So if you’re essentially replacing the jobs of those workers, and eliminating them, those people can’t really afford to live in those cities anyway, for the most part. Not to say that there aren’t a fair amount of exceptions, but you’re essentially displacing those skilled workers outside of the cities. It also ties back into Amazon having this awareness, or location information, about where their customers currently are, because they’re shipping to them already so they know what their addresses are, and they could use that information to identify, “Where is a good spot for a store?” I know when we worked at Wegmans they would spend a couple of years trying to figure out, “Where is the next store that we’re going to build?” And they would get all this demographic information from people, public sources. Try and figure out, “How much money do people make in this area? Is this going to be a profitable store? Or is it going to be a place where we’re going to lose money, or we’re going to have to shut it down? We’re not going to be able to do as many things as we want. Or are we going to be able to charge the prices that we want?” For someone like Amazon, if they can look at the average revenue per users of a particular area, and they know all this data around those people that says, “Hey, these people spend a lot of money with Amazon. Let’s put a store right in the middle of them.” Chances are good those people are going to shop there.
Rob [23:06]: Yeah. That’s the beauty of Amazon has your home address, and so they know the location of the people who probably spend the most on Amazon, or who buy high end things. They have big time information advantage over their competitors. I think one of the other social implications that I didn’t bring up when you were asking about that is that the store essentially requires you to own a smart phone, and that has some implication in terms of the income level of the audience, or the potential customer. And I think that’s another one there. They’re just basically saying that that is a requirement, and they know there are so many people with phones who are willing to spend the money. I think that’s probably a good bar to have.
Mike [23:44]: Right. One of the actual challenges like with a grocery store of any kind is that the margins on grocery stores, on goods that you buy at a grocery store, tend to be really thin. They don’t make a lot of money on most of those goods. They also have to deal with what’s called “shrinkage”, which is generally referred to as stuff where the goods are just damaged, or food spoils. Stuff like that. Those types of things count against the margins that you would make on most of the goods there. I think that because of their targeting at people who have smart phones, those people are going to tend to be better off financially, and are going to be able to spend more money, and they’re going to be willing to spend a little bit extra money in order to get the additional convenience that I think a store like this would operate. In a way that disadvantage, you look at that and say you can only target these people. Well, those people have money. That’s not necessarily a bad thing that you’re targeting those people with money.
Rob [24:41]: One thing I think Amazon’s doing really well here is they’re leveraging their brand. And I think if you think about what are the parallels in our space, think about someone like a Brennan Dunn, who has an email course, and then an ebook, and then a video course, and then a conference. And think of ‘Startups for the Rest of Us’ and how it has the academy, and I wrote a book, and you wrote a book, and we have MicroConf. We’ve kind of leveraged the trust people have in us. There’s a lot of examples of this online. But I think that’s something that Amazon has as an advantage, is that imagine in it wasn’t Amazon doing this, and if we heard that a brand new company raised a billion dollars in venture funding and they want to roll these out across the country. “A”, we wouldn’t be talking about it on this podcast, because it just wouldn’t be notable, and you’d be thinking, “This is never going to work. I don’t necessarily trust the brand. Are they going to be able to pull this off?” Whereas with Amazon they have deep pockets, they do things really well, they make things work that seem like they’re not going to work, and frankly, I by so dang much from them that, for me, it’s kind of a no-brainer to at least consider and at least give them a shot. I think leveraging that trust and that brand recognition is something that is going to do really well for them here.
Mike [25:49]: The other thing that is gives them is that the fact that they’re Amazon they have all these resources that they can bring to bear on it to solve all of the smaller issues so that when they do scale it up they have those issues taken care of. But you had just said, “Well, what would happen if this was some unknown startup who raised a billion dollars?” My first would be Webvan, which they rolled out a billion-dollar infrastructure back in the year 2000 and the whole thing collapsed on them. They just couldn’t make it work because the margins on groceries tended to be so low, so they couldn’t get all the delivery stuff taken care of. But by doing that pilot program, by concentrating on one thing, and leveraging their existing resources – which essentially provides them a runway. They’ve got billions of dollars coming in on a regular basis, and they can experiment with this one thing over here and see if it works; see if it’s something that they think is going to be able to turn into something big down the road. And if it’s not, it’s not a big deal. But if it is, then they can kind of put gas on the fire and push it for whatever they can get out of it in order to make it a long term profitable thing that they can roll out nationwide. And that’s really the key thing here, is being able to leverage your previous successes to future successes, and make sure that you’re doing things carefully in a way that it allows you to experiment without breaking the bank. If you don’t have that runway of some kind you’re really just rolling the dice, and it seems to me like Amazon is doing a lot here to hedge their bets.
Rob [27:13]: All right. So to wrap us up, what are the chances that you give this? That they roll this out, and they roll out thousands of stores and it becomes a big success?
Mike [27:21]: Thousands of stores?
Rob [27:23]: Is that their prediction? It’s like 2,000 stores by 2020?
Mike [27:25]: It’s wasn’t real clear. Those were kind of guesses that I’ve seen online.
Rob [27:29]: Got it. So maybe just say critical mass, whatever that means. That in most major cities when you and I go, maybe it’s not Starbucks level on every corner, but that it becomes a viable thing, like however many Apple stores there are, that there’s that many Amazon stores.
Mike [27:43]: Yeah. I could see that happening, and I could see that happening with probably the next four or five years. Whether they get to 2,000 stores in the next three years I don’t see that happening, because there’s a lot of competition out there. I could see them certain types of stores that are already in place and offering to essentially replace them. Go to the management and say, “Hey, would you like to convert this thing to an Amazon store?” But Amazon also likes to maintain control, so I’m not so sure that they would really want to do those types of partnerships. They would really just want to say, “Hey, we’ll buy you out. Or we’ll take over your space.” Something along those lines. They’re going to have to figure out what their profits margins on each of those stores are per square foot and find places where it really makes sense for them to do that in a way that can undercut competition around them and help make sure that the place stays in business. I say this is better than even odds. I’d probably say 60% or 70%. I’m hesitant to go higher than that, but given Amazon I’m also very hesitant to go less than 50%, 50% on it.
Rob [28:40]: Yep. I think it’s going to work. I am bullish on anything Amazon tries to do in terms of their ability to execute and do crazy big hairy audacious things. So I think that we will before long be seeing Amazon stores in a major city near you. And that wraps us up for the day. If you have a question for us, call our voicemail number at 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 comments. 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 319 | Questions about the Technical Side of SaaS
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike answer listener questions about technical sides of SaaS. Some of the topics include pros and cons of including marketing website in main codebase, SaaS quality, and re-engaging a cold email list.
Items mentioned in this episode:
Transcript
Rob [00:00]: In this episode of ‘Startups for the Rest of Us,’ Mike and I answer several listener questions about the technical side of SaaS, and we also talk about how to re-engage a cold email list. This is ‘Startups for the Rest of Us,’ episode 319.
Welcome to ‘Startups for the Rest of Us,’ the podcast that helps developers, designers and entrepreneurs become awesome at launching software products. Whether you’ve built your first product or you’re just thinking about it. I’m Rob.
Mike [00:31]: And I’m Mike.
Rob [00:32]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, sir?
Mike [00:37]: Well, I think I mentioned a little bit in the last episode about some of the scaling issues I’ve been running into, and one of them I got kind of kicked into the groin this morning about. I logged in and checked in my server bill is on track to be about $500 more than I expected it to be this month. So I kind of have to drop everything –
Rob [00:53]: That’s not good.
Mike [00:55]: No. It could be one of two things. It could be just like I have the wrong size for the server. But my sneaking suspicion is that it’s actually a licensing issue. So I switched over from one program to another inside [Avisure?] and I feel like they’re charging me a heck of a lot more than I probably should be. Unfortunately, the billing cycle is already more than half way through the month, so I may have to just eat some of it which really sucks. But that’s one of the things that I’ve actually been probably more concerned about, is just am, “I storing stuff in the right way that I’m not going to get – I’m not going to run into this type of thing.” Because that’s my biggest concern is if I’m not actively in there looking at how much I’m paying for the servers every month then I could get whacked with this massive bill, and I just wouldn’t even really know it until it’s too late. And it’s like, “Okay, here’s your bill.”
Rob [01:40]: Yeah. That’s one of the dangers of this metered pricing. [?] the Google app engine. Something that I was doing for a while, when we were moving a lot of stuff around, and starting new servers and stopping, is I had a counter reminder. Every two weeks it would ping up and it would say, “Check AWS billing.” And it had a link right in, and so I would just log in and I would just look at the bill. And I knew sanity check about what it should have been each month, and so if we were a lot more than half that two weeks in, or we were a lot more at the end, then I knew we had messed something up. I did it every two weeks for maybe a year. I think I only caught something once, but it saved us probably $1,000 at the time. So that may be something you want to think about. The bigger danger – you know if it’s a mistake – because I’ve made several mistakes with AWS and accidentally purchased different things, and dropped $2,700 on some reserved instances that turned out to be not what we needed, like pretty gnarly stuff. But the bigger concern I have is, “Is this a mistake, like an accident? Or do you need that much in server costs in order for your app to run? Because that’s a much bigger issue, right. You don’t want to be paying out more than you’re making from your customers.
Mike [02:45]: Yeah. And, I mean, that’s one of my biggest complaints is just that the licensing behind everything in Azure – not everything, but in certain things inside of Azure, it’s very obscure. And so if you’re under one particular program with them – by program I mean like a licensing program. If you’re under one program with them, like you might be paying one amount. And then if you’re not under that, or if you’re on a pay-as-you-go subscription, you could potentially be paying four times as much for the exact same thing. And I’m just like, “I don’t have time to deal with this.” I don’t want to have to deal with this, but I have to. I kind of sucks. I don’t know. I have an email in to somebody at Microsoft right now to talk to them about it and say, “Hey, can we kind of move up the time table on our discussion about this.” So, I don’t know. We’ll see what happens here. But that’s kind of always been in the back of my mind that I need to pay attention to that stuff. And it’s just a distraction. You know?
Rob [03:36]: Yep. This is all the stuff that doesn’t provide any value for your customers, but you have to do it. This is like handling legal, EU compliance contracts. This is frankly handling HR when you get there. This is handling benefits and payroll, and even hiring support people, and it’s just expected [dev ops?] I see as that these are all required necessary things that if they’re not there, then it is a really bad thing. But it doesn’t provide value to your customer. It’s not about building the product. And so that’s the tough part, man, of kind of being bootstrapped, is if you had a bucket of funding you could at least hire some really good people because you could afford to pay them. And I’m not saying everything’s easier once you have that, but I see – as we started growing Drip, I really saw how having more money could make a big difference in how quickly you could move, because you don’t have to do everything yourself.
Mike [04:28]: It also allows you to ignore those problems that are at a smaller scale that if it was an extra $500 a month for three to six months, that’s not a big deal if you’ve got revenue and lots of customers to work with, because it just kind of evens out over all the customers. But when you’re still working with that really small number then it is a big deal, because you don’t really have the revenue yet to cover that and do lots of other things. So it’s a very different story. And I realized something when I thought about our episode last week where I was talking about some of the scaling issues. I went in and I looked at stuff, kind of based on that episode, and I was like, “Okay, yeah. I’ve really got to get passed this and just see what I can do to move forward, because I felt like I was turning my wheels a little bit, and I think even on the podcast it probably sounded a bit like that. So I went back and I started looking at things and I realized that what’s really happening – in terms of some of my scaling problems – is just a lack of visibility. Like I haven’t gone in and looked at certain things. It’s in the back of my mind, like that might be a problem but I’ve yet to go in and at certain pieces, looked at data, or taken measurements, or done anything like that. It’s kind of a lingering fear in the back of my mind, “Hey. You’ve got to pay attention to this, or you should go look at that.” But I just haven’t done some of that yet. And this is one of those areas where I haven’t gone to look at it and it’s in my mind as a scaling issue but nothing popped up as a problem until just now.
Rob [05:48]: Yep. I totally get it. So, for me, I don’t have a ton new this week. I’m actually flying out to Boston to speak at SaaSFest. So maybe I’ll see a few folks there. I’ve also got about three or four days of work that I’m cranking on. Something I forgot to mention last week in our goals episode was I did have a goal for DRIP revenue. And, I don’t know, I hinted around about it and didn’t say it, but I kind of wanted to say it so that it’s like on the record, and that I can revisit it next year and talk about whether we hit it. But I think we can 2x DRIP’s revenue again in 2017. This is a tall order now, right, because you’re talking large numbers. I’m talking about going from –
Mike [06:24]: Five customers to 10. Is that what you’re saying?
Rob [06:26]: Five to 10. Yeah. We’re talking about something bigger than that. So I wanted to put that out there and realized that I kind of wanted to get that on the record so we could cover it again in 12 months.
Mike [06:36]: Awesome.
Rob [06:37]: Today we have a bunch of listener questions. We’re getting some really good listener questions, and I kind of wanted to do a little theme episode where the first four really are – they’re kind of the technical side, technically related questions about software as a service. And so, our first two come from Ray Smith. And he says, “I love the show. I started listening at the very start in your first 20 or 30 episodes. Then I started a non-software business and I’m getting itchy feet to get back into software and I’ve been listening for the last couple of years. A couple technical questions.” So his first question is, “When creating a SaaS app, what are the pros and cons of having your marketing website and the actual SaaS code base combined into a single project?” I’m assuming he means like a GitHub project. Like same repo, right? Or if you’re in dot net, it’s an actual project. Stuffs not broken out. The idea is that when adding features, changes or bug fixes at the SaaS app, you can then update the sales website at the same time and push all changes in one go. So he’s saying there’s a lot of pros to it. What are the cons? Do you have thoughts on this either way, pros and the cons?
Mike [07:38]: I think both of them are a trade-off. I think that it’s perfectly legitimate to either have everything all in one project or to separate them out, and I can think of pros and cons for both of them. If you are going to integrate everything I think I lean more towards the cons for each of them, and it’s more of a, “Hey, just make sure you’re aware that these are the limitations, or that these are the types of things that you’re going to run into.” If you have them combined, then you almost need a developer to make any sort of marketing side changes, and that is not necessarily the greatest of positions to be in once you’re, I’d say, down the road a little bit. The other thing is that you are limiting the technology stack that you’re marketing site can be in. I know that a lot of people tend to go in the WordPress direction for their main marketing website, because it’s just so much easier to make changes and you don’t need a developer to do it, versus if you integrate that directly into your website, let’s say that you need to make some changes solely for SEO purposes. Well, then you’ve got all those things intermingled a little bit, and it makes things more difficult to deploy just because of the fact that you’ve got to push those marketing site changes and you have to push the app changes at the same time, and because those things are comingled you have no other choice. It’s very difficult to push them separately. Now, you can split them out into, let’s say, different projects for example, or you can deploy them into different directories and something along those lines, but it still runs into the future problem of having to bring somebody on who may be doing marketing, but now you have to have a developer go in an actually make the code changes. Those are, I would say, probably the biggest cons to it. If you do separate them, that problem tends to go away, but there are advantages to having them kind of all linked into the same tech stack. One of its which is like your signup process. You don’t have to have somebody go from one domain to a different domain to sign up. The other thing is that if you have them in separate in technology stacks, or even separate servers or sites, then you don’t have to worry about redirecting somebody from one site to another and then losing some of your tracking mechanisms for having them signup and then go to a different subdomain, for example. So I’ve run into this with Bluetick where my main website is on Bluetick.io, but then the app itself is on a subdomain. So in terms of where I have people sign up, I want that to all be done on the main marketing site, but because it’s a different technology stack than the backend application now I have to figure out, “Okay, how are they actually going to go through and signup? And how am I going to pass that information over the wall to the backend to have it do its thing so that they can login when they get to that point?” There is the cookie situation where you’re trying to track things with you various marketing tools. You want to make sure that people go through your sales funnel. But, again, those are things that you can do. You can get around them, but it’s just a lot of issues you’re going to have to be aware of.
Rob [10:29]: Yeah. I think you outlined it pretty well. I think when you first start something, I’d probably have them combined. But, boy, we hit a place where we were going to have to devote engineering time to breaking them apart. And once I brought Zack on who was doing growth marketing for us, he wanted to run all these split tests. He wanted to do things and we couldn’t. We were limited by the fact that the Rails marketing site was tied into the source code of the project, of the actual application. So I think if I were to do it all over again, I actually would probably split them apart now that I’m thinking about it. There were a bunch of shared styles. There were reasons for doing it, but I think, in the end, you’re going to want someone to be able to do stuff on the marketing site. And if you build it from the start and they’re already separated, then you don’t have to come back and try to separate it later. Because it was just hard for me to justify spending two weeks or whatever to rip it out. And, in the end, when we were acquired by Leadpages, that was one of the first things that they did. They essentially recreated the site over on a new domain and now we’re at Drip.co. It was a great move, because they do a ton of split tests. They change a lot of things very quickly. They can just iterate and go quickly. I think, overall, I would probably vote towards having two separate projects. You can have two repos, and you’re just going to want to deploy them together, or you can use some type of CMS if you want to. Ray’s second question is, “How do you handle data protection? Not security, but not losing customer data? I know you can do database backups daily, etcetera, but are there any good options for doing live backups almost instantly to an offsite location? One of my greatest fears is losing customer data.”
Mike [11:55]: This is such a technology dependent question. I mean, because if you’re running Windows in Sequel server, then you’ve got one set of answers. And if you’re running MySQL and using AWS, it’s a completely different answer. And then in addition to that, if you’re using any sort of key value parastorage from either AWS, or Azure, or Rackspace, or any of those other providers, then you have this secondary set of data that is not in a database, but it is important to have that along with your customer data. I don’t know how to best answer this just because it does depend on those things.
Rob [12:30]: I actually think the answer for any relational database is going to be the same. And I think your right for key value stores like [Retis?] or whatever, I would argue that most people use those for caching, and that it you don’t necessarily need to back them up unless you’re using them to perpetually store things.
Mike [12:45]: It depends on what you’re doing there though. In Bluetick, for example, I store copies of header information from emails that I’ve synchronized from their mailbox.
Rob [12:54]: Okay, so you store them in [Retis?] or in a key value store?
Mike [12:56]: Yes.
Rob [12:57]: Got it. So then that you’d have to back up. Now is that writing to disk every minute or two and then you’re sending that off to the equivalent of S3?
Mike [13:04]: It’s synchronized. It’s the equivalent of S3.
Rob [13:06]: Okay.
Mike [13:07]: Yeah, I would say it’s kind of like that. The cache doesn’t go away when the machine restarts or anything like that. It’s just a long-term data storage. It’s basically like a non-sequel database is more or less the best way to describe it.
Rob [13:20]: Right. I think his concern is – he says, “I know you can do daily backups, but can you do stuff that’s more up to the minute – instant backups?” And any RDBMS has log files, right? And if you’re putting those log files to multiple drives – now maybe they’re not offsite instantly – but you can basically do a point-in-time restore using those log files, right?
Mike [13:40]: Yeah.
Rob [13:40]: And that should work for MySQL and Sequel server and PostgreSQL and all those.
Mike [13:44]: Yeah. That’s generally how you would do it. For the longer term storage stuff, even in AWS or Azure there’s multiple ways of having that data be sent out. Usually you can use some sort of location specific storage where you’re going into a particular region of the country, or a specific data center, or something along those lines. The other thing that you could look into is having essentially a multi-site fail over. Now, that’s not something that you want to get into on day one –
Rob [14:11]: Yeah, you’re way out ahead of Ray.
Mike [14:12]: Yeah.
Rob [14:13]: Ray’s talking about whether to have his marketing site with his app at this point.
Mike [14:19]: Yeah.
Rob [14:19]: I think that you wouldn’t even want to think about that at this point. I think, “A” if you have two hot swap databases – or not hot swap – but you have a main database, and then you replicate out to a second fully developed database, a backup that’s essentially hot and sitting there at any time, that’s you’re instant offsite backup, in essence. Or if you put it in another zone or something. That’s probably the safest way to do it. But I don’t think you need that at the start unless you’re dealing with really critical stuff. I think having your log files put to multiple drives, and written out to S3, and then having a daily partial backup, and then it’s a weekly full backup. This is the standard stuff that DBA’s would do. That’s going to get you a lot of protection up front. You don’t want to over-engineer your SaaS app when you have 20 customers or whatever. And then I think down the line, at some point, you are going to want that fail over in case something crashes. But a lot has to happen for all of that to be gone.
/// [15:13]
Mike [15:12]: Yeah. And most databases that I’ve seen you can go down to like an hourly backup that’s just a partial backup, and then you do a daily backup, and then you do a weekly backup. So you take your weekly’s, you put them offsite, and then you do your daily’s, and then your hourly’s are based off of your daily’s. So at most you would have to put in – let’s say it fails on a Friday – you’d have six days’ worth of daily backups to apply, and then you’d have however many hours of hourly backups to apply. Which is not, you know it sucks, but it’s not a huge deal, and you’d at least have that hourly snapshot.
Rob [15:43]: Right. And Ray, that’s advice from two guys who are not DBA’s, who basically know just enough to be dangerous.
Mike [15:50]: Well, I actually know more than a lot of DBA’s that I’ve met. I do agree with Rob that all the stuff I started talking about with being able to store your data in multiple geographic locations, I wouldn’t even worry about that stuff. I would just go with the hourly backup at the most, and then just work from there. If something crashes, if it’s some customer data, it’s probably not that big a deal. Especially if you only lose like an hours’ worth.
Rob [16:14]: I don’t know that I’d say not that big of a deal. I do think it will be a big deal if it happens. Just the odds of it in the early days when you have a small amount of customers, it’s just not that likely to happen. And so, you’re right, you need these backups. You want to be able to restore from them. You don’t want to lose data. But there’s always this knob you can turn of how far do you go when you only have a handful of customers.
Mike [16:35]: Right. The one thing I would point out – because I’ve seen this happen to somebody before – is test the backups. Make sure that you can restore them, because I’ve seen somebody’s business be completely destroyed because they thought they were doing backup and they weren’t, and their backups didn’t work. They not only lost their entire database, but they also lost all of their customer’s information, and the way that they get in touch with all their customers. It was all gone.
Rob [16:58]: Pretty crazy. I remember that. Our DBA does that once a month. Takes all the backups and restores them onto a server and queries it and shows us the results. It’s kind of nice. Our next question is from Roger in the UK. And he has a question about a SaaS app accessing a corporate database. So he says, “I have an idea for a product which I’d rather implement as SaaS rather than the client installing the application, because the software’s complex, it’ll be updated regularly, and therefore, the client installing it would not be practical. However, it would require access to the corporate database of the customer. How easy is it to get a client to provide the database name, user ID, and password to a SaaS app so it can access their internal relational database?” Mike, did you cringe when you read this? There’s just no chance – the answer is there’s no chance ever that this will work. No chance they’re going to give it to you. Not only are they not going to give it to you, even if they created a read-only login. You’d never make your database to the outside world. You don’t open the firewall ports to it. So, I think it’s probably more useful to talk around what are the other options, because you’re not going to have any customers if you do it this way. Do you have other ideas, maybe, for how Roger could approach this? And if he needs access to their data, how he can do that? I also think we should probably discuss whether it actually needs to be a SaaS, you know, or they need to perhaps install it inside their firewall.
Mike [18:22]: I think that was what kind of came to mind for me. You almost need this piece of software that’s in their environment that’s running, that is separate from the database. And the closest thing that I’ve seen to this type of model is where you’re essentially providing somebody a virtual machine that they can put into their infrastructure that acts more as an appliance than anything else. And that’s probably the closest thing that I’ve seen. But I don’t know as you would get somebody to hand over the database name and credentials and stuff like that, unless it was to go into something like that where it is reaching in, it’s accessing the database, but if it’s an existing database, that’s a totally different story. I’m getting the impression from the way that this question was phrased that this is acting on an existing database, and it’s providing statistics and queries and additional indexing of the data that’s in there, which is a different type of problem that you’re solving then if you simply need the customer to install a database in order to run your app. So those, I think, are two very, very different situations. Now if it’s the first one where you’re trying to analyze their existing database, you really need to have some sort of a downloadable piece of software. And if they want the latest features you’re going to want to have them update.
Rob [19:34]: Or you could build and auto-updater in it, right? Something that helps manage that, and it allows them to pretty easily update. It depends on how complex it is, but this is not out of the realm of – like .Net’s gotten pretty good at being able to auto-update desktop and server apps.
Mike [19:48]: That’s problematic though just, because of the issues that you’re going to face with like user access control in Windows. It’s actually gotten much more difficult to do those types of things.
Rob [19:57]: Yeah. When I say “auto update,” I don’t mean in the background.
Mike [20:00]: Okay.
Rob [20:01]: I mean that it pings the add man and it says, “Hey, it’s time to update.” One-click update. Maybe that’s what I meant.
Mike [20:05]: Okay. Yeah.
Rob [20:06]: That is what I meant. I meant much more of that, where they don’t have to download this big zip file and read a bunch of instructions and run command line things. They click the button, and as long as you give it the user access control stuff, it’ll go out and download it, and verify, and install the MSI, or whatever.
Mike [20:22]: Yeah. Simplistic updated –
Rob [20:24]: There you go.
Mike [20:24]: – versus auto updating.
Rob [20:26]: Yep. That’s a good point. The other idea I have here is, I don’t know to what extent Roger needs his code to be able to access their database, but it just depends to what extent. If he needs to run queries across millions of rows, then yeah, he really does need direct access. But if not, and if you’re just pulling users out to look at something or you’re just pulling different things out, you could either ask the corporations to build like a small rest layer – like a little API on top that you’re hitting from the outside – or build it for them. If all of your customers are going to be running Sequel server and they’re all going to be paying you a tremendous amount of money – let’s say the average contact value is $50,000 a year, or $100,000 a year, then build a single rest API layer, and you know that it’ll run on Sequel server. And if they’re running Sequel server, they’re probably running .Net so you build it in C#. And if you’re on PostgreSQL then maybe you build it in PHP or in Python or Ruby. But you pick a language where you almost lay something on top of it, and it accesses it and then is a couple to communicate it, like as a “conduit” is probably the best word. They would still have to install that piece but it’s a server piece that’s just communicating out through, obviously, a highly secure mode of communication, encrypted and SSL and all that stuff.
I still think you’re going to run into people who don’t want to install stuff on their servers but, again, it really depends – without knowing more about the idea. Because people do install monitoring software on their servers. They’ll install NewRelic, or they’ll install Redgate. So it’s not that it never happens. It’s that you need to “A”, get the credibility and, “B”, really tell people what they’re installing, and what it’s going to do on their servers. And if it’s going to provide them a lot of useful information, I do think that you can get some people to agree to do this.
Mike [22:04]: There’s a big difference between installing something like a server performance monitoring software, and something that goes into the core of the database and pipes any sort of data outside of the local network. That’s a big problem. Those are two entirely different things, and any DBA is not going to want to do that.
Rob [22:21]: That’s right. Any CTO won’t want to do that, unless the value proposition is there and it’s worth it. I mean, that’s the thing. Without knowing what this idea is, are there other companies that are already doing this, and doing it successfully, and it’s the standard for this type of application. What if it’s offsite backup software? Yeah, they’ll probably do that, right? Because that’s the whole point. It needs to back it up, it needs to send it off site. But you’re right, if it’s a time tracking app, then the odds of that are much, much less.
Mike [22:52]: Yeah, but even you get to a certain level, or certain scale, with the type of customer that you’re targeting, they are going to want to be able to control those things in house. They’re going to want to install them themselves. And even with an offsite backup, there’s companies that do provide appliances like that and they just buy multiple appliances and they point them on opposite sides of the country and it just propagates the backups from one side of the country to the other. And the companies are willing to pay tens of thousands for each of those appliances and it maintains in their control. They don’t necessarily have credentials to all the core stuff inside of it, but it’s an appliance. They own it. They can do whatever they want with it, and they control where the traffic goes. It’s not like it’s reaching out to some external service that they need to completely control all the traffic going into it and out of it.
Rob [23:37]: There you go, Roger. You heard it here first. If you’re building an offsite backup engine, we’re recommending using an appliance, or at least having a better chance of doing it. Now I think that depends if your certain clients are willing to do that. Certain clients of certain sizes. I think if you talk to a small or medium-sized business – let’s say you talk to a dentist, who has a couple servers running something. Or you talk to a 30-person law firm who, definitely has IT folks and definitely has servers, but are they going to be willing to pay $20,000 a year for an appliance? Or would they perhaps prefer there to be a less expensive option for getting offsite backup. So that’s where I think if you choose your customer wisely, you could potentially find folks who are willing to deal with some of these different options we’ve thrown out. Our next question – it’s our fourth technical SaaS question, and then if we have time, we’ll move onto another. This one is from John Buford. And he says, “Hey guys. In episode 311 with Derek Rhymer, you mentioned “SaaS quality” several times. Can you describe how you measure or quantify SaaS quality? Is it based on the code base, or is it more aligned with overall business in terms of MRR, low churn, big list size, etcetera? Are the differences in quantifying SaaS quality as viewed from a seller of a SaaS app versus the buyer?” This is not a common term. I just happen to throw it out and say [?] is a really high quality app. And all I meant by that was the code base was pristine. It had a tone of test coverage. Zero or very, very few known bugs, modular code, really good coding standards, the deployment and architecture are all set up. Just everything you would want as a developer from a code base was there. In addition, it looks really nice. The design is really nice. It just feels like a high quality app. That’s all I was referring to. I don’t know if anyone else’s definition would be the same as that, but I was not talking about financials, or churn, or big list or anything like that. It really was specifically from more of the technical side of things. Moving on to our next one. We have a question from Chris [Cottom?]. And he says, “Hey guys. You’re both now working on businesses that deal with tons of email, so maybe you’ll have some insight into this question. Do you have any tips for reengaging with an email list, or with leads with whom you haven’t communicated in a long time?”
Mike [25:51]: Yeah. I think that if you’re trying to reengage with people then you’ll probably want to, I’ll say, prep the email engine a little bit, and have at least some idea of what it is that you’re going to be sending them down the road. So let’s say you got a couple thousand email address that you haven’t touched base with in, call it 10 months, for example. In a situation like that you probably want to map out what it is that they originally signed up to the list for, and try and translate to say, “Okay, we’ll how do I get back on track with that? Where did things go wrong? Why did they go wrong? And how do we get back on track with that?” And map out the next half dozen emails that are going to be sent. Now, I don’t think you need to write all the text for each of those six emails, but you at least need to have a conceptual level of what the bullet points are that you’re going to cover over the course of those next six emails, and when you’re going to be sending them. Because the last thing you want to do is send out an email to those people to kind of reengage with them and then drop off the face of the earth again. I would start out by doing that, figuring out what it is that you’re going to say to them. And then, in addition, the first few emails that you send out to them to kind of reengage with them, you probably want them to be a little bit shorter than you otherwise would. Try and provide some value up front. You don’t want to just launch into a sales pitch, for example, because it’s been a while and they haven’t seen emails from you. You don’t want to lead with a sales pitch at that point.
Rob [27:10]: Yeah. I think what you said was good advice, and I think you want to provide a lot of value in that first one. This is a make or break moment, and you’re not going to get most of the people back, but you really have to be sure you explain why you’re contacting them; why they were originally on your list. And then give them something free that should otherwise cost money. Or give them a really great tip. Or give them something – depends on at what scale you’re doing this. Are you doing this to 10 people? In which case I’d do some very custom something or other. Review their website or something. And if you’re doing it for 10,000, you can’t do that, but you can give away an e-book or video course or something that is of quality to basically apologize and get them back.
Mike [27:47]: It gives them a reason to stay on your list, is really what that is.
Rob [27:50]: Yep. That’s right. There’s a whole other topic. Originally when I read this I thought it was for reengaging people who are on your list but who just haven’t opened emails in a while – kind of people who have disengaged. But there’s a really good workflow for this in the knowledge base. We go to KB.getDrip.com and search for I think it’s like “reengagement.” There’s workflow blueprints there. There’s only maybe 20 of them, so it’s easy to flip through. In essence, it sends them an email and it just says, “Hey, I’ve noticed you haven’t opened emails in a while. I’m going to unsubscribe you, basically, and if you don’t want to do that, click this link.” And you get a small portion of people to hang around and reengage a bit. The good part about that is you’re actually increasing your sender reputation by doing that because, these days, Gmail and Yahoo and these ISP’s, they look at the domain that it’s coming from, and if your open rates are crappy then they start penalizing you and sending you either into spam or into the promotions tab. So keeping that high is a good thing. In addition, it can cut down on your costs. If you unsubscribe those people, then you’re paying your ESP less money because you have fewer subscribers but your open rates will be a lot higher. That’s a good question. Thanks for the question, Chris. I hope that was helpful. Our last one is from Ali, and it’s a question about whether email lists are really relevant/effective in the US. He says, “You’ve mentioned email lists for marketing and sales throughout many episodes, and it made me wonder are things really this different in the US? I’m from Saudi Arabia. If I would ask my colleagues who work in sales and marketing about using email lists, they would not even entertain the idea – not even as a last resort. From my experience, if you send unsolicited emails – and “unsolicited” is the key here – unsolicited emails they will end up ignored or deleted, and if you persist, your domain probably will be blocked altogether. It’s all about knowing the right people in a [?] organization” and some other stuff. It feels like maybe he’s confusing kind of cold outbound email versus spamming, versus opt-in marketing lists. You have some thoughts on this, Mike?
Mike [29:42]: Yeah. Well, as you pointed out, the whole difference between unsolicited emails and things that people have opted-in to because they want to hear more about a particular topic. That right there is the fundamental difference between those two things. I will say that there is some semblance of certain types of cultures would probably shy away from certain sales techniques. And you can even translate this not just into cultures, but different groups of people, one of them being developers. Developers tend to not want to call people on the phone. So those type of people will tend towards email lists and other types of marketing efforts which don’t involve them getting on the phone and actively talking to a prospect versus that email list. It’s much easier for them. And then if you take that the other direction, you can say, okay, what about an inside sales rep. They’re used to being on the phone all day. So their natural inclination is to pick up the phone and call people. I don’t think that it’s a whole lot different whether you’re talking about different groups of people, or different cultures, they all have their natural tendencies to do one particular thing. But that doesn’t mean that it’s always the right thing for every situation. You do have to take it into context a little bit. But the fundamental thing is just unsolicited versus opt-in.
Rob [30:56]: Right. That’s a big one. That’s kind of building that prelaunch mailing list. Now there is this whole other branch of essentially B2B cold email. So there’s the CAN-SPAM Act in the US. And, obviously, if you’re sending bulk unsolicited email to consumers, that’s illegal. And there’s no way around it. I’m pretty sure if you send individual cold emails pitching a service or something, that that’s illegal. I don’t know enough about cold email, because we don’t allow it at Drip. But I do know that B2B there is a carve out in CAN-SPAM where if you’re sending like a direct, one by one emails from one business to another soliciting stuff — there are companies like LeadGenius and LeadFuze – where I’m an angel investor – and that’s a little cottage industry that’s formed around sending cold email outbound one at a time to prospects. And that has had success. There are entire books, like “Predictable Revenue” that are written around this concept. You probably have some thoughts on this, Mike, having worked on Bluetick now for the past six to 12 months.
Mike [31:55]: Yeah. I looked into this pretty extensively because that was one of the questions that came up early on. Not only did I have it, but there were people who asked me specifically. This is more applicable directly to the US because of the CAN-SPAM Act, but there are three general classifications of email. The first one is the commercial one. Most people are more familiar with this because they think if of it as the spam laws that people are running afoul of. So there’s the three different categories. There’s the commercial, and then there is the transactional emails which is if you purchase something from someone, they can send you a receipt; they can send you follow-up emails, let’s say, for you to download something. It’s generally the emails that you would send to somebody in the course of doing business with them. And then there’s this third category which is called “other.” And the documentation that I saw literally called it “other”, which is interesting because they don’t put a very good definition on any of them. They specifically say that for commercial, you’re emailing somebody in an effort to sell them something. But if you, let’s say, send somebody an email and ask them, “Hey. Can we set up a meeting? I want to talk to you.” That’s not considered a commercial email. That falls into “other.” Pretty much anything that’s non-transactional, or isn’t directly pitching something for somebody to purchase, falls under “other.” So it becomes this very grey area where you get into that situation and it’s like, “Okay, well, this one might be spam. This one might be considered commercial, this one might be considered “other.” Transactional is the one that’s really well defined. The other two are not. And it does depend, I think, a little bit more on whether or not you’re emailing with a business, versus an end-user or consumer, so to speak. But there’s a lot of grey area there that people work with, which is kind of the reason why the ESP’s are the ones that tend to be the people who are enforcing that – not the Google’s of the world or other mailbox providers. They don’t necessarily care as much, because if you get your domain banned, they’re not the ones who suffer for it. But with the ESP – you’ve run into this with Drip – it’s your IP addresses that are at risk. Not the customers. That’s really why those ESP’s really crack down on those, and really want to make sure that you are not sending bulk spam because they’re the ones that are penalized for it and all their other customers. There are revenues at stake.
Rob [34:09]: Yeah. That’s right. You look at MailChimp or Drip and we have entire massive algorithms. I won’t go so far as to say their AI, but it’s machine learning stuff that’s looking at listed or being imported. It’s looking at different signals that people signup behaviors in the app. Certainly the open and the click metrics and spam complaints. We have this whole network of we’re approaching a couple dozen signals that we look at over the course of the lifetime of a customer, all the way from the first time they entered that form all the way through their sending and we flag a lot of people and manually review them, and we always try to educate, to try to help the customer understand what they’re doing. But when you have IP’s and sending domains that you’re worried about, this is the stuff you have to have in place or else, as Ali originally mentioned, if you were sending unsolicited, then the stuff will get marked as spam and then your IP’s get dinged and then you can’t get into people’s inboxes any longer.
Mike [35:01]: Right. According to the official guidance from the CAN-SPAM Act, if you go over to FTC.gov, they’ll spell out certain things. They kind of boil it down into seven points. One of them is don’t use false or misleading header information. Don’t use deceptive subject lines. You have to identify it as an advertisement. Telling people where you’re located, giving them a capability of opting-out of future messages. But again, these are for bulk emails. And if your sending individual emails, it kind of falls into this very, very grey area. If I send out 10,000 emails – or even, let’s say 100 – it’s a very different story than if I send out the same email to 35 people and I individually click send on each of those. It’s treated differently. I also think that because of all the grey areas there, you’re in a different world when it comes to interpretation of what it is that you’re doing. And if you were to send out 10,000 of them you’ve got 10,000 possible sources of complaint. And that kind of puts you in a much higher risk category, I would say, then if you’re just emailing a few people here and there. Or even just 1,000 people but it’s over the course of a couple of months or a couple years or something like that. It’s a very different story.
Well, thanks, Ali. I hope that answers your question. And I think that about wraps us up for today. 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 at startupsfortherestofus.com. Our theme music is an excerpt from ‘We’re Outta Control” by MoOt used under creative comments. Subscribe to us in 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 318 | Our Goals for 2017
Show Notes
In this episode of Startups For The Rest Of Us, Rob and Mike make their goals for 2017. In addition to setting their new goals, they also talk about last year’s goals and how they did.
Items mentioned in this episode:
Transcript
Mike [00:00]: In this episode of ‘Startups for the Rest of Us,’ Rob and I are going to be talking about our goals for 2017. This is ‘Startups for the Rest of Us’ episode 318. 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 [00:25]: And I’m Rob.
Mike [00:26]: And we’re here to share our experiences to help you avoid the same mistakes we’ve made. What’s the word this week, Rob?
Rob [00:30]: The word is iTunes reviews. We have 510 worldwide reviews. A recent review is from a username that’s a lot of numbers and letters so I’m not going to pronounce it. But it’s just from a couple days ago. It says, “Great information but why do they talk so fast? Their podcast sounds like it’s being played at 2x speed and it’s annoying.” What do you think, Mike?
Mike [00:49]: I don’t know. I always play it at 2x speed anyways, so.
Rob [00:49]: I’m the one that talks fast. So here’s the thing. I actually do listen to it at 2x speed. We don’t speed the podcast up at all. I think maybe I just talk too fast. Because I don’t feel like you talk nearly as fast as I do.
Mike [01:02]: Yeah probably. It’s weird but I’ll talk to people whose podcasts I listen to and I have listened to their podcasts on 2x speed so when I talk to them I naturally expect it to be at 2x speed.
Rob [01:12]: Oh, I totally agree. So anyways, we love reviews. We don’t love it when you call us annoying. But we would appreciate if you could log into iTunes, click five stars. You don’t actually need to leave feedback or sentences or type anything. Just hitting that five star would be super helpful for us. Keeps us motivated to keep going and helps us get found in iTunes. On another note – quick Drip update – we’re hiring another person to help with – is such a task. It’s really our first non-developer hire. We’re hire someone to help with deliverability and kind of compliance and a bunch of internal stuff that’s currently spread – like I do some of it and Derek does some of it and our support team handles some of it. And it’ll be nice to be able to get that under one roof. So I think we have our number one candidate all chosen and should get that going here within the next couple weeks. How about you? Do you have any updates?
Mike [01:57]: Well, I got an email from Tyler Tringas, who reached out to me because there was a podcast episode we did a few weeks ago where we talked about some of the different books that were out there in the bootstrapped area. And he said it sounded like we were having trouble coming up with books that were kind of written in that space. And he’s got one that he wrote called ‘The Micro-SaaS eBook.’ And it’s actually being released for free from his blog. So if you go to microsaas.co. We’ll link that up in the show notes. But you can get it for free. It’s aimed at first-time SaaS developers. I looked through it. He’s got four chapters out there right now and I think he’s shooting for 12 or 13. But it looks pretty good. It’s definitely a good resource for anyone who has never developed SaaS before. It has some solid advice in there about what sorts of things you should just completely avoid. And it’s based on his experience building a Micro-SaaS of his own on the side where he built it up to, I think, $250K in annual revenue and it was for store mapping. So if you have a bunch of stores that you want people to be able to locate and put that map on your website then he essentially provides the capabilities to integrate that onto your website and allow people to search for the different store locations that you have.
Rob [03:04]: Very cool. So I was thinking today – it was actually over the last few days – you know, coming up in the late let’s say 2008, 2009, 2010 I was just all – and even before that – I was all about being solo. I think I’ve mentioned this maybe briefly before. But I think that working in an office and working on development teams and working for managers and stuff, I just didn’t enjoy it. And so I kind of turned that into this thought of I just want to be solo; and I don’t want to manage anybody; and I don’t want to work with anybody; and I want to be off on my own doing things. And then over the course of time, I found that I just couldn’t do bigger things when I was completely on my own. Even with a team of eight contractors or whatever. And so eventually I wound up hiring folks as HitTail grew and then as we grew Drip. I mean, it’s a really different way to approach building software. But the realization I had today was you know, last week several of my team members were out of town. Anna and Derek specifically were out for several days for Thanksgiving and so was I. I didn’t see them for about a week and then they were gone Monday and Tuesday and I was in the office and realizing like I actually really don’t like doing this solo thing anymore.
[04:05]: It’s been an interesting transition for me of how much my enjoyment of work now is about having teammates; and about doing things with the team; and working with people; and helping them do their best every day and helping them excel. And then they, I think, in turn do the same for me. They kind of motivate me to do it. So, it’s kind of a random realization. But I’ve been thinking, you know, obviously if I think years down the line and I think what am I going to be up to – I don’t honestly know if I want to do another solo thing where it’s just completely me because so much of the fun and actually so much of the biggest epic realizations and the big breakthroughs that we have tend to be when I’m talking and working with another person or two other people and we’re having these in-depth conversations. Kind of like the breakthrough Derek and I had a couple weeks ago. That just wouldn’t have happened on my own. I don’t know. It’s kind of an interesting thought process. What do you think about that?
Mike [04:55]: I wonder if that’s more of a factor of what your historical experience has been when working with other people. I mean, your last job was working for the City of Pasadena, wasn’t it?
Rob [05:06]: I worked there and then I worked for a credit card company in Los Angeles for a couple of years.
Mike [05:10]: Yeah, that sounds fun. No offense there but –
Rob [05:13]: Yeah. For sure.
Mike [05:15]: Looking objectively at both of those and, granted, in at a very, very cursory level it sounds to me like you probably weren’t necessarily working with people who inspired you to do better and were working on things that were extremely interesting. So, I would almost attribute that to where you came from and what your background was. It feels to me like you would have just changed what your viewpoint was based on “Oh, now I’ve got this team, and I’ve liked them, and I hired them, and we fit together well.” Versus, you know, you come out of this environment where you either don’t enjoy the job or the management and you’re just not having a good time. And you’re like, “Oh, I hate people. I want out and I want to go do my own thing.”
Rob [05:54]: Right. I realized that it’s not that I hate working with people. It’s that I hate working with the wrong people.
Mike [05:59]: Yeah.
Rob [06:00]: You know? And finding the right people really changed the game for me.
Mike [06:02]: I was trying to put it in a very polite way.
Rob [06:05]: Yeah. How about you? Anything else you’ve been up to this week?
Mike [06:08]: Well, I ran a last minute cyber Monday sale for my book and sold quite a few copies. I shipped out a lot of the physical copies of the book several days ago. And one of the things I found out was I was looking through the people who bought it because I had to go through and fulfill the orders for the physical copies because I have them printed on demand through CreateSpace. And one of the people who bought it actually lives right in my town. I have to reach out to him at one point.
Rob [06:33]: Yeah, that’s cool.
Mike [06:34]: It was interesting. I was kind of shocked because I was going through and was like, “Oh, I’ve got to send one to -“ wait. He’s like five minutes from my house.
Rob [06:41]: Yeah, totally. Got to get together for lunch.
Mike [06:43]: Yep. The one thing I have started to run into if anyone knows of a print on demand service for printing and sending out books that allows you to just upload a spreadsheet of those – because when a bunch of them come in it’s kind of a pain in the neck to actually go through so if anyone knows of something like that definitely let me know. I sent an email into CreateSpace’s customer support to see if I could just upload a spreadsheet but it’s kind of a pain in the neck.
Rob [07:05]: Yeah. I agree. Or something that integrates with Gumroad. Because I ran into the same issue with – my 10-year-old wrote the ‘Parent’s Guide to Minecraft’ book and whenever a new order comes in one of us has to go and manually enter it into CreateSpace to print it out and it seems like there should just be a better way. Like an API or something.
Mike [07:22]: Yeah. Like I said, I emailed them and asked them if they had any information on how to do that but it would be nice if there were other options out there that just kind of integrated, as you said, directly into Gumroad so that it’s all completely hands-off so I didn’t even have to worry about it.
Rob [07:33]: Right. And to be honest, when copies of my book ‘Start Small, Stay Small’ come through, I actually do have a VA who does that for me. And basically when I get the purchase conformation I forward it over to the VA and say, “Please send this book.” And you know the address is right in there so. It’s human automation. It’s not ideal but it could save you some time if you get 10, 20 orders like that again.
Mike [07:52]: Yep.
Rob [07:53]: So, what are we talking about this week?
Mike [07:54]: Well, we are going to be, I think, revisiting our goals from 2016 and looking to see how we did on them. And then discussing a little bit about our 2017 goals.
Rob [08:02]: Yeah. We’ve done a goals episode, what do you think? Four, five years in a row?
Mike [08:06]: I think so. Something like that.
Rob [08:08]: The podcast started in 2010, if I recall. So I think we’ve done it most of the years. It would actually be interesting to kind of look back at all the goals we’ve had over the years. Do you think it would be happy or like the Boulevard of Broken Dreams to look back over those goals?
Mike [08:21]: It depends on whether it’s you or me looking at them.
Rob [08:25]: Yeah. You want to kick us off with a couple of your goals? Looks like you had four goals from 2016 and I had three.
Mike [08:33]: On that list, there were two kind of major goals and the two other ones were more strategy related in terms of how I was going to accomplish them. I look back at them now and it’s probably a little more difficult to quantify some of these. But the first one was to launch my new product by early next year. My goal was to have early access by April 1st and then email my launch list by July 1st. I was able to get it, I’ll say, the MVP ready by April 1st but it certainly wasn’t ready for prime time. And in fact, it probably took four to five months after that in order for it to get to the point where it was not even minimally useable, but useable enough to start providing value. We’ve spent the last couple of months just trying to clean up a bunch of stuff and make it so that we can iterate faster on different features.
[09:17]: I’ll be honest, I’m kind of disappointed at how long it has taken to get some of these things done. But at the same time, I also feel that, right now, the product is actually in a reasonably good position and it’s looking better. And when I’m talking to people they seem excited by it. I was talking to somebody from Microsoft the other day and they just kind of called me out of the loo and said, “Hey, can we talk about how you’re using this [?]?” And I said, “Sure.” And I got on the phone and was talking to them. I was telling them about what my product does that runs on their platform and he was like, “This isn’t a discussion for now, but I’d love to hear more about it.” So, it’s nice to get that kind of feedback. And I’m getting inquiries from people and walking through what it is that they need and how it can best serve them. But it’s hard because I still get a lot of support requests as well. So, trying to balance between all of the different things and just juggle. That’s been, I’d say, the hardest challenge over the past couple of months.
Rob [10:07]: And so, your goal was to hit early access by April 1 and you kind of got there. We give you maybe an 8 out of 10 on that.
Mike [10:11]: Yeah.
Rob [10:13]: And your plan was to launch to your email list by July 1, which is about three months after that. When did you launch to your email list?
Mike [10:19]: I, honestly, still haven’t done that.
Rob [10:20]: Oh, wow. Okay.
Mike [10:21]: Yeah. I’ve been individually going to people and kind of picking them off of the email list and following up with them based on their interactions with the emails in there. But I haven’t done like a mass email to them to say, “Hey, come sign up.” So, I’ve gone individually to people who seem like they’re more interested than others. But I’m a little hesitant right now. As I said, Microsoft’s coming in. They’re sending in a couple of consultants to take a look at some stuff. But I have some concerns about scalability. And I think that until those are alleviated – Once they are, I’ll feel better about that but I’m a little gun shy about just dropping about 20, 30, 50 mailboxes on the thing.
Rob [10:59]: Oh, geez. That’s a bummer. That’s a real bummer to have that concern at this early stage. I know that you’ve been kind of cherry picking people out and adding a customer here or a customer week or a few customers a month. But I guess I hadn’t realized it was – what am I not paying attention or something – I hadn’t realized that you hadn’t emailed your list. Scalability, yeah, that’s the concern right now. It’s December 1 right now when we’re recording this. What’s it going to take to fix that? Like how long?
Mike [11:23]: I’m meeting with them next week, so I’ll have a better understanding of it after that. I really just want that second set of eyes looking over my shoulder who’s got some experience scaling out stuff like this. That’s really all it is. I mean, could I start adding one a day for the next 30 days? I probably could. Could I add 30 tomorrow? Probably not. It would probably work but, as I said, there’s a lot of hand holding that kind of goes into the product at the moment just to get people on it, get them using it. You probably ran into this early on with Drip where somebody would sign on, you put them in and then it might have been difficult to get them to add in their email addresses or to write the emails that went with it. And, of course, you can help them out with that. You can write them for them or you can offer to port emails over. But you can’t make them do certain things. You know what I mean?
Rob [12:12]: Right. Yep. To be honest, when we were doing it before where we had our onboarding built out like kind of walked them through it like a guided set up or a wizard, I used Boomerang a ton. I would just email somebody and then Boomerang it three or four days later and check in. I was essentially, I kind of had a poor man’s Bluetick. That’s really what you want. You really want a Bluetick that’s basically pinging people. I think you could [dog food?] your own product certainly for this onboarding. But yeah, that was it. It was a lot of questions and it was a lot of “Can I do this for you?” and it was a lot of “What do you think?” and it was just a bunch of hustle; is how I remember. And then once we knew the sticking points and kind of that minimum path to awesome where people got the dopamine rush from it then we built that into code and we built the actual guided setup with the bar across the top and the trial emails that go out to people and let them know what’s next.
Mike [13:00]: Yeah. Some of that stuff like the onboarding issues that people have run into, those are some of the things that we’ve focused on. So one thing, for example, when an email gets bounced if they send it to an invalid email address, it comes back. And the software previously didn’t know how to handle that. It just kind of ignored it. And it depended on whether or not it came back directly from the server or if it came back delayed in some way, shape or form way after it was sent. Depending on which situation it was in, it might do one thing, it might do another. At this point, it now handles that and it also marks those emails as bounced inside the application. But previously it didn’t do that. So you had not way of telling based on contact in the system how the system treated it. You also didn’t have a way to pause people; you didn’t have a way to just mark it as completed; you didn’t have a way to mark somebody as, “Hey, don’t ever contact this person again.”
[13:48]: There’s a lot of these – I don’t want to call them edge cases – but situations that come up where people are using the software and then they say, “Oh, I would like to be able to do this. Or mark somebody in this way. Or if an email gets bounced, I want to tag them automatically.” And some of that goes in to actual automation and some of it’s just how do you have field in here that captures this piece of information and is that something that lots of people want. So, those are the things I’m still kind of working through. But I am kind of moving in the direction of a public launch. The website itself, I got that ready, I think last week. And there’s still a lot of work to do on it but I, at least, got a new design and some webpages out there and I’m working on putting a full blown signup process in place for that.
Rob [14:29]: Right. And you don’t even need that to launch though, right?
Mike [14:31]: I don’t need that to put somebody onboard. I can manually walk them through but I want to get it to the point where I don’t have to manually do it. That’s really the –
Rob [14:40]: Oh, that’s true. Because when you send them the email, you want them to be able to go and signup on their own.
Mike [14:43]: Exactly. Exactly.
Rob [14:44]: Okay. Yeah. Got it.
Mike [14:45]: I can get somebody on Skype Call and walk them through it but I don’t want to have to do that long-term.
Rob [14:51]: And by the way, you and I have both used the phrase “an email.” What we really mean is “a launch sequence.” You’re not going to send them an email, “Hey, come and sign up.” You’re going to build some anticipation and you’re going to tantalize them and give them a little screenshot, screen cast action. Then you’re going to, boom, drop the hammer on them. Here’s the big discount. Time limited for that – right? It’s the standard?
Mike [15:09]: Um-hmm.
Rob [15:10]: Okay. Just making sure. I would hate to see you make that mistake. I know you –
Mike [15:14]: No, I’m definitely not doing that.
Rob [15:17]: Here you go. Our app is up. Probably once a quarter I just get from some random start-up that I must have signed up here about a year ago and I get this random thing, “Hey, Blaze app has” – I’m just making a name up – “blah-blah app has launched. Come sign up.” And it’s like “A” I don’t even remember what you do. “B” one email’s not going to get me to do it. “C” you didn’t build any anticipation. Just kind of making all the rookie mistakes and, I mean, you can obviously 10x your signups if you do it over a sequence and you build some anticipation.
Mike [15:47]: Yeah. One of the things I’m looking at doing as kind of a marketing tactic for this is setting up stuff inside of Bluetick to more or less just demonstrate how it works. As opposed to having somebody come to the website and go through a tour, say “Hey, why don’t you come over here, enter in your email address and you’ll see exactly how this works. This is what’s going to happen. This is what would look like if one of your customers or one of your prospects was on the other end.” And then just be very blunt and open and honest with them and say, “Look, I’m marketing to you. This is all automated but you wouldn’t know that probably unless I told you. And this is how you can make it look for the people that you are pursuing as leads.”
[16:25]: I did some of that when I was onboarding people and it worked really well. I had the little disclaimer at the bottom, “Hey, by the way, this is completely automated. I’m not touching anything here. And if you don’t respond then you’re going to get another email and here’s the time you’re going to get it.” It would be great to be able to have those things injected in there and use that as more of a demonstration of exactly how it works and what it’s going to look like from the other side. Because that’s one of the concerns that I hear from people is, “How is this going to look to my customers? How do I make sure that it looks like it is personalized and it has that warm fuzzy feeling as opposed to this was some bulk, automated, cold email?” Or what have you. That’s the thing. They want that illusion of personal touch and –
Rob [17:07]: Sure.
Mike [17:08]: – there’s some things that they don’t get that from.
Rob [17:10]: Got it. So when they enter their email and they click submit, they’re actually going to receive an email that says, “Hey, this is a sample.” Or were you going to just show them like a screenshot of a sample?
Mike [17:19]: My intent is to build out, essentially, a series of emails and workflows inside of Bluetick that will walk them through. And if they take certain actions, it will do different things. And at the bottom of the emails I would basically just say, “P.S., if you do this, this is going to happen. If you do this other thing, then that’s going to happen. If you don’t do anything, then this is what will be next.”
Rob [17:38]: Got it. But will they be receiving actual emails in their real inbox –
Mike [17:41]: Yes.
Rob [17:42]: – with this? Yeah. See, I think that’s super cool. I was going to say if not, you should do that. Because that’s the true demo of it is for them to really see what the customer sees.
Mike [17:48]: Exactly.
Rob [17:49]: That’s cool. So we’re 21 minutes in and we’re one bullet of 14. Let’s move on. This may be a little bit of a longer episode. My first goal for 2016 – so the one that I set a year ago – was to 2.5x Drip’s revenue. And at the time that I set this goal we were on pace at our current growth rate to hit 1.8x. I actually think we will hit – it’s going to be very, very close to hitting 2.5x. A lot of that help was Leadpages – the acquisition and then their marketing team. Something interesting that they did is when Leadpages acquired us and then did the $1 plan and then the free plan, is they actually nuked about $22,000, $23,000 in MRR. That actually set us way back on this goal. And this was just a personal goal that I had set up for myself. Leadpages goals for Drip are totally different. So that actually set us back and then we’ve since, of course, caught back up to it. So, anyways. Yeah, 2.5x I think we’ll either hit it or we’ll be really close. Something like 2.4. And given the level of revenue that Drip was at a year ago, this is not too bad. Not too shabby. How about you? What’s your next one?
Mike [18:54]: My next one was to rerun some of my, what I called ‘life experiments’ because back in 2015 I hadn’t done so well on them. And this year I’d say I probably did about the same as I did last year where they ran for a while, I was doing a bunch of different things and then things got busy with Bluetick and I kind of took my eye off of that stuff. So early on in the year it was good and then mid to late year I just didn’t do so much. So I kind of focused on Bluetick more than let’s say going to the gym and going to random events and stuff. There’s like a Renaissance fair that is south of Boston that I wanted to get to this year that I just didn’t get to. And then there is a gaming meetup nearby that I’ve been going to meets every week but I don’t go every week. It’s nice to get out and do things like that and just kind of meet new people. You work from home all the time and you don’t get out much so there’s not a whole lot of social interaction. So it’s nice to get out of the house and do other things. I really just want to kind of open my horizons to other stuff, to new things and get me out of my day-to-day.
Rob [19:54]: That’s what you mean by ‘life experiments?” Like the meetup and the Renaissance fair?
Mike [19:58]: Life experiments is more like trying new things and doing things that I wouldn’t normally do is more it than anything else.
Rob [20:04]: All right. My second goal for the previous year was to support Sherry with her ‘ZenFounder’ book. I was planning to be second author on a book that she had outlined and was planning to write. Kind of like a founder of mental health. Like how to stay sane while starting up type of thing. That’s still on the docket. To be honest, the Drip acquisition just decimated any time that I had to be able to contribute to that. And then the relocation and kind of the chaos that that created – planning for a move; planning to sell a house; shut down Sherry’s private practice; pull the kids out of school; find a new place to live; get the mover. Just everything that goes along with that was literally hundreds of person hours and it was all the nights and weekend time that Sherry probably would have spent writing the book. So this did not happen in any way, shape or form – and in fact, I don’t even know – I think she has maybe less than a chapter kind of drafted up. I think this will be on her docket here in the next year. I wouldn’t be surprised if she gets it all or mostly done in 2017.
Mike [21:03]: The third goal on my list was to be a lot more deliberate about where I spent my time. So to kind of draw delineations between work time and family time and then me time. And my intent was to work less and enjoy my off time a little bit more and generally be healthier. That went well for the first few months. And then after I got to that pre-launch beta period for Bluetick, things went downhill for probably four or five months. And then I think things are getting back on track at this point. So the last month or two I’ve been going to bed earlier, turning off all electronics and stuff like that. And just kind of taking it easy in the evenings. So, I don’t know. I’m not sure how to rate this one. Probably 6 or 7 out of 10 as opposed to anything else.
Rob [21:41]: Cool. And my third and final goal for the previous year was to make three to five angel investments in Bootstrapper. These are post-traction B2B SaaS apps. So in essence kind of going after the folks who are building real businesses rather than raising crazy rounds for B2C stuff. And I definitely made two investments and there was a third that is still in the works basically. And they’re having actually – I’ve committed to it but they’re having a delay in getting some paperwork together. So, I’ll say that I’ve mostly made this goal. In retrospect, five is just a little ambitious for me given how little time I have to devote to this and just how few really – I don’t know. I’m trying to say investment worthy companies that there are and that kind of came across my desk at a valuation that made sense. Since I am somewhat a small time angel investor, I’m not going to invest in rounds when people have valuations of $7 million or something. It just doesn’t make sense for me to write a check. It just doesn’t make economic sense. So for a deal to really be a fit for me and my skill-set where I can provide value, which is why I’m investing in things. Not just to get a return or to have a dog in the race, but I want to actually be able to contribute and offer advice, insight and opinions. It’s kind of niched down in terms of opportunities that I think are really a fit for me. I’m going to be moving forward keeping it kind of a more modest goal.
Mike [23:01]: My fourth goal was to be more complete with my planning. And the intent there was to create full plans rather than partial ones because I have a tendency sometimes to have things more in my head as opposed to written down on paper. I’ll scope out the first set of things really well and then after that I won’t drill down and write down a lot of the details until I get near the end of something. And then I kind of thrash a little bit. I did reasonably well with this. I would say that I definitely got to a point with Bluetick last year where things kind of went off the rails for a while and things are, as I said, kind of getting back in the right direction at this point. A lot of the plans that I came up with are starting to look like I can actually go back and pursue them. But some of the plans that I did put together, they basically just got delayed is really what it came down to. I do have a full blown marketing plan for Bluetick set out and I have a road map for the Product for Features and stuff. But even with that product road map things get moved around a lot which I’m not really comfortable with but, at the same time, customers are asking for stuff so I kind of have to slot in what they need versus what I think that the product needs just because they’re using it, they’re running into issues and it’s like those things need to be fixed.
Rob [24:11]: Yeah. And there’s a balance here between having a longer term plan of like, “Over the next 12 months I want to do this to revenue and here’s the general idea of how I’m going to get there” I think is one thing. And even having that in writing is probably good like “here are the tactics I’m going try. Here are the growth sprints or whatever.” I feel like planning product road maps is really difficult. Like we move ours around quite frequently based on customer request; based on response to the market; based on the realization we have of like “Oh my gosh, we shouldn’t have been doing this the whole time. We really need to get that in sooner.” Based on performance; based on someone trying to send spam through your system. There’s all these things that make you respond so my thing has always – we tend to roadmap about 60 to 90 days out. And I think if you’ve planned that out really well and have it written in order 60 to 90 days, I think that’s plenty of time. As early as you are where you’re still getting customers in who are going to find deal breakers for them. I’ll be honest, when we were at your point we were literally planning maybe a week out, sometimes two.
Mike [25:08]: Okay good. That makes me feel so much better because it was like I’m not anywhere close to 60 days.
Rob [25:13]: No, but we’re such a more mature product, you know. And we have more developers and you just have to do things a certain way. But you’re trying to just hammer out little things to keep your people around. And I think that when people have deal breakers and they’re like, “I can’t use your software until it has this,” we would drop everything and just do that. We would build that to get that next customer. It was like, “What can I build to get the next customer in the door.” So, all that to say, yeah, there’s a balance here. I think that having some long term plans but being really flexible with certain other ones at a different phase of your business I think is important. All right, 2017 goals. Looks like you have four, I have three. You want to kick us off with your first?
Mike [25:47]: Sure. So the first one is to log at least 100 days of exercises coming here. And under the umbrella of exercise I’m including both going to the gym and doing things around the house that are more physical exertion related. If I’m going out in the yard and clearing a bunch of brush and stuff like that. Moving rocks and stuff around. I kind of log that as a checkmark under the box of exercise for the day. Obviously, if I just walk up the stairs and back down or something like that I’m not going to count it. Because there’s certain things that you can do around the house that really should count as getting out of your chair and doing a little bit more than you probably would on a regular day.
Rob [26:23]: Is that why “exercise” is in quotes in the outline?
Mike [26:26]: Yes.
Rob [26:27]: Is that your case of exercising? That’s funny.
Mike [26:29]: Thanks for calling me out on that.
Rob [26:32]: Totally. My first goal is – it’s an interesting one. And it’s one that I’ve kind of struggled with and really had to think about. But you know I went on my retreat where I got strep throat a couple of weeks ago. And one thing I realized is that I really don’t want to start anything new in 2017. I don’t know if I can unequivocally say that I will not for the next 12 months start anything new but that’s kind of how it feels right now where basically you and I have the podcast, we run three MicroConfs now – two in Vegas, one in Europe – I have a podcast with Sherry and I’m still all in running Drip. And I’m still at the point where I’m kind of recovering from this year. Even the past couple years of just pushing hard, growing Drip and then the acquisition and kind of all the chaos and stress that created. And so, as I sit here today, I don’t really have the desire to do anything new. I’m talking like stuff that I might do and say, “Hey, launch a new app. Hey, write a book, start a new podcast.”
[27:25]: Whatever I might do with free time. It’s an interesting non-goal almost. It’s something that I want to – I don’t know that I’ve ever done this. You know what, last time I did this was in 2010 when our second son was born and I really kind of worked kind of the four-hour work week. I was working about maybe 10 to 12, 10 to 16 hours a week. That was when I had that whole portfolio of Micropreneur businesses – DotNetInvoice and stuff. It was right before HitTail. And that was a great time and I eventually got really bored and felt like what am I doing with my life. And that’s when I geared up and acquired HitTail and kind of 10x’d all my previous efforts. I think the one exception to this non-goal may be that if Sherry decides to really write the ZenFounder book, I want to do that with her. But I wouldn’t be, you know, the driving force. I would be probably adding my voice to it and helping her think through some stuff.
Mike [28:12]: I think there’s something to be said for intentionally doing nothing, so to speak. There’s times when you’ll go through like a rough patch or things are just really, really busy and you kind of need a break at that point. And you’ve been heads down on Drip for so long that running a startup is not necessarily the easiest thing in the world to do. It takes a lot of time, dedication and focus and it becomes something that you’re so focused on and you’re devoting so much of your energy to that there comes a point where you just kind of need a break I think. So it sounds to me like you’re probably close to that point or, you know, and it’s not to say that you’re just going to walk away and just go off and do something else as opposed to Leadpages. But coasting is not a bad thing.
Rob [28:54]: Yeah.
Mike [28:55]: You know you can’t always have a goal every single week. It’s hard to maintain that level of exertion for years on end. You can do it for a little while but you can’t do it forever.
Rob [29:05]: Yeah and it’s interesting. You use the word “coasting” and I guess I feel like I don’t think of it as much as coasting as just not starting anything new. I still want to be all in on the stuff that we’re doing, you know. I don’t want to coast on MicroConf; I don’t want to coast on the podcasts; and I don’t want to coast on Drip. I just don’t want to add anything new. Because it’s the new stuff, right. Like you’re going through right now. Just the tremendous amount of energy that that takes to get something from a standing stop to any type of worthwhile point, it’s a lot of effort. I genuinely do see this as a temporary thing. I do not think I’m done for life. But it’s almost like if you’ve ever burned out, it just takes a while to recover from that. I don’t know if I burned out or not. I just know that looking back on this year- there was obviously a lot of good that came out of it – but it was a very exhausting year. I’m looking ahead and think about just kind of being all in on what I have and not adding anything to that plate, it feels like a good thing to strive for.
Mike [29:59]: My next goal for 2017 is to make Bluetick profitable. And by profitable I also mean including my time.
Rob [30:05]: Woo hoo! So not ramen profitable?
Mike [30:06]: Yes, not ramen profitable. Something that if there was nothing else that I could make a fulltime living doing it. And I think that there’s definitely some challenges with this. I’m sure we’ll talk about them at length in some other episode, I don’t think we should do it here because we’ve talked at length about it very early on just the challenges of this past year. But I feel like it’s in a good spot at the moment. And even with some of the concerns I have about scalability, I still feel like a lot of the stuff is well written enough that it can be broken out and it can be made to work better without nearly as much effort as it took to get there. So we can talk about that some other episode. I’m sure we will. But that’s kind of my goal for the next year is to make sure that it is a profitable product moving forward.
Rob [30:48]: That’s a good goal, man. To me this is the number one thing that you could be focused on all year. And I think it’s really measurable. I think it could be a really good win for you. So, glad you have that in here. My second goal is to do between one and three angel investments this year. I’ve really enjoyed this process of getting to know founders and of, like I said, being able to offer advice and to be able to contribute financially and help their business get to the next level. I would think that even without trying too hard, I’ll probably just stumble upon one over the next year and I think top end might be three angel investments. And this is a way for me to feel like I’m really still in the game with these startups because I am invested and I’m seeing the monthly revenue growth and I’m seeing the struggles they’re going through but I don’t have to go through them first hand. And I can still do a 30-minute call or an hour call and I feel like dispense, “Here’s what I’d do in this situation.” But I don’t have to then go do it. This is probably my way of really staying in the thick of things without perhaps really staying in the thick of things.
Mike [31:53]: It gives you a layer of abstraction between you and the actual problems. My third goal is to blog publicly at least every two weeks. So that comes out to 26 total blog posts over the next year or so. But I’ve got a lot of ideas that I’ve written down that I just haven’t sat down and allocated the time to write those things out. But there’s still a lot of things that are just kind of jumbled up in my head so I kind of want to get those out. Somebody asked me before if I was going to write another book and I don’t see that in the near future. But I definitely see that, for me at least, writing about or documenting some of the things that I’ve been running into helps me get it, not just out of my system, but helps me think through it a little bit better and gives me a little bit more objectivity. I kind of want to make an effort to set aside the time to make that a priority and, not so much to get it out there so that people can read it, but more to get it out of my head and become more objective about certain things.
Rob [32:46]: This one’s interesting. I like the ambition of it. Are you like me where a blog post for you is like maybe between two and eight hours depending on how much time you invest in it?
Mike [32:57]: It could be. I actually thought a little bit more about this and – I didn’t write it down on the notes here – but my thought process behind this was to allocate between one and two hours per week to writing. And if it’s done at that point then it gets published and if it’s not done it still gets published. I’m really going to be working with hard deadlines in terms of the time that I’m allocating to it. So, it’s not going to be stuff that’s highly polished; it’s not going to be stuff that is extremely well thought through but it helps me get things out of my head. Because I write on a regular basis anyway, I just don’t publish it. So I think that by doing that it will give me that outlet to just put it out there and give people an opportunity to comment on it or talk about it or give it as points that could go up in discussions or what have you. I see it as just a way to get that stuff out of my head really, like I said. I’m doing a lot of that stuff now anyway, I’m just not publishing it. That’s not helpful for other people and that’s one of those things that I like doing is I like helping other people. And because the stuff that I write for the most part now isn’t published, it doesn’t do that.
Rob [34:04]: Yeah. I like the one to two-hour timeline for you. Or kind of a time box because otherwise I think – I do believe your focus should be Bluetick. And that if this goal distracts you from that that I should not basically. I think if you can set yourself a two-hour time limit every two weeks that’s perfectly reasonably.
Mike [34:22]: Yeah. And I think some of the topics are going to be related to things that I’m running into for Bluetick as well. I have some experiments that I want to run in terms of pricing plans and that will probably be turned into a blog post about what I’m doing and why. And other people might find it useful. They might say, “Yeah, that sounds great but it wouldn’t work for us and here’s why.” And that’s fine. But the idea is more for me to think about those things a little bit more objectively and by putting that tight time box on it then it forces me to finish in that time. Because you said that it could take you anywhere from four to eight hours to write a blog post. I could easily do the same thing because there’s not real end date for writing a blog post. It may take you an hour, it may take you 25 but if you don’t put that cap on it, it could easily go forever.
Rob [35:08]: My third and final goal for the next year is to exercise two days per week. I have typically been exercising about one day a week, one and half days a week. Kind of finding it hard to really carve out the time. But since moving to Minneapolis I have found since we live right next to a lake that it is so much easier to just get out for 20 minutes and just run. In our neighborhood back in Fresno, it just wasn’t really feasible. There were no sidewalks and there were all these busy streets and it just didn’t make a lot of sense. So I found this a lot easier. I think the challenge will be in the winter. I’ve run a few days when it’s in the 20’s and the low 30’s. I have kind of the proper gear for that at this point I think. So we’ll see if I’m disciplined enough to really carve out the time. But I’ve just found that the more I do that kind of the better I feel overall. It’s funny, I looked at this goal, you know, two days a week is about 104 days of exercise a year and you basically have a very similar goal of 100 days. So, I think both of us are looking to stay in shape now that we’re as old as we are, huh?
Mike [36:07]: Yeah. I mean, you look at the raw number of 100 and it’s like, wow, that’s a lot. When you break it down like you just said, two days a week is actually not that much when you look at it across the entire year.
Rob [36:19]: No, it’s not. And to be honest, I would love for it to be three days. I’d love for it to be every other day. But those just aren’t realities for me these days given what’s going on. So I don’t think this is overly ambitious. I think it’s very realistic. But certainly an ambitious one would be a three day a week exercise plan. And for my fourth – it’s somewhat of an honorable mention because I just can’t be as specific as I would like to be on the podcast – but I have goals for Drip basically. And these days there are some secret revenue goals, although I’m not as in charge of that as I used to be given that Leadpages handles the marketing so well. I have more product goals about giving certain features out and just making it basically the best marketing automation tool available. I’m not going to sit here and lay out the roadmap of everything we’re going to build but I definitely have some very specific things that in the next 12 months if we don’t build I will be displeased. Maybe by the time we get back here next year, I should be able to point backwards and say, “Hey, that’s when we launched this, this and that. Those are the three components that I was trying to get out.” I apologize for the vagueness in advance. But in retrospect, I’ll be able to talk a little more about it.
Mike [37:24]: Awesome. Well, I think that about wraps us up. I’m sure we’ll be revisiting some of these throughout the year. And it probably makes sense to take a look at these in April or May or so and just make sure that we’re at least on target for some of these. And if we’re not we can start revisiting that.
Rob [37:38]: I agree. And as a listener, if you have a question for us, call our voicemail number at 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 comments. 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.
